Sustainable agriculture investment must be long term, as it will be years before investors begin to benefit from sustainable practices, especially with cheaper, unsustainably-sourced agricultural products still dominating the market.
Christian Super chief executive Peter Murphy said investors should also be aware of inherent risks.
Murphy said "the high volatility of commodity prices and outputs directly increases the uncertainty of the return on investment. Additionally, for products meant for export markets, there is also the foreign currency risk".
Investments in agriculture, he said, should therefore have comprehensive risk management through commodity prices and foreign currency hedging.
"This requires a strong understanding of both the agriculture industry as well as hedging instruments," he said.
AMP Capital head of sustainable funds Dr Ian Woods agreed risk management and long-term perspectives were crucial. Woods warned there were long- and short-term risks.
"For any particular investment, the longer-term impact of climate change is a risk that also needs to be considered along with the shorter-term risks of commodity prices and foreign exchange," he said.
"However, the long-term drivers for sustainable agriculture appear sound, with continued population and economic growth, especially in Asia, and greater focus on quality of produce providing strong underlying drivers."
Australian Ethical Investment portfolio manager Andy Gracey and Australian equities analyst Dr Mark Wade said they doubted if "pure agricultural 'product' investments lend themselves to being listed under a corporate structure".
Gracey said the food scarcity arguments were talked about regularly in investment markets, "but the reality is there are few ways to play it".
"Grain handlers have been successful, but they are not farmers. There has been some smallish success in companies buying sheep land, for example, and converting this into higher-value dairying land, but this is for all intents and purposes a land value investment," he said.
"There are listed dairy processing companies, but this also does not make a lot of sense when ultimately the milk suppliers operate under a more cooperative-type structure."
Beyond prices and currency movements, Murphy said Australian farmers faced two other key risks.
The demand for Australian produce might slow, especially with stagnant economic growth in export markets in Asia and Europe.
The Australian Bureau of Agricultural and Resource Economics and Sciences estimated net cash income from exports would fall 1.7 per cent a year over the next five years.
Additionally, farmers would have to manage the climate change risk and greater uncertainty in long-term climate conditions and higher frequency of short-term extreme weather conditions.
Despite cheaper, unsustainably-sourced agricultural products, current trends showed greater consumer awareness and higher demand for sustainably-produced food, despite higher prices.
IBISWorld estimated organic food revenues over the five years through to 2011/12 grew by an average 11.6 per cent a year, and this growth was expected to continue.
Agricultural commodity prices and, as a result, the potential income normally rose with inflation, providing a good inflation hedge.
As was the case with most impact investment, the non-financial skills had a much greater bearing on success than financial skills, Murphy said.
Unlike conventional investments, farm managers were responsible for selecting suitable assets, suitable products to focus on, and the right sustainable tools and practices, he said.
Investing in sustainable agriculture therefore required more confidence in the specialised skills and abilities of farm managers than the fund managers, which might introduce significant key people risk, he added.
Gracey said there were also arguments about how motivated corporate-owned farmers were compared to owner-occupy farmers with their livelihood at stake.
"Farming returns are too low and volatile, while investors on listed markets are looking for consistency in profits," he said.
