NSW tips natural capital market windfall to reward farm stewardship

Farmers are being urged to take greater notice of their natural capital assets and develop them further to help lift their land's crop and livestock productivity, and to cash in on a new generation of environmental markets.

The NSW Government is even willing to help farmers gain credits and recognition from the investment sector for the farmland stewardship work they do.

Environment Minister, James Griffin, said not only were international investors eager to promote natural capital as an investment class, the prices farmers received for rural sector products sold overseas would increasingly depend on Australian farmland having recognisable - and expanding - natural capital attributes.

Consumers and governments around the world had already decided ecosystem services such as carbon sequestration initiatives, improving water and air quality and greater flora and fauna diversity and density helped regulate climate extremes and contributed net zero greenhouse gas emission goals.

Enhancing these fundamental environmental characteristics also helped agricultural productivity and made farms, and the wider environment, more resilient against floods, volatile temperatures and drought.

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Mr Griffin said farmers should view natural capital as similar to traditional farm capital assets.

Investing in it enhanced a property's value and earning capacity, but ignoring or degrading the landscape caused the asset to depreciate.

All sectors of the community, from banks and investment funds to governments, retailers and non-government organisations were developing an "overwhelming interest" in the value of natural capital to help global environmental and economic stability.

"The World Economic Forum in 2020 found that more than half of all global gross domestic product was nature dependent," Mr Griffin told the Farm Writers' Association of NSW.

"In fact, the possibility of biodiversity and ecosystem collapse ranks as one of the top five risks facing the world this decade.

"Importantly, Australia ranks fifth highest on a list of 140 countries that will experience economic loss if environmental challenges are not addressed."

Financiers now incorporated nature-related risks and opportunities in their investing, lending and underwriting practices.

He said many Australian farmers were already leading the charge to improve agricultural land sustainability.

Subsequently, the sector deserved reward for the work producers were doing to tackle environmental challenges and past management mistakes.

NSW was ready to introduce a natural capital "statement of intent" to be a roadmap for developing natural capital as a new asset class.

Part of a $206 million sustainable farming program would include an accreditation scheme for farmers who managed their land for biodiversity and carbon while enhancing their productivity.

Government initiatives would support new avenues for private landholders to conserve land, create new markets for investors and, in collaboration with farmers, open new pathways for environmental programs in NSW.

He hoped they would set an economic foundation for natural capital markets which other states would follow.

"This is a global movement," he said.

"Around the world this market for environmental improvements and the investing opportunities which go with it are developing at light speed."

The New Zealand Government had begun investing in natural capital programs this year, and the Biden administration had an ambitious 15-year plan to develop natural capital accounts recording changes and losses to US natural resource stocks.

With 70 per cent of NSW land in private ownership, the government was well aware of the need to work closely with landholders, seeking their feedback and aligning their own farm management goals with the fast emerging novel markets for biodiversity, carbon and water quality credits.

Doing nothing, however, was not an option.

Consumers in Australia and overseas were driving investment in sustainability and food market priorities.

"Whether we like it or not, other countries are bringing in legislation that penalises our exports if we are not doing this sort of thing," Mr Griffin said.

"If farmers are perplexed or unsure about what all this means and what the opportunities are, make those questions clear so we can identify what information is needed from the government and the market."

"The more everyone knows the less anxiety it creates."

However, he also urged farmers to be proactive in avoiding the sort of conflict which had taken the climate change debate down a win-lose path for decades.

"Take a good look at the land sustainability issues we are talking about and give us frank feedback about how to improve this program to make it a value proposition on your farmland."

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