In my report on sustainable agriculture published in December 2009 entitled ‘Preparing for a second green revolution’, I wrote that one of the reasons why venture capital and private equity investment in the sector is so low, is that there are few experts with both venture investment and agricultural expertise.

At the same time, the drivers for investing in sustainable agriculture – forecasted food demand rising to unprecedented levels combined with tougher constraints on increasing food supply and the damaging nature of conventional modern farming – are more pertinent. Hence I concluded that it wouldn’t be long before investors become more incentivized to discover the commercial opportunities and put money to work in the sector.

It seems as if this forecast is somewhat materializing. Even though venture capital investment in sustainable agriculture still constituted only 3% of global cleantech investment in 2Q 2010, there was clear heightened interest from new cleantech investment funds from across the globe to invest in the sector.

Asia-based CLSA and Origo Partners, U.S.-based Global Environment Fund and JAFCO Ventures, and European investors BeCapital and Robeco are but some of the investors that made fund raising announcements in 2Q 2010 with the intention of earmarking some of the capital to sustainable agriculture.

I have now observed this heightened investment interest for the past 3 quarters suggesting that the drive to invest in sustainable agriculture isn’t a one off outlier and it paints a rosier outlook for venture investment in the sector. However, the vast majority of new cleantech funds expressing interest in the sector do so as part of a broader cleantech investment remit which suggests that they remain uncertain and wary in their approach.

Nevertheless, there have been some pioneering new agriculture-focused funds; Examples include Agro-Ecological Investment Management, Farmland LP, and MidPoint Food & Agri Fund. It therefore seems logical that valuable synergies exist between the more generalist cleantech funds looking to invest in the sector and the agriculture-specific funds. The more generalist cleantech funds could bring additional capital for co-investment opportunities with the agriculture-focused funds and in return the agriculture-focused funds could share their deep sector expertise with the more generalist cleantech funds.

Sustainable agriculture still remains a marginal player in the cleantech space, but I would expect this to slowly change over the coming years as the will and the capital to invest in the sector continues to grow and more investors find their feet in the sector.

Know of any other investors wanting to invest in sustainable agriculture? How about new companies in the space looking for funding? Any other thoughts? Weight in below.