How Capital Can Unlock 3 Levers to Build Regenerative Food Systems in Europe
The global food system is ripe for change that addresses ecological, economic, climate and human health breakdowns. Regenerative agricultural and food systems have tremendous potential to address these looming crises and capital has the ability to enable the development of the regenerative space.
This theme was front and center at this week’s Regenerative Food Systems Investment – Europe online gathering. Bringing together leaders from across the European regenerative agriculture and investing sector, the event outlined key opportunities to build healthy, resilient food systems and the role that capital can play. The 3-hour event was filled with compelling case studies, data points, and insight from farmers, entrepreneurs, and investors. Here are some take aways that we walked away with about how capital can unlock farmer adoption, supply chains, and innovation to build regenerative food systems in Europe.
In an opening conversation sharing perspectives from regenerative farmers, we learned of the variety of reasons that led producers, UK-based Charles Hunter Smart and Spain-based Alfonso Chico de Guzman, to regenerative. For Charles, three key circumstances drove his decision to transform the operation he manages, Bradwell Grove, back in 2005:
- A reduction in farm profitability as grain prices hit rock bottom and oil prices skyrocketed.
- The subsidy system in EU at the time was changing from specific crops to whole farm subsidies that started to emphasize environment in the government payments.
- He personally was starting to recognize the damage that chemical inputs, such as Round-up, was having on biodiversity around them and the potential for damage to the final food products that their crops supplied.
These factors, he said, led to taking the “leap of faith” into organic and regenerative.
Both Alfonso and Charles spoke of the importance of capital policy in the form of subsidies to incentivize their efforts to change production practices. Alfonso also described the important role that grant and debt capital can play in reducing risk in the transition period. Early on, donations allowed them to experiment with things like hedges. Later, they used longer-term loans that were more patient than traditional short-term loans – something necessary when it came to their investment in permanent crops that would not be harvestable until year 5-7.
Key Take-Away: Poor economics drive the transition away from convention but the economics of regenerative must also make sense in order to take on risky transition… and this often requires capital to help manage the risk over the multi-year transitional period.
Two of the three companies pitching in the RFSI Europe pitch session are working to address some of the barriers to regeneration that are presented by a lack of regenerative supply chains.
Pete Russell, founder of Ooooby – a UK direct to consumer platform for regenerative farmers and food producers – started his pitch with the call to action: if we want regenerative agriculture to be the next big thing, then we need regenerative farmers to be able to make a decent living. He explains that up to 80% of the retail price of food is in the supply chain, making it hard for farmers to get paid a decent price and consumers to pay a price they can afford. Ooooby’s solution is for farmers and food producers to deliver direct to households – eliminating much of the supply chain cost structure they would otherwise face, allowing them to own the supply chain all the way to consumer, and bringing consumers closer to their food sources.
UK-based Wildfarmed is a regenerative food brand working to bring farmers, food businesses, and consumers to move from chemical-based to biology-based agriculture. Co-founder Edd Lees, explained how Wildfarmed works with a community of regenerative farmers (primarily grain at the moment) to bring a branded product (flour) to market. He explained engaging the urban population around the fact that their food choices are their greatest point of agency to addressing the global climate crises is foundational to Wildfarmed and to bringing regenerative mainstream.
Key Take-Away: Transition to regenerative food systems doesn’t stop at the farm level. Producers need reliable markets that will both connect them to consumers and offer premium pricing. Capital can enable and expedite the development of new market opportunities, supply connections, and consumer awareness.
Chris Ramsay and Simon Evill of Pelican Ag laid out the opportunity for regeneration and the massive white space that exists for investment into innovation within it. Chris explained that, according to The Food and Land Use Coalition, “$300-$350 billion in investment is needed annually until 2030 to achieve a viable transition to sustainable food systems,” and if accomplished, “regenerative agriculture has the potential to reap $1.2 trillion a year by 2030.” However, investment is not currently addressing this critically important opportunity.
A 2022 WeForum.org report on regenerative agriculture states that, “Food systems can contribute up to 37% of climate mitigation needed to reach 2030 goals. Yet less than 2% of climate finance is directed at agri-food solutions.” With likely an even smaller amount going to regenerative. In addition, according to the Climate Change 2022 report from the IPCC, when one compares the efficacy of climate mitigation strategies with current VC funding, investment falls abysmally short and points to the tremendous opportunity to increase funding to agriculture and food projects that address climate.
The nascent nature of regenerative food systems, Chris and Simon argue, means that capital – and venture capital (VC) in particular – is primed to play a critical role. Why? For starters, the urgency of the crises we face – in climate and human health to name just two; the necessity to build entirely new systems that have not existed before; and the fact that we still have a lot to learn about the role of soil in human health, carbon sequestration, and more, mean capital willing to take on risk will be necessary to facilitate transformation.
Key Take-Away: Innovation has a key role to play in building new agriculture and food systems but venture and other capital, especially in early-stage development, is necessary to unlock new technologies and tools to accelerate the transition.
Sarah Day Levesque is Managing Director at RFSI & Editor of RFSI News. She can be reached here.