Investment firm Roc Partners and carbon asset manager C6 Investment Management are targeting A$250 million ($166 million; €151 million) in a partnership that aims to give investors access to carbon credits by integrating reforestation projects with agriculture.
The new joint venture, Silva Capital, has announced the first close of its Silva Carbon Origination Fund with A$80 million in commitments from foundation investors Rio Tinto, Qantas, and BHP.
The fund, targeting a minimum return in the low-mid teens, will acquire Australian agricultural land to develop carbon sequestration projects by reforesting cleared areas while maintaining the land’s agricultural productivity.
Silva Capital’s projects will generate Australian Carbon Credit Units, providing investors with returns and contributing to their decarbonization efforts.
The partnership combines Roc Partners’ agriculture and fund management capabilities with C6 Investment Management’s experience working in carbon markets.
Roc Partners managing partner Brad Mytton and C6 executive director Raf Wood are co-managing directors for the new fund.
Mytton said his firm has been eyeing opportunities in carbon for some time.
In 2022, Roc Partners invested in South Australian farm machinery company Kelly Tillage, which makes shallow tillage equipment to increase carbon levels in soil.
“A lot of people were coming through our office with different ways to approach [carbon investing],” Mytton said.
“We were very focused on creating an institutional-grade product for this space, and there weren’t any.
“When we met Raf [Wood] and his team… there was a meeting of the minds in terms of how we work the agriculture in conjunction with the carbon.”
Social license is critical in establishing any carbon project, and Mytton said this would not be possible without the support of farmers.
“We very much want to support local communities.
“That means jobs in these communities; it means agricultural activities ongoing on these properties.”
Wood said rather than planting as many trees as possible, the projects will preserve agricultural land for grazing while providing a natural “woodland” style of tree cover.
“You might have a forest that 100 years from now is a dense forest, and you can’t walk through it.
“That’s not a great outcome for the agricultural community – and it’s not even a great biodiversity outcome.
“There’s a fallacy that density equals diversity; you actually need a mixed species planting that’s open woodland, like it would have been.”
A reputation to uphold
Mytton said Silva Capital aims for its projects to have a high level of integrity, given the importance of reputation to LPs backing the fund.
“We’re in markets where reputation really matters.
“If you’re not focused on these issues, you run a high risk that you’ll be on the front page of the paper in a negative way.”
The issue of integrity has been front of mind recently, with the Science Based Targets initiative releasing findings last month that many carbon credits may not effectively reduce emissions as intended.
SBTi’s report highlighted issues such as additionality (the degree to which a project causes a change that would not have otherwise occurred), permanence, accurate emissions estimation, and leakage (shifting emission-generating activities to areas outside a project’s scope rather than eliminating them) as potentially undermining carbon credit projects.
Wood acknowledged these issues but said Silva Capital will pursue projects that pose less risk of failure.
“We don’t do avoided deforestation or human-induced regeneration.
“Investors and the industry as a whole have been pushing towards exactly the sort of project we hope for, because of those integrity questions.
“It avoids those questions because it’s clearly new, clearly additional, and you can clearly see the growth – it’s measurable by LIDAR [light detection and ranging] at any moment in time.”
Under the ACCU Scheme, both the avoided deforestation method and human-induced regeneration method were discontinued in 2023.
Addressing the issue of permanence, Wood said Silva’s projects will maintain their stored carbon for 100 years.
“We’re not going to be clearing land again any time soon,” he said.
While establishing the fund primarily to capitalize on carbon credits, the partnership will also explore the possibility of co-benefits including biodiversity credits, with Australia’s Nature Repair Market set to open in 2025.
Mytton said the fund aims to build upon its foundation investors to attract further institutional and corporate investors, both in Australia and offshore.
Silva Capital is targeting a final close within the next 12 months.
