Four potential sources of investment in NZ agriculture
In essence, equity partnerships bring external investment funds, sometimes pooled, sometimes from single entities or investors, into a sector which has historically – and riskily – relied more on debt.
They aren’t new and were started in the 1970s and early 1980s to develop kiwifruit, sheep and beef farms.
Traditionally, equity partnerships have enabled specialised skillsets to generate greater efficiencies and higher farm production. What we’re seeing now is greater interest in partnerships along the product development and distribution parts of the supply chain.
Creating products targeted to the preferences of groups of consumers is vital to adding value, but it requires in depth knowledge of the target market and how to access it.
Māori entities are already major stakeholders in New Zealand agriculture and through both investment and acquisition we are seeing Māori establish increasing leadership roles in these industries.
ANZ research has highlighted low levels of debt and large liquid holdings of cash and managed funds as key levers iwi/Māori investors have as they look to build scale, productivity and innovation to further develop their resources on a sustainable basis.
For New Zealand farm owners looking for someone to continue the legacy they started, Māori with their long-term outlook and strong values can be a good option.
The large-scale kiwifruit purchase by Tauranga Moana-based Māori Trust, Ngāi Tukairangi, is a great example of this, and also ensured a key NZ agricultural asset was retained in New Zealand ownership.
Political preferences for ethical onshore investments which grow jobs may see interest in agriculture investment from superannuation and KiwiSaver funds.
The NZ Super Fund has an explicit mandate to invest in New Zealand and is too big to do it solely on the listed market. It has already bought 21 New Zealand dairy farms and has indicated investment into other types of rural land, such as cropping, are on its radar.
It currently has a $NZ150 million portfolio of New Zealand rural land managed by FarmRight. ANZ expects Kiwisaver funds will show increasing interest in agriculture but many pastures have to be crossed.
This is especially the case in terms of how such an investment vehicle would be structured, who would be responsible for it and whether any of the KiwiSaver providers are big enough to put together a dedicated agribusiness fund.
In Australia, superannuation funds have banded together to form standalone unlisted investment vehicles they can all access, but they have much larger assets under management than in NZ.
Green finance uses instruments or investments (equity or debt) to finance or re-finance projects with a positive impact on the environment.
Green bonds are one of the most developed financing instruments within the green finance world and they’re being used to fund climate-friendly projects globally.
They are growing market and so far mostly applied in the property, transport, renewable energy and energy efficiency sectors (in global terms) but with real potential for application in the agriculture sector for sustainable land use practises, water efficiency, water and waste management, and energy efficiency.
Green bonds haven’t yet been used to help fund agriculture ventures in New Zealand, but we see the potential.