February 9, 2021

On Tuesday, February 9th, Croatan Institute joined The Mixing Bowl, U.S. Farmers & Ranchers in Action (USFRA), and World Business Council for Sustainable Development (WBCSD) in releasing a new report that analyzes the state of soil health technology and identifies opportunities to find new sources of capital to accelerate the adoption of climate-smart agriculture on farms and ranches across the U.S.

Over the past year, USFRA has convened leaders in food, farming, AgTech and finance to identify current capital flows, review the startup ecosystem and ground-truth actionable recommendations. The culmination of this extensive research and stakeholder-input process, “Transformative Investment in Climate-Smart Agriculture: Unlocking the potential of our soils to help the U.S. achieve a net-zero economy,” examines farmer and rancher barriers to practice adoption, the current state of climate-smart soil technology, financial mechanisms available to farmers and ranchers as well the investment case for including agriculture in the broader portfolio of net zero economy investments.

To provide informed context for an exploration of economic solutions, an Agricultural Capital Flows analysis was conducted to map the flows of capital from asset owners through asset classes and financial intermediaries to participants in the U.S. agricultural value chain. Investment totals $972 billion annually, based on 2018-2020 data, across institutional investors (approx. $600 billion), retail investors (approx. $360 billion) and the U.S. government via federal and state payments and incentives (approx. $20 billion).

Scaled adoption of climate-smart practices will take not only the realignment of existing flows of capital toward climate-smart outcomes, but also the ability to draw in new sources and forms of capital. The report details a variety of pathways in which this capital might flow and calls out the importance of collaborative and blended approaches to capital deployment to rebalance the risk equation. In terms of directly reaching farmers and those value chain actors working closely with farmers, public equity and fixed income are the asset classes that hold the most potential.

“As companies and investors continue to build out the climate-smart investing universe, there are many opportunities to create innovative financial products that simultaneously meet the needs of investors, accelerate the transition to climate-smart agriculture and improve the livelihoods of farmers,” said David LeZaks, senior fellow, Croatan Institute and report co-author. “From working capital loans for cover crop seeds to the promise of green bonds and sustainability-linked loans, we identified multiple opportunities to promote or develop financial mechanisms that enable climate-smart agriculture.”

There is also an opportunity to increase total investment in agriculture with the growing pool of environmental, social and governance (ESG) capital looking for impacts related to sustainability, socially responsible, or mission-aligned investment opportunities. Cumulatively, these investors can make a big impact by investing in agriculture that enables and targets climate-smart practice adoption and soil health outcomes.

Read the USFRA press release here.

Read the full report here.