Soil Wealth: Investing in Regenerative Agriculture across Asset Classes

Authors

Christi Electris, Joshua Humphreys, Kristin Lang, David LeZaks, and Jaime Silverstein

Publication

Soil Wealth | July 2019

Summary

As the investment community in the United States, particularly within the fields of sustainable, responsible, and impact (SRI) investing, shows an increasing appetite for investing in sustainable agriculture and food systems across asset classes, a subset of investors is demonstrating growing interest in financing not simply “sustainable” agriculture but agriculture that is deemed explicitly “regenerative.” What “regenerative” means for farmers and investors remains highly in flux, but broadly it tends to refer to more holistic approaches to agricultural systems that work with natural systems to restore, improve, and enhance the biological vitality, carrying capacity, and “ecosystem services” of farming landscapes. Regenerative farming operations also aim to support the resilience of the rural communities and broader value chains in which they are situated.

This report provides the first work product of a three-year project on innovative mechanisms for financing regenerative agriculture, led by Dr. David LeZaks at Delta Institute, with funding from a USDA NRCS Conservation Innovation Grant and support and involvement from 19 additional formal partners. It is designed for a diverse audience of stakeholders, including investors, regenerative agriculture practitioners, food system entrepreneurs, philanthropic funders seeking to advance the field as both grantmakers and investors, and policymakers at local, state and federal levels.

This study quantifies the U.S. landscape of investment funds that explicitly make sustainable food and agriculture or regenerative agriculture part of their investment strategy or criteria across investment asset classes – not only in farmland but also in cash and cash equivalents, fixed income, public equities, and private equity and venture capital. We have also identified a wide range of financial mechanisms, instruments, and approaches commonly used in more traditional conservation or agricultural finance transactions that could potentially be mobilized more explicitly to support regenerative agriculture outcomes in the future. This report therefore provides a roadmap to guide the development of new investment opportunities in regenerative agriculture. Philanthropy and government funding have critical, catalytic roles to play in creating an environment for more private capital to be mobilized in support of regenerative agriculture that truly delivers on its environmental and social impact potential.

The increasing urgency of addressing climate change has added to this mounting interest in regenerative agriculture and “carbon farming.” To realize the carbon sequestration and climate mitigation potential associated with implementation of regenerative agricultural practices, more than $700 billion in estimated net capital expenditure over the next 30 years will be needed. Based on our analysis of Project Drawdown’s published data, projected out to 2050, implementing climate-friendly agricultural practices could mitigate nearly 170 GtCO2e, while generating a nearly $10 trillion net financial return.

The outcomes from regenerative agriculture can also enhance the biodiversity of farming landscapes, improve the water cycle, and strengthen the broader resilience of both ecosystems and food systems, while bolstering the economies of rural communities. Additionally, these various outcomes and impacts of regenerative agriculture align with several U.N. Sustainable Development Goals, which growing numbers of investors are beginning to integrate into investment decision-making frameworks.

This constellation of benefits associated with building both soil health and community wealth through regenerative agriculture is what we call “Soil Wealth.”