Feeding the World Sustainably: The Promise of Regenerative Agriculture

Transitioning to regenerative agriculture practices needs to be a global priority to meet the growing need for a food system that nourishes people without harming the planet. Investors have the power to influence this transformation by financing the adoption of new technologies and approaches among farmers who are deeply connected to their land.

There is a vision of the world where we can feed our growing population of eight billion people while improving the health of our farmlands and waters, reducing carbon emissions and protecting habitats. A world where we can increase yields and provide better access to nutrient-rich food for underserved communities without razing rainforests.

Regenerative agriculture is gaining attention in the mainstream media as a solution to our food problem – take for example the 2020 documentary “Kiss the Ground” and its sequel “Common Ground,” which took the Tribeca Film Festival by storm this year. The influence of documentaries like these are building a more sophisticated consumer and increasing demand for regenerative food globally. Yet while filmmakers and celebrities highlight regenerative practices and making actionable commitments, we believe it’s ultimately up to investors, shareholders, and producers to lead the transformation of our food system. 

The how and why of regenerative agriculture

Regenerative agriculture is based on the principle that supporting human and environmental health can coexist harmoniously. Using innovative technology and agricultural best practices, farmers can improve crop yields and profitability, grow more nutritious food, and improve labor practices, while also supporting biodiversity and improving soil health on their lands. Regenerative agriculture can also deliver more equitable land and food access across communities worldwide.¹

When AlTi Tiedemann Global attended the Regenerative Food Systems Investment Forum, we heard repeatedly from farmers, entrepreneurs, and investors that access to capital was the number one challenge facing the transition to regenerative agriculture. To enable regenerative agriculture on a global scale, it must be made available to the many millions of small and mid-scale farms.²

This is a huge opportunity for the wealth management industry at large to incorporate regenerative agriculture into client portfolios and their impact investment strategies. There are few sectors with as much potential to meet impact investors’ goal of using capital to catalyze improvements in human health, equity and justice, or environmental healing. Regenerative agriculture has potential to do all three, and there’s no time to waste. Farmers are waiting for the capital they need to adopt regenerative practices and impact investors have the opportunity to provide it.  

Farming finance from our portfolio

Agriculture at the mid-scale level tends to be a conservative industry because change is difficult; if a farmer tries something new on the land they own and ends up losing a crop, the income losses can be staggering. To become a productive organic producer that can sell at a premium, farmers must commit about three years of expensive and risky development work. AlTi’s approach to sourcing investments for clients in this sector aims to help farmers overcome traditional barriers to financing by providing patient and flexible capital structures with a longer time horizon to repay debt and help reap the benefits of transitioning to regenerative agriculture.

One of our portfolio companies, for example, offers debt financing that is designed to help farmers adopt practices such as electrifying tractors, buying new seed, or re-leasing and repurposing portions of land while allowing them to pay back the loan over an extended period. The idea is to replace traditional loans with flexible solutions, so mid-scale farmers can scale healthy practices.

Another uses equity instead of debt to provide farmers with the capital they need to expand their farm or adopt regenerative practices. Farmers effectively sell a minority ownership in their farm, and in 10 years’ time, when the farm has hopefully appreciated in value, the farmer can refinance, using that cash to repay the minority owner and retain full ownership of the farm. This solution allows the land to grow in value without the need for annual debt repayments to be met.

We also work with several FDIC-insured banks and Community Development Financial Institutions (CDFIs) to drive inclusive innovation – for example, one of our partnerships with a CDFI provides access to capital, education, and land to low-income farmers engaged in regenerative agriculture in California. Projects include helping Black, Indigenous, and POC farmers purchase and refinance loans; access loans for planting, harvesting, and other crop expenses; and source infrastructure loans for equipment, vehicles, and facilities, as well as on-site housing.

Financiers like these recognize that farmers operate on thin margins and can provide flexible financing solutions that de-risk sustainable growth and expansion. While their land is worth a lot, many farmers tend to be cash poor. Now more than ever, they need capital and support to bridge the gaps toward better practice and innovative tech.  

Where’s the risk?

Regenerative agriculture investments do not come without risk, often associated with the fact that regenerative agriculture itself can be misunderstood and subject to forms of greenwashing. There is work to be done in standardizing processes to measure and verify what’s happening on farms and avoid adopting practices that don’t have much scientific basis.

This is difficult in practice, mainly because what constitutes regenerative practice is site-specific; for instance, techniques that are considered regenerative for annual row crops (e.g., corn or wheat) may not be applicable for permanent crops (e.g., grapes or apples). Also, more practically, financing a farm to begin a transition into regenerative practices may mean that the farm inevitably experiences lower productivity in its early stages.

Transition to regenerative agriculture still needs to be a priority, especially considering that agriculture accounts for nearly a quarter of the world’s greenhouse gas emissions.³

When farmers are relieved of their financial constraints and equipped with the means to adopt new technologies and more sustainable methods, we can begin to imagine a future where we don’t have to choose between combatting food insecurity and preserving our ecosystems. The promise of regenerative agriculture is one of healthy, abundant crops, thriving biodiversity and a nourished people and planet.

Sources:
[1] https://www.globalbankingandfinance.com/investing-in-regenerative-agriculture-balancing-profit-and-sustainability/
[2] https://www.oneearth.org/why-smallholder-farmers-are-key-to-scaling-regenerative-agriculture-10-case-studies/
[3] 2023.04. Nature-based Solutions Theory of Change.pdf