Measuring
what matters
An approach for natural capital
investors

Clean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

A message from
Australia’s ‘green bank’Australian agriculture is an $80 billion businessconducted across half of our land mass, withdiverse enterprises delivered via large-scale multisite portfolios, location based aggregations andsmaller-scale family farms.
Its role as a key economic driver can hardly be overstated, whether
considered through an historical lens, or in the context of forecast
growth and the ongoing contribution to our national prosperity.
The sector draws its strength from its reliance on experienced
and expert farmers, its embrace of technology and its enduringcommitment to product innovation. The intersection of thesefactors has seen it lift yields, capture new markets and capitalise on
a market-leading reputation for high quality produce, delivered atvolume and on time.
This description is in no way sentimental. Rather, it brings together
the core ingredients of a sector-wide approach that is drawing
growing interest from institutional investors, including dedicatedsustainable investors such as the CEFC and those representing
some of the world’s biggest pension funds, including recent CEFC
investment partner CDPQ.
And this matters in the race for capital to finance our transition to
net zero emissions. The sectors that demonstrably deliver on thetwin economic and environmental demands of a net zero future
will be those that attract long term capital, at scale, so they are
positioned at the forefront of this seismic economic transformation.

1

CEFC investments in agriculture showcase this transition, withcommitments to lower emissions, improve land protection andincrease biodiversity. Investment commitments are important ofcourse, but they are not the full picture. Measurement, reporting
and analysis are important too, as investors, managers andregulators consider the impact of capital in the context of broader
emissions pathways and ambitions.
For the CEFC and the institutional investors we work with, credible,
comparable and reliable metrics are a foundational element ofinvestment decisions, alongside well-established factors such as
capital returns, risk and financial management. We recognise toothat transparency and consistency in accounting for the full value
and costs of using natural systems will strengthen the appeal of thenatural capital sector as a high value investable asset class.

Ian Learmonth
CEFC, CEOAs we strengthen our own approach to metrics and reporting for
agriculture and forestry, we are pleased to share our thinking withother investors making similar decisions.
We give you a collated view of everything from assessing therelative value of different reporting frameworks to identifying
decarbonisation priorities, defining metrics and capturing the rightdata to measure, monitor and assess performance, with the shared
end goal of avoiding emissions where we can and sequestering theremainder where necessary.
We are pleased to recommend this report to you: Measuring whatmatters: an approach for natural capital investors.
Heechung Sung
CEFC, Head of Natural CapitalClean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

Measuring
what matters
About this report

Index

As a specialist investor in Australia’s transition to
net zero emissions, the CEFC sees natural capital
assets as a strategic priority in a low carbon future.

A message from Australia’s ‘green bank’

1

Natural capital emissions

4

Investment potential

8

Industries that rely on natural assets such as agriculture andforestry will need to consider their carbon impact on the landscapeand how to improve the long-term sustainable performanceof land use activities, while also protecting and strengthening
broader environmental outcomes. Investments to reconfigure how
landscapes are designed, rethinking future business models andsequestering carbon through incorporating value accretive carbon
farming projects will present as opportunities to capitalise.

Measurement approach9

Decarbonisation activities

10

Guide to natural capital frameworks

17

Glossary19

For investors, national and global policy developments aroundemissions and biodiversity are reshaping investment considerations.
Navigating emerging financial accounting, industry and regulatory
standards can be challenging and may create barriers in assessing“what does good look like?”.
This report provides guidance on the consistent measurement ofemissions reduction activities across agriculture and forestry assets.
It may assist investors in those sectors screen investment strategies
and hold asset managers and operators to account for emissions
reduction. This may facilitate the flow of capital into replicablesustainable activities, allowing investors and financiers to compare
projects more easily and prioritise investments according to theirown sustainability goals.
2

Acknowledgement of Country
The CEFC acknowledges the Traditional
Owners and Custodians of this land, andwe pay our respects to all Elders, past andpresent. We recognise their continuingconnections to country, water and culture.

Clean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

Institutional investors
and sustainable agriculture
The CEFC has committed more than$440 million to the agriculture and forestry
sectors (to 31 March 2024).
Along the way we have benefited from the experience of our coinvestors, asset managers and Australia’s scientific leadership inachieving sustainability outcomes. This has included working with
CDPQ, a global investment group, to create Australia’s Wilga Farming
sustainable agricultural platform.
Based on this experience, we are pleased to share our insights into how
institutional investors in the natural capital arena can use relevant metrics
to enhance the assessment of decarbonisation activities and the waysthat this can lead to the flow-on of broader environmental outcomes.
This practical guidance includes an overview of priority activities thatcan reduce, avoid or sequester emissions in the agriculture and forestry
sectors; an approach to defining metrics and establishing ongoing
monitoring; and an overview of the available measurement approaches.
We have used the production environment in Australia and global
approaches and frameworks to arrive at the metrics, but the metrics
can be applied to other key agriculture and forestry markets given the
key activities that drive emissions are well accepted globally.
In developing this guidance, we have considered key internationalframeworks and protocols, including the ISIC for classification ofactivities, as well as the TFND, SBTN, SBTi, Climateworks, the NCMC
and the GHG Protocol to formulate the measurement approaches foreach priority activity.
As with all investments, decisions will be made on a case-by-casebasis, reflecting production systems and the relevant environmental
conditions. The analysis in Measuring what matters: an approachfor natural capital investors, was prepared by the CEFC with theassistance of EY.

3“This practical guidance includes an overview of priority
activities that can reduce, avoid or sequester emissions;an approach to defining metrics and establishing ongoing
monitoring; and an overview of the available measurement
approaches and tools.

Clean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

Natural capitalemissions
The widespread adoption of sustainable agricultural
practices, such as no-till farming, variable ratetechnologies, crop rotation, efficient breeding
and genetics selection of animals, and the use ofcover crops between growing seasons, can reducegreenhouse gas emissions, while making the soil
healthier and farmland more fertile and potentiallymore productive over time.
Reducing agricultural emissions is a global effort, withdecarbonisation investment in agriculture and forestry assets
at the national level. Understanding the global view of sector
emissions can support investment analysis of different markets.
Agriculture, forestry and other land use accounted for 13 to 21 percent of global greenhouse gas emissions over 2010-2019.1 This figure
may be up to one third when the broader food system is considered,including food processing, transport, packaging and waste. 2
Agriculture sector emissions relate to the biologicalprocesses associated with commodity production.
Additional energy-related emissions, from fuel-use in farmmachinery and electricity consumption, are often measured aspart of energy and electricity sector emissions.
1 IPCC 2022, Agriculture, Forestry and Other Land Uses (AFOLU) in Climate Change 2022:
Mitigation of Climate Change, WGIII AR6. Cambridge University Press.
2 Ritchie, H. 2021, How much of global greenhouse gas emissions come from food?. Published
online at OurWorldInData.org.
3 IPCC 2022, Agriculture, Forestry and Other Land Uses (AFOLU) in Climate Change 2022:
Mitigation of Climate Change, WGIII AR6. Cambridge University Press.
4 R itchie, H. 2020, Sector by sector: where do global greenhouse gas emissions come from?.
Published online at OurWorldInData.org.

4

The largest sources of emissions from the sector globally3,4

26%

14%

51%

Animals (mainly ruminants,
such as cattle and sheep)
produce methane through adigestive process called ‘entericfermentation’. In addition, nitrous
oxide and methane can beproduced from the decompositionof animal manures under low
oxygen conditions.

Nitrous oxide is produced whensynthetic nitrogen fertilisers areapplied to soils. This includes
emissions from agricultural soils
for agricultural products.

The land use, land use change
and forestry (LULUCF) category
measures net emissions ofcarbon dioxide from changes inforestry cover (i.e. the difference
between forestry loss and gain)
and land use. Emissions are
based on lost carbon storesfrom forests and changes incarbon stores in forest soils.
Since vegetation can absorb
carbon from the atmosphere,
increasing forest cover has theability to function as a net sinkof emissions.

Livestock and manure

Agricultural soils

Deforestation

Clean Energy Finance Corporation

Natural capitalemissions

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potential

Measurement
approach

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activities

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Glossary

Australianemissions sources
Global agricultural emissions highlight the
decarbonisation needs for the sector. Natural
capital investments can deliver both abatement
and sequestration of emissions, and land use playsa critical role in delivering national net zero targets.
At the CEFC, Natural Capital investments are a strategic priority andour investments target decarbonisation outcomes that are scalable
and replicable to address Australia’s agricultural emissions.
Australian agriculture activities are the largest source ofgreenhouse gas emissions outside of electricity, gas and oil use,
representing 18 per cent of national emissions (82 Mt CO2-e)in 2023. 5 Australian forecasts show the sector’s emissions areprojected to remain flat to 2030 without further action. 6

In Australia the main sources of emissions
from agriculture are: 7

62Mt CO2-e

Livestock and manure (80% in 2022)
This includes 55 Mt CO2-e from enteric fermentation
and 7 Mt CO2-e from manure management.

16Mt CO2-e

Cropping and horticulture (20% in 2022)

5 D
 CCEEW 2023, Australia’s emissions projections 2023, Department of Climate Change,
Energy, the Environment and Water, Canberra, November. CC BY 4.0.
6 D
 CCEEW 2023, Australia’s emissions projections 2023, Department of Climate Change,
Energy, the Environment and Water, Canberra, November. CC BY 4.0.
7 A
 ustralian Government 2024, National Inventory Report 2022, Volume I, Department of
Climate Change, Energy, the Environment and Water, Canberra.
8 D AFF 2023, Agriculture, land and emissions: discussion paper, Department ofAgriculture, Fisheries and Forestry, Canberra, October. CC BY 4.0.
9	Australian Government 2024, National Inventory Report 2022 Volume I, Departmentof Climate Change, Energy, the Environment and Water, Canberra. Figures have beenrounded to the nearest 1 decimal place.

5

Figure 1: Australia’s agricultural greenhouse gas
emissions by source 2021-229

The cropping and horticulture sectors
contribute nitrous oxide and carbon dioxide
emissions. Most of the emissions fromagricultural soils (12 Mt CO2-e) were fromfertiliser application and crop residues, though
livestock waste is also responsible for a portionof emissions from agricultural soils. 8
Carbon dioxide equivalent emissions fromapplication of urea and lime accounted foranother 3 Mt CO2-e.

Enteric
fermentation
Manuremanagement
Rice
cultivation

70.6%
9.3%
0.4%

Agricultural
soils

15.0%

Field burning ofagricultural residues

0.7%

Liming

1.7%

Urea application

2.4%

Clean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Figure 2: Emissions and removals from LULUCF,
2021-22, Mt CO2-e10

Measurement
approach

90Forests

Mt CO2-e-70

Net LULUCF

-88

10 A
 ustralian Government 2024, National Inventory Report 2022, Volume I, Departmentof Climate Change, Energy, the Environment and Water, Canberra.
11 D
 AFF 2023, Agriculture, land and emissions: discussion paper, Department ofAgriculture, Fisheries and Forestry, Canberra, October. CC BY 4.0.
12 A
 ustralian Government 2024, National Inventory Report 2022, Volume I, Departmentof Climate Change, Energy, the Environment and Water, Canberra.
13 DCCEEW 2023, Australia’s emissions projections 2023, Department of Climate
Change, Energy, the Environment and Water, Canberra, November. CC BY 4.0.

6

Glossary

9Mt CO2-e

9Mt CO2-e

Electricity, energy and fuel are needed
to run facilities, vehicles and production
equipment for agriculture commodities
and represent a significant source ofgreenhouse gas emissions.

Land use, land use change and forestry(LULUCF) emissions are accounted forseparately to agricultural emissions in Australia’s
national accounts and emissions projections,however agricultural activities can contribute tothese emissions through primary clearing andmaintenance clearing. ‘Forest conversion’ wasa source of 9 Mt of CO2-e in 2022. However,forests overall were a sink for 70 Mt CO2-e and‘Agricultural and other lands’ were a sink for 27
Mt CO2-e.12 As more emissions are taken up by
the growth of forests and other sinks than are
emitted through forest conversion and othersources, the LULUCF sector was a net sink of 88
Mt CO2-e in 2022. Most forest conversion activity
in Australia is to provide pastures for grazing
activities, although some forest conversion
occurs to support cropping, settlements,
infrastructure, and reservoirs.13

Fuel and energy (2021)-27

Natural capitalframeworks

Two other significant sources of emissions are accounted forseparately in Australia’s national greenhouse gas accounts:

Forestconversion toagriculture andother lands

Agriculture
and other lands

Decarbonisation
activities

11

Deforestation (2022)

Clean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

Moving towards
net zero emissions
250

200

Mt CO2-e

The agriculture and land sectors are already150
250
Figure 3:
feeling the effects of climate change through100
Historical and forecast Agriculture
more frequent and extreme weather and changing
200
and LULUCF emissions with illustrative50
conditions. Producers, land managers and investors
paths to net zero, Mt CO2-e 19
150
0have a long-term interest in seeing successful global
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
100
efforts to combat climate change and Australia’s-50
agricultural industry plays a pivotal role.
50-100

Australia has committed to achieve net zero emissions by 2050, andover 140 countries and 1,000 corporations have also set net zero
emissions targets.14 This means that all sectors of the Australianeconomy need to make plans to cut net emissions.
A number of industry groups, such as Meat & Livestock Australia
and the National Farmers Federation16, have also committed toefforts to reduce the trajectory of agricultural emissions. The
Commonwealth Government is currently developing a sectoral
decarbonisation plan for agriculture and the land sector.17

LULUCF
Delayed agriculture path to net zero
Early action agriculture path to net zero0
1990

1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

-50
-100

15

For the agriculture sector to aim for net zero, early action to cut
on-site agriculture emissions will mean a smoother transition.
Australian government forecasts show the agriculture sector’semissions are projected to stay flat at around 80 Mt CO2-e fromnow to 2035 without further action.18 As an illustrative example(Figure 3), if the sector was to aim for net zero emissions overall by
2050, but waits till after 2035 to move towards this goal, then net
emissions would need to fall around 5 Mt CO2-e a year (7 per centof 2035 emissions). If the sector starts cutting emissions now, thennet emissions would need to fall by only around 3 Mt CO2-e a year
(4 per cent of 2023 emissions).
7

Agriculture

Agriculture
LULUCF

Instruments such as carbon offsets can be used to manage residual
Delayed agriculture path to net zero
emissions in a corporate decarbonisation strategy. Nature based
solutions and carbon markets, such as the Australian Carbon Credit Early action agriculture path to net zero
Unit (ACCU) Scheme administered by the Clean Energy Regulator,
provide a regulated market for carbon sequestration projects.
This provides the Natural Capital asset class with opportunities tosequester carbon and generate an economic return through the saleof ACCUs. Often there are additional co-benefits for biodiversity andnature through the development of improved carbon sequestration
14	
Net Zero Tracker, accessed 8 June 2024
15	Meat and Livestock Australia, accessed 10 April 2024
on farmland.
“Insetting” refers to decarbonisation activities that avoid or sequester
carbon on farm and lower the farm’s own carbon emissions profile.
Insetting does not necessarily mean the creation of ACCUs. However,
if an ACCU is created and retired (i.e., not sold as a carbon offset),
the sequestration generated remains attributable to the farm andreduces the whole of farm emissions footprint.

16	National Farmers Federation, accessed 10 April 2024
17	DAFF 2023, Agriculture, land and emissions: discussion
paper, Department of Agriculture, Fisheries and Forestry,
Canberra, October. CC BY 4.0.
18	DCCEEW 2023, Australia’s emissions projections 2023,
Department of Climate Change, Energy, the Environment
and Water, Canberra, November. CC BY 4.0.
19	DCCEEW 2023, Australia’s emissions projections 2023,
Department of Climate Change, Energy, the Environment
and Water, Canberra, November. CC BY 4.0.

Clean Energy Finance Corporation

Natural capitalemissions

Investment
potential

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approach

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activities

Natural capitalframeworks

Glossary

Investment
potential
Financial and environmental value creation
Australia exports around 72 per cent of the total value of agricultural,fisheries and forestry production. 21 Australia’s top export markets
include China, Japan, South Korea, Indonesia, Vietnam and the UnitedStates. This export orientation links returns on agricultural assets to
global demand drivers such as rising populations and incomes.
Australia is a key agricultural market, attractive to global investors,
with benefits including opportunities for scalable investments, a stable
regulatory environment, proximity to export markets and a southernhemisphere location providing seasons that are counter to US andEuropean markets. Australia’s agriculture sector also has deep expertisemanaging diverse agricultural systems and climatic conditions, volatilecommodity prices and considering climate impacts.
As well as investments made to produce agricultural commodities,
there is significant value held in Australian agricultural land. Farmland
transactions in 2022 equated to a total of 8.8 million hectares of land
traded across 6,588 transactions at a combined value of $11.7 billion. 22
Efficient, responsibly managed agricultural assets are likely toincrease in value. Those institutional and family farmers who
recognise this now stand to benefit in the future. What’s more, thecarbon sequestration potential for landowners (including in soils)
has the ability to reduce their own emissions (“insetting”), while also
creating new revenue streams via carbon credits, alongside broader
biodiversity benefits.

20	The nominal gross value of agricultural production is forecast to be $80 billion in 2023– 24, or $86 billion including
fisheries and forestry. ABARES 2024, Agricultural Commodities Report: March Quarter 2024, Accessed 10 April 2024
21	ABARES 2024, Snapshot of Australian agriculture 2024, March. Accessed 10 April 2024
22	Rural Bank 2023, Australian Farmland Values. Accessed 10 April 2024

8“

Within the broader natural capital asset class,agriculture continues to be crucial to the Australianeconomy, with ABARES forecasting the value of
production to be ~$80 billion in 2023-24, coming off arecord high in 2022-23 due to drier conditions.20

Clean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

Measurement
approach
Benefits for investors
Natural Capital investments are an attractive asset
allocation that can deliver appropriate returns forthe risk while also targeting environmental benefits
over time. Metrics can aid investors and asset
managers in the credibility and comparability ofsustainability outcomes.
As investors, we focus on identifying investment opportunities thatcan provide both financial and environmental outcomes. Embedding
sustainability targets into natural capital investments provides
a contractual mechanism to target priority activities and land
management practices for decarbonisation outcomes. By setting
targets and adopting a rigorous assessment of land management
and emissions profiles, investors are able to direct capital to thoseinvestments which demonstrate low emission farming and can assist
in determining the highest and best land use.
Natural Capital investors can set metrics relating to the management
approach and land activities. This can bring together baselining,targeted emissions outcomes, investment monitoring and reporting
schedules. Setting metrics is an important performance management
tool for investors and these metrics can be used to compare
performance of similar assets and management techniques. Metrics
can also underpin a verification process to support the assessment of
indicators and progress toward achieving environmental outcomes.

9

Investors and lenders bring financial expertise to structuring
investments which consider investment and asset parameters.
Investment decisions are necessarily made on a case-by-case basis.
Relevant metrics for an asset will vary depending on the land use
activity, the targeted outcomes and the gap to achieve these,among others.
As financial institutions and corporates seek to adopt frameworks
such as sustainable finance taxonomies and science-based targets,it will be increasingly important to demonstrate comparability
when financing activities that lead to improved environmental
outcomes. We consider standardisation and comparability acrossemerging sustainable finance and natural capital frameworks to be
best practice and an enabler for increased capital flow and lower
transaction costs with increased investment opportunities.
This report reflects the the CEFC approach to measuring natural
capital investments that relate to agriculture and forestry production
from landscapes. We focus on activities that deliver productivity,
carbon and environmental outcomes, and in defining and grading
the metrics outlined we have leveraged the available frameworks
listed with a focus on those that are most meaningful and commonlyused by institutional investors.

$

440m
CEFC agriculture andforestry commitments

Clean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

Decarbonisation
activities
In assessing potential natural capital investments,
the CEFC considers a range of factors influencing
financial and environmental outcomes. This
includes focusing on identifying activities thattarget co-benefits of productivity, carbon andenvironmental outcomes from landscapes andidentifying immediate improvements to longerterm sustainability strategies.

10

Activities that increase productivity,
carbon and environmental benefits
Adjust livestock management practices (e.g. genetics,
inclusion of pasture legumes, animal feeds/supplements)
to lift productivity and reduce enteric methane emissions
and/or reduce nitrous oxide emissions

Efficient application of fertilisers, herbicides andpesticides to optimise yield, cut nitrous oxide
emissions and pollutant run-off to soils andwaterways

Increase organic carbon storage in soils to improve soil
health and drought resilience

Optimise water management practices to reduceenergy use, surface and ground water use

Increase tree planting to reduce nitrogen andphosphorus load before run-off on soil and water,
and/or develop revenue potential via ACCUs

Integrate trees and shrubs into grazing management
to improve carbon storage, animal health and welfare
and biodiversity

Increase area of protected land under management,
to improve biodiversity and habitat connectivity

Consider agroforestry methods, such as shelterbelts,
insectaries, riparian zones, wetlands and habitat
conservation

Optimise frequency of rotations in crop and pasture
to lift carbon storage in biomass

Replace fossil fuel use with renewable energy

Optimise timber land management to lift carbon
storage in biomass

Integrate pest management

Fire management practices

Capture and reuse waste

Clean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

Metric grading
matrixA streamlined guide to grading Natural Capital
metrics can support prioritisation of activities, withrespect to emissions abatement and sequestration.
The gradings are summed to develop an ‘overall
grade’, promoting options that are less complex but
provide the most accurate outcomes.
The grading matrix supports the identification of priority
metrics, through rating different activities and their subsequent
measurement and data sources, across three assessment criteria,
namely, feasibility, suitability and maturity. Consider allocating
points to produce an overall grading where: Basic = 1-3 points;
Good = 4-7 points; Very good = 8-9 points. The gradings are
summed to develop an ‘overall grade’ out of nine, promoting options
that are less complex but provide the most accurate outcomes. At
the whole-of-farm enterprise level an assessment should be madeof all metrics, to consider any interplay between decarbonisation
activities that could impact the overall grading.

Table 1: Grading matrix

What to look for
Feasibility

Degree to which
the metric canbe readilymeasured

Relevant considerations

Grading categories
Basic

Good

Very good

Substantiallyrestricted
datacollectionSomebarrier todatacollection

No barriers
to datacollection

Not science
based
and/orrarely usedmethodScience
basedprotocol andsometimesusedmethodScience
basedprotocol andestablishedmethodMetric isnascent
or mature
Innovative: use of emerging
technologies and product innovations to with limited
opportunity
lift accuracy, efficiency
to improve
Nascent: limited use and/or limited
other criteria
availability, suppliers

Metric ismaturewith some
opportunity
to improve inother criteria

Metric ismaturewithopportunity
to improve inother criteria

Viability: readily available andproven in practiceUseability: degree of difficulty incapturing data
Efficiency: relative cost, effort,
skills to implement

Suitability

Quality of data
sources, use ofscientificprotocolsPrimary data: identification andtracking of relevant inputs
Science-based protocols:
relevance of data to rigorous
scientific requirements
Established: recognised approach,proven in practiceMaturity

11

Track record of
the metric,
statusof potential
innovation

Mature: readily available,
commonly used, widely recognised

Clean Energy Finance Corporation

Natural capitalemissions

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Measurement
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Decarbonisation
activities

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Glossary

Sustainable investment metrics and reporting
The CEFC set sustainable investment targets for its natural capital investments. The following tables provide examples of decarbonisation
activities and metrics to measure the performance of cropping, grazing production systems and forestry as they relate to management oflandscapes. The tables include their expected outcome, data requirements and measurements. For activities and outcomes eligible under the
ACCU Scheme, they would be assigned a Very Good metric grade.

What is it

Activities

Outcomes

What to measure

How to measure

Metricgrading

Agroecology (the application of ecological principles to land based systems and practices)
Using site spatial dataand emissions modellingto measure reduced
ecosystem disturbanceand avoided GHG
emissionsProtect natural lands

Increased area protection

Area (ha) and the condition of eachprotected land type:– productive land
– shelterbelt– riparian– habitat conservation, corridor– native, plantation forest

Spatial mapping

Enhance natural lands andconnectivity

Emissions avoided from area of land protectedor habitat connected, and reduced conversionof land use

Area of and connection between
habitat areas to determine condition(including shelterbelt (ha), riparianzones, wetlands, insectaries, biodiversity
conservation reserves).

Spatial mapping

Observed species using visual assessment,
surveys, and distribution maps

Field survey

Area (ha) of each crop species andnumber of crop or forest stand andharvest rotations per year

Spatial mapping,crop data, forestry data

Decreased GHG emissions through increased
legume planting and frequency

Area (ha) of legume planting, number ofcrop rotations per year

Spatial mapping,crop data

Decreased GHG emissions through carbon
stock held in trees, shrubs, and debris

Environmental plantings: (ha) of native trees
or mallee eucalypt planted in land that has
been cleared of forest cover for over 5 years

Spatial mapping,ha of planting area

Emerging practice with methods evolving

Increased habitat connectivity
Emerging practice with methods evolving

Increased native species

Decrease carbon and nitrous oxide
emissions

Decreased carbon and nitrous oxide emissions
from crop, forest stand and harvest rotations
Established practice with clear outcomes

Established practice with clear outcomes

12

Very
good

Very
good

Basic

Good

Good

Good

Clean Energy Finance Corporation

What is it

Natural capitalemissions

Activities

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

Outcomes

What to measure

How to measure

Increased soil organic carbon

Area of each type of land protected
or connected to determine avoided
emissions (tCO2-e per ha)

Spatial mapping

Area of pastures that build carbon stocks

Spatial mapping

Metricgrading

Soil carbon sequestration
Using site spatial data,
emissions modelling, andsoil testing to determine
soil surface and subsurface condition andcarbon sequestration

Retention of ground cover and stubble
Protect natural lands

Good

Planting of legume crop species
Enhance natural lands andconnectivity

Good

Increased soil infiltration and percolation rate

Area of each crop species and rotation
frequency

Spatial mapping

Area of ground cover and tree thinningfrequency to determine soil surface
condition

Spatial mapping

Soil subsurface condition

Agronomic soil testingfor each land typeincluding forestry

Good

Very
good

Basic

Fire management
Using emissions
modelling to determine
avoided GHG emissions

Increase fire management practices(e.g. Savanna fire management
methods)

Decreased carbon and nitrous oxide
emissions
Avoided emissions and improved
carbon storage
Established practice with clear outcomes

13

Area of each land type, fuel type(e.g. savannah), burning efficiency andpatchiness (GHG emission avoidance)

Emissions factor
determined by area,
fuel type, burning
efficiency, and patchinessBasicClean Energy Finance Corporation

What is it

Natural capitalemissions

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

Activities

Outcomes

What to measure

How to measure

Conversion of waste to energy andcaptured and reused waste

Increased renewable energy

Amount of waste converted from waste
to energy (GHG emissions avoided)

Emission factor for
asset class waste

Amount of waste converted and re-used(GHG emission avoided)

Emission factor for
asset class waste

Amount of timber water converted fromwaste to energy (GHG emissions avoided)

Emissions factor for
timber waste

Amount of fertiliser, herbicideand pesticide applied

Spatial mapping

Modelled using LWG and emissions
factor (methane)

Genetic characteristics
of livestock

Modelled using feed intake (kg), LWG
proxy and emissions factor (methane)

Dosage of livestock
supplements used

Modelled using site spatial data (GPSand satellite imagery) and emissions factor

Area of pastures (i.e.:
legumes) that reduce
methane emissions

Metricgrading

Waste to energy
Using waste andemissions modelling tomeasure avoided GHG
emissions

Decreased carbon and nitrous oxide emissions

Basic

Basic

Basic

Optimised fertiliser, herbicide and pesticide use
Using site spatial data,application data andemissions modellingto measure avoided
emissions and reduced
pollutant run-off

Optimise fertiliser, herbicide andpesticide use

Reduced nitrous oxide emissions from fertiliser
use in some pasture and crop production, andforestry land
Established practice, clear outcomes

Modelled using
amount applied andwater quality flow meter

Good

Livestock management (including reduction of enteric methane)
Identifying selective
husbandry and genetics
practices

Optimise livestock management
practices

Amount of livestock
supplements used

Optimise livestock management
practices

Decreased carbon and methane emissions

Identifying pasture / feed
type (i.e.: legume typeand location)

Plant legume (N2 fixing) crop species

Decreased carbon and nitrous oxide emissions

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Increased production efficiency and reduced
methane emissions intensity (per kg of production)
Established practice with clear outcomes

Emerging practice with targeted
decarbonisation outcome.

Increased soil organic carbon

Liveweight gain (LWG) applicable for
reduced methane emissions

Area of pastures (i.e.:
legumes), woody thickening
and dead woody biomass
that build carbon stocks

Basic

Basic

Good

Clean Energy Finance Corporation

What is it

Natural capitalemissions

Activities

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

Outcomes

What to measure

How to measure

Reduced freshwater withdrawal

Water used for each harvest and rotation
frequency

Modelled using flow
meters and water level
loggers to determine
water used per kg yield

Metricgrading

Optimised water use
Using flow meter / water
logger data or site spatial
data to measure wateruse

Optimise water management
practices
Protect natural lands
Enhance natural lands andconnectivity

Site spatial data of green,
blue and grey water
footprints
Reduced sediment runoff

Amount of sediment discharged to water
Water used for each harvest and rotation
frequency (forestry)

Change in downstream water quality

Modelled using amountapplied and water quality
flow meter (cropping)

Good

Good

Good

Site spatial data ormodelling using flow
meters and water level
loggers to determine
water used per kg yield(forestry)
Modelled using amountapplied and water quality
flow meter

Good

Integrated pest control
Managing pest predation
for improved ecosystemoutcomes

15

Integrate pest management

Reduced pest species
Reduced crop losses (pre and post harvest)

Area (ha/km2) / land type of each land typeimpacted by pests

Site spatial data
Very
good

Clean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

Emerging technology
solutions
Rapid technology advancements continue to shape the approach to data
analytics in natural capital and support land managers to measure and manage
their environmental assets. These advancements hold the promise of more
effective measurement and verification, are more cost competitive to traditional
methods of data collection, have more environmental benefits from improved data
and better-timed application and in some cases, have better workplace health andsafety outcomes from reduced risks for workers.
During 2022–23 total Australian agricultural research and development funding
was $2.32 billion, with 57 per cent contributed from public funding and
43 per cent by the private sector.22 While the majority of Australian agricultural
R&D continues to be public funded, the private sector has increased its share of
expenditure over the past few decades.23
Globally the agtech industry has faced a major decline in investment in recent years,
alongside venture capital more broadly. Venture capital funding has declined by
60 per cent from late 2021 to the end of 2023, due to broader market uncertainty
and decreased risk appetite among investors.24 Despite these funding challenges,
McKinsey points to a promising long-term outlook with several tailwinds including thebenefits of digitisation and geopolitical focus on food security and sustainability.25
This indicates the potential for the measurement of natural capital metrics tobecome more accurate and cost effective over time through the benefits ofemerging technologies, improving the decision-making process for natural
capital investments from improved reliability of data for strategic targets andoperational goals. As technology develops in support of natural capital activities,
and performance of on-farm activities can be measured and reported consistently,
agricultural managers can more readily adapt and adopt activities that increase
productivity, carbon and environmental benefits.
Accessed 10 April 2024:
22	ABARES 2024, Agricultural research and development investment in Australia - 2022-2023 update.
23	ABARES 2024, Agricultural research and development investment in Australia - 2022-2023 update.
24	Pitchbook data, cited by McKinsey and Co. 2024, Seizing opportunities amid the agtech capital drought.
25	Pitchbook data, cited by McKinsey and Co. 2024, Seizing opportunities amid the agtech capital drought.

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Australian agricultural research and development
funding in 2022-2323

Private43%

Public funding57%

Clean Energy Finance Corporation

Natural capitalemissions

Climate and natural
capital frameworks
There is an array of frameworks and tools available
to measure emissions and nature-related outcomes.
Some are well established and commonly adopted,
while others are emerging or in development.
Increasingly, investors and corporates are required to understandnatural capital reporting and how to use and apply theseframeworks to investments or business operations. The guide
below lists some of the commonly referred to frameworks and asnapshot of their key strengths and constraints to assist investors
and corporates to select the most appropriate for their purpose. The
list is not exhaustive, we note that globally there are other relevant
frameworks. With increased adoption of common frameworks, overtime financial institutions and corporates will benefit from increased
standardisation of approach and comparability of emissions andnature-based reporting. Refer to glossary.

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Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

GlossaryClean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

Glossary

Framework

Description

Strengths

Constraints

GHG Protocol

Comprehensive standardised global framework to measure and manage emissions fromprivate and public sector operations, value chains and mitigation actions

Standardised, global and well-established

Limited to carbon emissions

Guidance extends to freshwater, land,
oceans and biodiversity

Related MRV framework underdevelopment

Consistent approach supports relevant
comparative analysis

Related MRV framework underdevelopment

Includes measurement methodologies for avoided or sequestered land-based emissions
SBTN

Resource network to support and drive progress toward nature positive decarbonisation solutions
Provides methods and resources for science-based targets for nature, including integrated
technical guidance for the assessment and prioritisation of environmental impacts

SBTi

Particular relevance for land-intensive sectors, including forest, land and agriculture (FLAG)
activities
Provides framework for emissions reduction based on science-based targets
Includes measurement methodologies for avoided or sequestered land- based carbon emissions

TNFD

Voluntary disclosure framework for organizations to report and act on nature-related risks,with a focus on shifting from nature-negative to nature-positive outcomes

Uses and leverages other existing frameworks
providing step by step guidanceApplication requires multiple
metrics using a range of
methodologies and theirgeo-locational dependencies

CBI

Comprehensive global certification scheme to support the evolving green bond market bypromote investment in decarbonisation projects and assets

Increasing global reach by issuers,
governments, investors and financial markets

Limited to climate-related
debt products

Uses rigorous scientific criteria to enable tracking of the sustainability performanceof green bond debt issuances

Includes sector-specific criteria for agriculture

Relevant for organisations that directly or indirectly (e.g. supply chain or customers) own ormanage natural assets (e.g. land managers, conservation groups, mining sector, agricultural
sector, corporations, finance and investment, government etc.)

Based on extensive feedback from a broad
range of stakeholders

NCMC

Supports identification of metrics and methods for use in the management of natural assets(e.g. at the farm level, or along corporate value chains or within defined, managed land areas)

Aligned with multiple reporting standards
to support external reporting (e.g. against
disclosure standards and frameworks)

NCMC is currently a proof ofconcept version, designed
to demonstrate a possible
new arrangement of natural
capital metrics

Extends to management of an organisation’s
nature-related impacts and dependencies, or risks
and opportunities (e.g. indirectly through supply
chains or directly through business operations)
FSC

Global certification system to encourage responsible and sustainable practices across forestry
sourcing, conservation and restoration

Considered one of the most recognised forest
certifications worldwide

Based on 10 principles requiring management planning and reporting across a broad range of
relevant areas, including economic, environmental and social policies and objectives

Standardised, global and well-established
Uses satellite mapping and remote sensing
technologies to assess sustainability practices
Relevant across multiple forest ecosystems andin diverse cultural, political, and legal settings

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Certification, compliance andaudit processes are subject
to feesClean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Glossary
TermDefinition

ABARES

Australian Bureau of Agricultural and Resource Economics and Sciences

CBI

Climate Bonds Initiative

CDPQ

Caisse de dépôt et placement du Québec

CEFC

Clean Energy Finance Corporation

CH4

MethaneCO2

Carbon Dioxide

FSC

Forest Stewardship Council

GHG

Greenhouse Gas

ISICInternational Standard Industrial Classification

LULUCF

Land Use, Land Use Change and Forestry

LWG

Liveweight Gain

MRV

Monitoring, Reporting and Verification

Mt

Million Tonnes

N2O

Nitrous Oxide

NCMC

Natural Capital Measurement Catalogue

SBTi

Science-based Targets Initiative

SBTN

Science-based Targets Network

SDG

Sustainable Development Goals

TNFD

Taskforce on Nature-related Financial Disclosures

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Measurement
approach

Decarbonisation
activities

Natural capitalframeworks

GlossaryClean Energy Finance Corporation

Natural capitalemissions

Investment
potential

Measurement
approach

About the CEFC
The CEFC is an experienced specialist investor with a deep sense of purpose: we’re Australia’s‘green bank’, investing in our transition to net zero emissions by 2050. With access to more than
$30 billion from the Australian Government, we’re backing economy-wide decarbonisation, fromrenewable energy and natural capital to energy efficiency, alternative fuels and low carbon
materials. In parallel, we’re focused on transforming our energy grid, backing sustainable housing
and supporting the growth of our climate tech innovators. We collaborate with co-investors,
industry and government, recognising the urgency of the decarbonisation task. We also invest
with commercial rigour, aiming to deliver a positive return across our portfolio.
Disclaimer
This report has been prepared and issued for public dissemination and is provided solely for information purposes. This
report (including all information, opinions and conclusions set out or referred to in this report) must not be relied upon
for any purpose. This report is not intended to constitute financial, tax, legal, regulatory or other professional advice
or recommendations of any kind and should not be used as a substitute for consultation with your own professional
advisors. This report does not purport to contain all relevant information, any historical information is provided by wayof illustration only, and any information as to future matters are not predictions and may prove incorrect. The CEFC
accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this report.

info@cefc.com.au© Copyright Clean Energy Finance Corporation 2024
Clean Energy Finance Corporation
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June 2024

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Decarbonisation
activities

Natural capitalframeworks

Glossary