Paul McMahon on building a 250M climate positive portfolio of tree crops in Europe

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A check in interview with Paul McMahon, co-founder of SLM Partners, to discuss their current focus and investment strategies in Australia, USA, and Europe. 

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What are orchard systems? Why do SLM Partners, one of the most successful asset managers in regenerative agriculture, choose to focus on orchards, tree crops, perennial crops, etc. in Europe? How does the mechanizing of some agricultural processes promote regenerative agriculture?

The SLM Partners

Over the  years, SLM Partners, an asset manager, has worked with annual cropping in organic systems, forestry, etc. Now, they’re exploring regenerative agriculture for permanent crops such as orchards. SLM, having found many opportunities in Spain and Portugal, believes that there is a future in investing in a wide range of diversified tree crops. Currently, they’re looking into raising 250 million euros, half of which is allocated to permanent crops, orchard crops, Mediterranean food crops, as well as to the agroforestry system. 

“I think the other real goal of this fund is to build a climate positive portfolio where we’re storing more carbon than we emit.” – Paul McMahon

Good and Bad

Perennial crops have high financial returns as they produce high-value food products, which also have high consumer demand. They are also known to store carbon if managed right. However, perennial crops also have their downs such as heavy inputs of synthetic fertilizer, pesticides, and chemicals, as well as heavy use of water. What SLM does to make the process more regenerative is focus on cover crops, use biological fertility to avoid synthetics, and strengthen pest management to reduce pesticides. 

“Some of the integrated pest management benefits as well is you have an healthy functioning ecosystem that is going to have a positive knock on effects on the orchards too, by controlling your pests and disease.” – Paul McMahon

Mechanizing the Processes

According to Paul, one of the major challenges we’re facing is the lack of agricultural labor particularly for orchard systems. Hence, we might need to start mechanizing the processes. In fact, the industry has already started the use of technology in agriculture such as the use of pheromone-based systems for trapping harmful insects and the use of camera-assisted weeding machines. Further, technology can lead us to switch to fully organic systems, which will eventually eliminate the utilisation of synthetic fertilisers and chemicals. 

“I think there’s a huge potential to do things within a more intensive and larger scale mechanized system.” – Paul McMahon

The Partnership Model

It’s important to have balance, so a ‘partnership model’ works best when investing in regenerative agriculture. In this model, there is an investor and a local operator (business/person), with equal position, who share everything- from the expenses to the revenue. For the partnership to work, no one should be greedy and both the operator and investor must have ‘aligned incentives’. The real path towards scaling is to not overstep the boundaries of capital. 

“It all comes back to those farmers, foresters, who have that ecological knowledge and local knowledge. How do we empower them and support them and help them grow?” – Paul McMahon

Other Points Discussed 

Koen and Paul also discussed the following: 

  • Local context is important in selling agricultural land and forestry;
  • Many farmers still can’t even own lands;
  • We need more efficient ways to manage land or modern regenerative agriculture. systems; we don’t have to sacrifice efficiency for regeneration when we can have both;
  • There are more opportunities to invest in Europe than many would think;
  • We should have a more clear and consistent set of rules around what qualifies as stored carbon. 

To know more about Paul McMahon and SLM Partners, download and listen to this episode. 

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The above references an opinion and is for information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

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