Compelling evidence that regenerative food systems are finally scaling rapidly: now roughly 10% of all impact investing “dry powder” is earmarked for it — $47.5 billion, to be precise.
The official dirt on regenerative food systems and capital markets focused on reversing climate change, profitably
This moment reminds me of the late 1990s, when “clean technology” was not yet a thing. Back then, we coined the phrase “sustainable technology” because, well, we could think of no better name. We knew we’d struck a nerve when a new, local VC fund announced it was focused on the same thing, and I asked them “what is it?” They did not know!
Later, as hardware prices dropped and projects started to make money here and there, things like utility-scale solar, wind power, and eventually turning those things into a service, as Sun Edison did, the cleantech/greentech sector was born!
So, too, is the regenerative agriculture space becoming a prominent focus of some 70 investment groups worth $47.5 billion, accounting for roughly 5% of the 1,340 organizations that The GIIN estimates manage $502 billion in impact investing assets globally. Overall, the impact investing space has derived a compound annual growth rate of 17% among four-year repeat respondents to GIIN’s 2019 Annual Impact Investor Survey. June 19, 2019 Impact Investor Survey: https://thegiin.org/research/publication/impinv-survey-2019
How these shiny new regenerative agriculture investors will faire remains to be seen, as investments in this sector exploded into existence over the past 18 months or so. Very few even knew what “regen” meant to agriculture, let alone that it is an important contributor to mitigating climate change.
A common misconception is that impact investing is only for investors who target below-market rates of return. Expectations for returns vary widely, and represent a diverse set of players, including pension funds, family offices, foundations, private equities and even some Venture Capital firms with objectives across the risk-return spectrum.
66% of investors who responded to the GIIN’s survey 2019 target risk-adjusted, market rate returns, with 91% reporting meeting or exceeding their expectations for financial performance and 98% reporting the same for impact performance. How do they know? Impact investors typically measure the impacts as diligently as single-bottom-line investors track their financial results.
There are now substantial funds set up specifically for grass-fed cattle and several related aspects of generative and ecorestorative agriculture – whatever rebuilds topsoil and stores carbon, improves water cycles, etc. Some new investors are based in the US (one East Coast source is now investing in regen farms all across the country), but it is actually a global phenomenon, per this link (PDF of Soil-Wealth-2019 report, 3 MB).
This news was originally sent to me by our S. African partner, Hugh Goble, working in the regen ag / no till farming space in W. Africa and Southern Europe (Spain). The report was authored by the Croatan Institute, the Delta Institute and the Organic Agriculture Revitalization Strategy. Good people!
What exactly caught our attention? Recent feature article headline at https://www.linkedin.com/feed/update/urn:li:article:8819403954831038399:
Regenerative Agriculture Investing: 70 Investment Groups Worth $47.5bn
To see how this space has evolved since 2014, prior articles at https://www.agriinvestor.com/tag/regenerative-agriculture tell the story via a 3-page introduction, or for the financial news, check out
1. Regenerative Agriculture is Having a Moment and 70 Investments Worth $47.5bn are in it; https://agfundernews.com/regenerative-agriculture-investing.html (may require a subscription, so I’ve reprinted it below), or
2. How Investing In Regenerative Agriculture Can Help Stem Climate Change Profitably; https://www.forbes.com/sites/devinthorpe/2018/12/12/how-investing-in-regenerative-agriculture-can-help-stem-climate-change-profitably, featuring a great introductory 25.5 minute video.
We do not have to obtain our food via big corporations and their agroindustry ways. Thumbnail view of regenerative food systems and agriculture:
- Builds up healthy soil, profitably
- Create strong, local economies
- Sequester carbon en masse instead of relying on the chemical agriculture systems that degrade and burn down the available topsoil. Such mass-scale farming also uses and wastes significant water, causes fertilizer runoff and toxins that are silently accumulating in people, waterways and environment.
- Practices
- Crops in rotation increase productivity, using cover crops and other practices minimize tillage (which releases CO2 into the air), and reduces or eliminates potentially toxic chemical inputs. There are viable, alternative pathways. Shift is from chemical pathways to biological ones.
- Result: Delivers healthier food and other important natural, renewable products and ingredients
Ironically, the UN Special Report on soils doesn’t even come out until next month!
Lastly, an award-winning film worth mentioning, that may help rekindle interest in farming among young people, called The Biggest Little Farm, in theaters now. Without farmers, what’s the point? The 200 acre farm near Los Angeles uses Biodynamic approaches, arguably a type of “beyond organic” regenerative agriculture (an article from 2018 that makes this case, but also points out that “regenerative capital” is the path to scale). This documentary is extremely entertaining and educational, already with greater than 90% approval, and highly recommended. Trailer
Live
long and regenerate,
Daniel
Daniel
N. Robin
Managing Partner
International Impact Finance & Strategic Advisory
Regenerative Agriculture is Having a Moment and 70 Investments Worth $47.5bn are in it
Regenerative agriculture is having a moment. For long-time regen ag practitioners and proponents, this is probably jarring. But having written about regenerative agriculture for five years now, I’ve never seen such engagement or our stories about this ultra-sustainable method of farming perform so well.
Readers aren’t only engaging with the subject matter — the comments boards on these two stories are worth wading through — but the number of headlines about the strategy is also growing as more and more businesses realize the potential in what is, in fact, an age-old farming strategy.
There are many different definitions of regenerative agriculture, but broadly, it’s a set of “beyond sustainable”farming practices that aim to improve the land farmers use with a particular focus on soil health and with the potential to mitigate climate change through carbon sequestration.
In the last month, several major initiatives have launched to promote farmers’ transition to this style of farming. Just this week we report on a program in Montana to help ranchers transition to rotational grazing, two weeks’ ago dairy giant Danone launched a regenerative dairy project with some major players including Corteva, DSM, Yara, MSD Animal Health, and leading agriculture university Wageningen. Earlier in June Indigo Ag, the ambitious Boston-based startup launched the Terraton Initiative, with the intention of sequestering one trillion tons of carbon from the atmosphere through regenerative agriculture methods. Earlier this year, General Mills and Anheuser Busch also made commitments to regenerative agriculture.
It’s unclear at this point which initiatives are genuine, which will work, and which are merely trying to take advantage of the growth in consumer demand for sustainable-labeled food, but they certainly won’t be the last.
Investors getting into the act (article on Forbes entitled “How Investing In Regenerative Agriculture Can Help Stem Climate Change Profitably”).
Regenerative agriculture investing: Soil Wealth Report
This week, a new report, cleverly called Soil Wealth, has come out detailing the level of investment in regenerative agriculture-related projects and the numbers are surprisingly high: there are some 70 investment strategies with assets under management of over $47.5 billion, and that’s just in the US.
Just to clarify, that amount includes all investments made by these firms, some of which were regenerative agriculture-focused. But the potential is there, so much so that a new conference dedicated to regenerative agriculture investing launches in September. And the asset class with the biggest focus on regenerative agriculture — farmland — is full of dedicated fund houses, purely focusing on it.
David LeZaks, one of the report’s authors from Delta Institute, is excited about the space opening up further.
“This is a great start, but we need a lot more investment activity to have a meaningful environmental impact,” he told AFN.
Why are investors looking at regenerative agriculture?
The increasing urgency of addressing climate change is a major factor, according to the report’s authors — Croatan Institute, Delta Institute and the Organic Agriculture Revitalization Strategy. Regenerative agriculture has the potential to sequester carbon dioxide from the atmosphere and store it, not only halting the industry’s impact on the environment but reversing it. The potential for outsized investment returns is another clear benefit.
The report’s authors estimate that some $700 billion of investment in regenerative agriculture in the next 30 years could not only return $10 trillion, a return on investment of 14.3 times but could mitigate nearly 170 Gigatons of CO2 emissions (GtCO2e). To put that into context, in order to limit global warming to 1.5 degrees centigrade, per the IPCC’s recommendation, we need to remove between 100 and 1,000 gigatons of carbon dioxide from the atmosphere, while we’re still emitting between 39 and 45 GtCO2 per year.
While various data point to the proven potential for certain agricultural practices to sequester carbon in the soil, there’s still some debate about how effective it could be in reversing climate change. Impossible Foods recently waded in to try and debunk the potential for rotational grazing, and members of the World Resources Institute are skeptical about the potential of the agriculture industry to effect widespread change in CO2 levels.
LeZaks said there’s a wealth of data to prove the carbon sequestration potential of regenerative agriculture.
“The uncertainty around carbon sequestration [through agricultural practices] is mainly focused around exactly where, how long, and what practices are followed, but where there is certainty is that we cannot continue to degrade agricultural land in the same way that we are today and there’s agreement in the direction we should be taking,” he told listeners on a call about the report today.
How are investors investing in regenerative agriculture?
The report, authored by the Croatan Institute, the Delta Institute and the Organic Agriculture Revitalization Strategy, highlights six different types of investment asset class investing in regenerative agriculture: cash, public debt, private debt, public equity, private equity and venture capital, and farmland/real assets.
While the public equity markets are increasingly focusing on ESG (environment, social and governance) metrics, just two funds were identified to pursue regenerative agriculture in some way: Calvert Investments and Trillium Asset Management. The fixed income and cash asset classes included a mix of local initiatives, banks, and investment management firms.
In venture capital, our main focus here at AFN, just five funds were identified as having made regenerative agriculture investments — Almanac Investments, Fifth Season Ventures, Fresh Source Capital, Renewal Funds, and S2G Ventures — although we believe there are more (AgFunder included with our investment in soil health startup Trace Genomics).
By comparison, farmland funds are the most prolific investors in the space, with 29 identified strategies, most of which attract large institutional investors such as pension funds and insurance companies, including TIAA-CREF’s own asset management firm Nuveen. Most of these funds purchase conventionally-farmed land and transition it to regenerative and organic, with the aim of increasing its value and revenues from more sustainably-labeled harvests. Practices adopted include cover cropping, no-till, crop rotations, reducing the use of chemical pesticides and fertilizers, and rotational grazing of livestock.
The report authors assess which asset classes, and specific types of investment vehicles, are most appropriate — or “regenerative ready” — with a leaning towards farmland, cash, and fixed income investment opportunities.
“We view farmland, cash, and fixed income as asset classes ripest for rapid development in part because bank financing remains the leading form of financing farms and businesses in rural communities,” it reads.
“Ultimately, though, our interest is in fostering diversified, total portfolio approaches to investing in regenerative agriculture across asset classes. As such, we also recommend continuing to work with a secondary focus on equity investment, both public and private, and on private debt, where some of the greatest experimentation has already occurred, though at limited scale. Given the demonstrable social and environmental benefits associated with regenerative agriculture, we also strongly recommend greater blending of private investment with catalytic sources of capital from philanthropy and government, at multiple levels, using frameworks such as Integrated Capital that would expand the reach of regenerative agriculture.”
Recent Comments