Florence Chong speaks to consultant investment director Damon Petrie
While its focus remains grounded on agriculture in pursuit of the future of food, London-based Cibus Capital is considering venturing into the world of carbon credits, initially in Australia before venturing into other geographies.
Carbon credit strategies are structured to use unproductive land to generate carbon credits for growing demand from both corporate and institutional investors looking for nature-based solutions to climate change.
Damon Petrie, consultant investment director at Cibus, says: “Australia is of interest to many firms considering a carbon fund because of its government-sponsored carbon credit market, through what are known as Australian Carbon Credit Units [ACCUs].”
The Australian market has started to see the convergence of regulatory and voluntary carbon markets. ACCUs were introduced in 2011, issued and administered by the Clean Energy Regulator (CER). CER has launched a certificate registry, which it describes as a “modern, easy-to-use system that will allow account holders to manage and trade the units and certificates”.
“Australia is of interest to many firms considering a carbon fund because of its government-sponsored carbon credit market”
Damon Petrie
In the 12 months to March 2024, 13.4m carbon credits were delivered to CER, generating investment of more than A$165m (€99m) in carbon projects.
The Australian government runs a second scheme, the Emissions Reduction Fund (ERF), established primarily to buy carbon credits to offset its own emissions. This fund has a budget of A$2.25bn and has contracted more than 190 tonnes of abatement. Another scheme, Safeguard Mechanism, ensures that the country’s largest industrial plants reduce greenhouse gas emissions.
Aside from government backing, Petrie says the land title system in Australia protects ownership, especially when it comes to long-dated carbon projects. “Land chosen for carbon sequestration projects is not viable for crops or timber, whether it be softwood or timber rotation,” he says. The unproductive land is more suitable for mixed-species bio-planting and the generation of carbon and the biodiversity benefits that come with it.
“Mixed species planting is favoured because, unlike pine trees, grass and other vegetation can grow among the trees,” Petrie says. “Optimal management of forests means not locking them up; they still need to be managed for fire mitigation and to control undergrowth. Once trees are three to four metres high, there is an opportunity for farmers to have their cattle graze on grass in these forests.”
Cibus has begun risk and viability analysis for a carbon credit project over 18 months and is sounding out investors.
Most investors in carbon sequestration strategies already have investments or assets in Australia that may require carbon credits for their emissions, Petrie says. “This is unusual for a manager like us, as our investors are mainly [limited partners]. There is also rising interest from those who do not need carbon credits now but are thinking ahead for when they will have to mitigate Scope 3 emissions. A small group of LPs is starting to look at carbon credits as an investable asset class.”
Petrie says the carbon strategy will be complementary to Cibus’s core business.
The firm’s venture funds have investments in start-ups, which are developing monitoring and recording of carbon in soil, and are now looking to monitor biomass carbon above ground.
Cibus invests in agriculture and agrifood venture capital and has interests in 23 tech venture companies and nine mid-market companies around the world.
Petrie says one of the Cibus portfolio companies, Withcott Seedlings, is on track to become the largest tree nursery in Australia within the next few years. “Withcott is growing native trees and has quite a number of orders for native species. These trees are being used for carbon and biodiversity plantations, and in some instances, for biofuel. We are seeing strong growth for tree seedlings.”
Cibus agri-businesses already produce carbon, but this has not been monetised because it is needed for the health of the soil. “Better stewardship of our land is having a positive impact on our costs, as we can use less water and have more efficient use of fertilisers,” he Petrie says.
Carbon credits are also generated by nature easements in Cibus farms, but the firm has chosen to leave the easements to native bees. “We need them for pollination,” says Petrie.
