Australian farmland sees surge in green investment as ESG targets drive demand
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Large companies are increasingly investing in Australian rural properties to meet environmental targets, driving up demand for natural capital assets, according to new research from Knight Frank.
Head of agribusiness valuations and advisory at Knight Frank Australia, Jason Oster, said natural capital opportunities had become a primary focus for investors.
“Buyer demand for agricultural properties with strong natural capital qualities in Australia is still very much growing, especially when compared to a market like the UK, where the trend is much more established due largely to legislation,” he said.
Natural capital encompasses a country’s natural resources including vegetation, soils, water, oceans and biodiversity, offering both financial and non-financial value to investors.
The trend has been particularly noticeable in certain agricultural sectors.
“There has definitely been an increase in demand for assets such as low-rainfall pastoral grazing that have the potential to sequester carbon,” Oster said.
Corporate buyers have been pursuing these investments to satisfy their environmental, social and governance (ESG) requirements.
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The push comes ahead of new mandatory climate reporting requirements for large businesses and financial institutions, set to begin on 1 January 2025.
McGrath Upper Hunter managing principal Michael Burke reported strong local interest in large-scale properties.
“The biodiversity offsets space has been particularly active over the last five to 10 years in particular as environmental impact assessments have become mandatory for industrial and corporate clients, including those in mining,” Burke said.
Properties suitable for biodiversity offsets were attracting significant premiums in some regions.
“Properties suitable for biodiversity offsets command as much as a 10 to 15 per cent premium above traditional grazing markets in the Hunter Valley,” Burke said.
Institutional investors have shown strong appetite for agricultural investments, with significant capital being deployed in the sector.
“Institutional investors seem to be finding it really easy to raise funding to invest in agriculture at scale. Centuria Capital’s agricultural fund has, for example, invested over $400 million in protected cropping assets in recent acquisitions,” Oster said.
The farmland market has begun to strengthen as land values rise and livestock markets recover.