How finance can unlock benefits of regenerative agriculture

While our current food system contributes to one-third of GHG emissions, evidence shows that it has huge potential to be part of the climate solution. Sustainable and regenerative farming has a key role to play, encompassing a broad range of context-specific farming practices that work in harmony with biodiversity to improve soil health and boost resilience.

As it stands, shifting to regenerative methods takes time and carries risk, which is currently shouldered entirely by farmers who are often already working on extremely tight margins. Food producers understand their land and are more invested in its health and quality than anyone. However, they lack the financial support to transition to sustainable farming practices. Innovative financial mechanisms are key to helping alleviate these risks and to plug finance gaps including training costs, inputs such as new seeds and mitigating yield loss.

Consumer demand for sustainable food alternatives is rapidly increasing, bringing a host of exciting new investment opportunities across supply chains. Our research shows that over half of Europeans take sustainability into account when making food choices. But during a time when food products are becoming more expensive, consumers should not be expected to bear the costs of the regenerative agriculture transition either.

Analysis from the Food and Land Use Coalition shows that an annual investment of $35-40 billion is required to shift procurement from buying commodities to investing in sustainable supply chains and deploying innovative finance to reach currently underfinanced areas. Impact investors can also support the shift away from high-carbon inputs across complex and global value chains towards more localised production.

The pay-off is significant: by 2030, this investment could unlock an annual opportunity worth $530 billion for businesses associated with the transition to sustainable food production.

Regenerative agriculture practices can also draw CO2 from the atmosphere and lock it into soils, providing high-quality carbon sequestration – a key component of the EU’s net zero strategy.

Startups such as Fyteko, which is developing next-generation bio crop inputs including bio-herbicides and Paltech, which has designed a mechanical weeding robot to support weed control on organic farms are evidence of the growth and scaling that are possible when investment reaches regenerative agriculture innovation.

Significant benefits can be realised by bringing new technologies directly to farmers. EIT Food’s Test Farms programme links agritech startups with farmers and testing land, enabling entrepreneurs to validate and test their products and services, showcase their business to customers and investors and, in the longer term, support the regenerative transition.

Impact investors have an exciting opportunity to deploy innovative financing at the root of food supply chains to support climate resilience and biodiversity restoration. Regenerative agriculture overlaps with many of the other shifts that are needed to transform our food system, including healthy diets, food loss and waste. This means that regenerative agriculture will become an increasingly critical area for investment and innovation over the next decade.

There is a strong case for impact investors to work together to create a ‘Coalition of Capital’, building on the foundation of organisations like EIT Food which seed the first critical stage and de-risk later investments. We invite you to join us, to invest in sustainable agriculture and the future of food production.

If you’d like to know more about EIT Food’s innovative work supporting regenerative agriculture and to get involved, contact us: info@eitfood.eu