A report has found that a primary barrier to increasing capital deployment in regenerative agriculture is a lack of demonstrable evidence that the financing will fit financiers’ current risk and reward standards.
Pollination and Transformational Investing in Food Systems (TIFS), with support from The Rockefeller Foundation, has released a foundational guide for mobilising and scaling capital for the regenerative transition.
Canvassing the market of available resources for financing regenerative agriculture solutions, Financing Regenerative Agriculture offers insights from key market participants and provides interested stakeholders with a broad catalogue of the innovative regenerative financing instruments currently being deployed globally.
Maria Kozloski, Senior Vice President of Innovative Finance at The Rockefeller Foundation, said, “In order to shift conventional food systems to regenerative agriculture, the world needs to close funding gaps and unlock $4.5 trillion in new investments per year. This report highlights the potential of investment solutions that deliver healthy food while also rehabilitating land, water and nature.”
Regenerative agriculture, a net-zero approach to food production, prioritises optimising soil health, water retention and biodiversity, better equipping producers to address the risks inherent in food production posed by climate change. However, financial incentives and favourable capital costs for regenerative and agroecological producers remain scarce.
With a $250,000 grant from The Rockefeller Foundation, Pollination partnered with TIFS to synthesise learnings and insights gained from over 40 primary interviews with practitioners in the field. The report expands awareness of structures that have the potential to scale capital deployment, positively impact millions of producers, regenerate millions of hectares of land, and mobilise sizeable investment flows in both developed and emerging markets.
“As industries move towards implementation in 2024, this new body of work addresses a critical need in the global push for regenerative agriculture,” said Dave Haynes, Managing Director at Pollination. “We are excited to highlight the breadth of economically enticing incentives that will bring more constituents to the table.”
Rex Raimond, Director of TIFS, said, “The global financial sector has a tremendous opportunity to serve innovative farmers and companies with financial products that build regenerative agricultural systems. This report organises a growing body of evidence and opportunities to invest in a maturing sector that is generating net-positive financial and non-financial returns. Financial actors now have at their fingertips many viable pathways to utilise for regenerative agricultural investments.”
The new report highlights several key learnings identified through this research, including:
- The financing of regenerative agriculture is nascent across most geographies, with the primary barrier to increasing capital deployment being a lack of demonstrable evidence that the financing will fit financiers’ current risk and reward standards. Growth in the market for regenerative agriculture financing requires continued development of the underlying commercial model, establishment of supporting markets, and entry of large institutional capital.
- Financing for regenerative agriculture will follow a market maturity curve over time with phases that have unique objectives, and consequently, different financing instruments and suitable sources of funds. Based on where the market is today, the regenerative agriculture financing market will not accelerate toward maturity without significant pools of concessional capital with high risk tolerance deployed across a range of opportunities.
- Pension funds, insurance companies, endowments and foundations with substantial capacity to direct large pools of capital toward regenerative agriculture have viable options to contribute to and significantly influence the development of the regenerative agriculture financing ecosystem. Several financing structures for supporting the transition to regenerative models exist across the world – some with growing traction and others that are more nascent models with potential.
Roy Steiner, Senior Vice President of the Food Initiative at The Rockefeller Foundation, said, “Transitioning to healthier, more resilient food systems will only come by working together to design solutions that distribute risk across the value chain so that no one actor is bearing the full costs alone. This report helps us envision the financial structures needed to redirect finance and rebuild food systems that are better for people and planet.”