Putting capital into our natural capital

Australia’s natural capital – our land, soils, water and biodiversity – is under imminent threat from climate change. Farmers on the frontline need new weapons to turn risk into resilience and boost their bottom lines, highlights Heechung Sung, Executive Director – Natural Capital at the CEFC.

The National Climate Risk Assessment, released in September 2025, demonstrates that the existential threat of climate change is here, with our land already 1.5 degrees hotter than in recent decades. This is not news for farmers; it is their lived experience on the climate frontline where every decision, from planting to harvest, is now shaped by a less predictable climate.

The National Farmers Federation described the assessment as “sobering”, but noted that farmers can deliver on climate, productivity and sustainability at the same time, with the right support.

We must invest in innovation, technology and new business models – not just to reduce emissions, but to create value in the global marketplace. Investing in natural capital – the land, soils, water and biodiversity that underpin agriculture and forestry – is a critical part of the CEFC’s work to accelerate Australia’s transition to net zero by mobilising capital into clean energy solutions.

Heechung Sung

Executive Director - Natural Capital, CEFC

Unlocking capital to give farmers options to respond with new technology and multi-use approaches to land can create new value in our natural capital. It can ensure the adaptability and competitiveness of one of our most important export sectors, while creating valuable revenues for farmers.

We must invest in innovation, technology and new business models. Carbon credits must be an integral part of a new approach to natural capital approach, but we need banks, regulators and investors to step up.

The very land that is under threat from climate change also offers a critical pathway to net zero. By harnessing our natural capital assets, we can not only protect Australia’s unique landscape, we can also unlock value.

Australia’s agriculture sector is no stranger to volatility. Farmers contend with drought, flood, fire, shifting markets and the uncertainties of global trade, they are uniquely impacted by weather, water and ecosystems. But today, the challenge is stark: the climate itself has changed.

Farmers on the frontline

Farmers see the impacts of climate change daily. They do not need convincing about this change, they need support to respond. The question is not whether we should act, but what happens if we don’t.

This is about the future viability of one of our most important export sectors. A two-degree or three-degree scenario is not abstract. It means degraded soils, lost productivity, water stress and reduced global competitiveness for Australian agriculture.

A growing population, longer lifespans and rising prosperity are fuelling increasing demand for food, fuel, fibre and timber. And agriculture now competes with biodiversity restoration, plantation forestry and carbon markets for the same hectares.

Land that works harder

The era of single use land is behind us. What we need now are multi-use landscapes: cropping integrated with forestry, livestock with revegetation, and carbon sequestration with food and fuel production. Technology and data allow us to understand land at a granular level – soil type, rainfall patterns, biodiversity values – and design systems that are both productive and sustainable. Australia has the science and innovation to make this shift. But it requires scale, patient capital and new partnerships.

Carbon projects are an opportunity to diversify income for farmers already looking ahead. The Australian Carbon Credit Unit (ACCU) market is one of the most robust and high-integrity compliance markets in the world. Each unit reflects tangible interventions – trees planted, soils improved, landscapes restored. Carbon markets are a mechanism to channel capital into these activities.

It's new approaches and technology embracing some of nature’s oldest technologies. Trees help deliver clean air, shelter and carbon sinks, and build resilience against the impact of the droughts and floods that scientists warn will hit more severely and regularly.

To earn credits, a grazing enterprise might integrate tree planting projects, then reintroduce cattle over time, creating dual revenue streams. Other farmers may choose to retain credits to decarbonise their own supply chains, positioning themselves for markets that increasingly demand net zero production.

The critical thing is, this gives farmers choice. They can sell credits, hold them, or use them. But the bottom line is that clever land management, planting trees and selling the credits is sound commercial practice.

Making finance fit

Of course, challenges remain. Farmers face knowledge and capability gaps in navigating carbon project registration and compliance. Banks and valuers are learning how to treat farmland where part of the asset is reforested or restored. This uncertainty creates hesitation. If a farmer puts 10 per cent of their land into trees, will their lender recognise the enduring value of that asset? CEFC investments in the agriculture sector help demonstrate that these projects do not diminish long-term value, they enhance it.

We need the broader finance sector to move in step. Regulators, too, must strike a careful balance: maintaining market integrity while simplifying access. Farmers should not be excluded from carbon markets because the system is overly complex.

Australian farmers are innovators. Operating on one of the driest continents, they have developed resilience and efficiency out of necessity. This resilience is an asset in the low carbon transition. If Australia can continue to lead in sustainable production, we will become an increasingly prized source of food and fibre for global markets. Our competitive edge will rest not only on volume, quality and price, but on sustainability credentials.

We must invest in innovation, technology and new business models – not just to reduce emissions, but to create value in the global marketplace. Investing in natural capital – the land, soils, water and biodiversity that underpin agriculture and forestry – is a critical part of the CEFC’s work to accelerate Australia’s transition to net zero by mobilising capital into clean energy solutions.

We are investing in platforms that can demonstrate how production and restoration go hand in hand. We are backing the development of new resources, such as the Pathfinder tool with the CSIRO, to help landholders at the family farm level understand their emissions baseline and plan interventions. We are supporting green finance initiatives with banks such as Rabobank and NAB to give farmers access to concessional loans for on-farm decarbonisation.

Working with institutional investors, the CEFC is investing in Australian land for the benefit of taxpayers and farmers, to restore value, productivity and resilience. It is beginning to unlock the capital at scale that farmers need to enhance productivity and maintain their competitive edge.

And our investments in the exciting agtech sector are developing technologies that support sustainable farming practices to help farmers boost productivity and energy efficiency while reducing emissions.

The path ahead

The journey to a low carbon economy is not without challenges. Farmers face uncertainty, revenue pressures, knowledge gaps and politicised debate. But the opportunity is immense.

By combining the ingenuity of our farmers with the scale of institutional capital and the integrity of Australia’s carbon markets, we can turn risk into resilience. This is about more than meeting targets, it is about safeguarding the future of Australian agriculture, maintaining global competitiveness and ensuring our land continues to sustain us for generations to come.