Regenerative Returns
The Long-term Benefits of a Regenerative Development Investment Strategy
Overview
Farming, to many, is an afterthought to their daily lives; many of us do not realize the degenerative ecological and economic effects that come from almost all food produced globally. Global degenerative agriculture is the leading cause of rainforest deforestation [1], land [2] and water [3] toxicity, is the largest consumer of water [4], and one of the largest causes of soil erosion globally [5]. Regenerative agriculture is the complete opposite; it restores water in local hydrology, builds plant biomass and increases soil content [6] (and soil carbon levels [7].) This type of agriculture currently has a fraction of the global food market, and due to serious crises facing all of human society, it is set to explode; offering huge investment potential for regular and institutional investors.
Regenerative agriculture can take carbon out of the atmosphere and replace it in the soil (see next subheading.) This means that soon consumers will be able to link their eating habits to food, and fashion habits to clothing, that is specifically designed to reverse climate change. The average consumer need not wait for their government to take action; their everyday purchasing habits can ‘fix’ the largest problem facing humanity today. This is an exciting investment opportunity unlike ever before in recorded history.
Regenerative Agriculture, unlike its degenerative counterpart (according to preliminary research,) may offer exponential return in the form of food production. This arises from the symbiotic relationship of regenerative plant, microbe and water systems that are designed to improve over time. More research has to be done to fully prove this scientifically, but if true, as the human population continues to grow exponentially, regenerative agricultural yields can keep up with demand in ways that benefit the ecosystem, the local water cycle, and the soil. As Ryland Englehart, cofounder of the nonprofit Kiss the Ground, says, ‘it’s an idea whose time has come [8].’
The purpose of this paper is to recruit activist investors who see the long term restorative potential of regenerative agriculture, and who want to link a portion of their retirement savings to land regeneration projects. The key driver here is that average investors can link long term portfolio performance with the regenerative movement, and will therefore have an incentive to ‘convert’ their close friends and families toward eating more regenerative food and to wearing more regenerative clothing; leading to an increase in value of land regeneration investments and a decrease of carbon in our atmosphere- a truly virtuous cycle.
International Initiative- 4 per 1000
4p1000 is an international initiative that uses the metric of four parts per thousand as the driver for success to offset carbon current carbon emissions; they have identified the tipping point of carbon sequestration to halt the annual increase of CO2 in the atmosphere. The infographic below explains the process thoroughly. Regenerative Agriculture has the potential to rebuild land value while reversing climate change, and this international initiative will help accelerate the process.
According to the 4p1000 website, ‘The aim of the Initiative is to demonstrate that agriculture, and agricultural soils in particular, can play a crucial role where food security and climate change are concerned.
Based on robust scientific evidence, the Initiative therefore invites all partners to declare or to implement practical programmes for carbon sequestration in soil and the types of farming methods (regenerative agriculture) used to promote it [9].’ The Initiative is currently being signed by 25 nations, as well as 65 partner organizations [10]. This international momentum will push for international policy changes; leading toward potential government subsidies for regenerative agricultural practices (which would increase investment return for regenerative agricultural projects.)
Regenerative Food and Textile Production
The team at Regenerative International is teaming up with other organizations to digitally map the landscape for regenerative farms and organizations worldwide. The goal for this project is to inform consumers where they can purchase food from farms on an easy to understand digital map. This technology will help drive demand for regenerative goods to food consumers, as well as be a ‘best practice’ guide for regenerative farmers in the future. Such easy to use consumer tools help create consumer action that could quickly take market share from degenerative foodstuffs toward regenerative foods.
Companies like Fibershed in Northern California are exploring how to unite locally produced fiber/ textiles, with local dyes and local labor, all with original source materials (wool, etc) raised on regenerative land [11]. Imagine the social clout that comes when early adopter consumers will be able to tell the story of how their new leather jacket, or wool hat, were raised on a farm that sequesters carbon in the soil. As the realities of climate change continue to lead to global weirding, this social impact solution has potential to rapidly spread in the marketplace.
‘Kiss the Ground’ 2017 documentary
Josh and Rebecca Tickell (of ‘Fuel’ and ‘The Big Fix’) are currently creating a full-length documentary about regenerative agriculture called ‘Kiss The Ground.’ Their goal upon release is to encourage one million people to become regenerative farmers. This documentary will help to inform consumers of power of regenerative agriculture, leading to both an increase in supply- by driving farmers to the land, and an increase in demand- by informing consumers of the benefits of regeneration. The nonprofit behind the film, also called Kiss the Ground have an easy to understand animated film called ‘The Soil Story [8]’ that breaks down the story of soil carbon sequestration. This digestible communication can drive rapid consumer demand for regenerative development.
Loess Plateau in China- Case Study of Success
John Dennis Liu, in his documentary, ‘Hope in a Changing Climate [12]’ highlights real world examples of regeneration on a large scale. Over 3 million acres of land were regenerated by local farmers in the Loess Plateau area of China, and according to the World Bank [13]:
‘More than 2.5 million people in four of China’s poorest provinces — Shanxi, Shaanxi and Gansu, as well as the Inner Mongolia Autonomous Region — were lifted out of poverty. Through the introduction of sustainable farming practices, farmers’ incomes doubled, employment diversified and the degraded environment was revitalized…
Incomes doubled…Natural resources were protected… Sedimentation of waterways was dramatically reduced… Employment rates increased… Food supplies were secured…
The project significantly contributed to the restructuring of the agricultural sector, the adjustment to a market-oriented economic environment and created conditions for sustainable soil and water conservation.’
This real-world example showcases that regeneration is good for the environment, while being overwhelmingly good for the economy.
Opportunities for Investment
Regenerative Agriculture is a step beyond organic agriculture. Organic agriculture has only achieved 3 percent marketshare in 30 years; partly because it is viewed as a luxury good in the minds of many consumers. Regenerative production on the other hand, can halt CO2 in the atmosphere, and here in drought ridden CA and other arid regions, can rehydrate dry and fallow landscapes. Rehydrating landscapes is a big investment opportunity; by returning water into dry and dessicated farmscapes, there is potential for land appreciation. This investment would yield the side benefits of reversing the effects of CA’s drought, while reversing the effects of climate change with carbon sequestration, a win win for every investor and every sentient being on planet Earth.
Regenerative Land Development
Farmland investments (measured by the NCREIF Farmland index) have returned 11.83% compounded from 1992–2013 [14]. This outperforms both the S&P 500 and the NCREIF Real Estate index for the same time frame. Most of this farmland yielding investors ROI is degenerating the environment, depleting the local water resources, and does not include the expense to farmers of laying fallow (when farmland is not being used) for long periods of time, a common practice in an industry that strips land of its resources. Market shifts will come in the future when many examples of of regenerated vs degenerated landscapes sit side by side. Imagine driving through California’s Central Valley (the breadbasket of America [15]) and seeing pockets of green, lush land with water flowing on property, next to properties of dehydrated plant life and rows of food barely alive. As a long term investor, which land would you choose?
Farmland LP, the Gold Standard of Land Regeneration
‘Farmland LP owns 9,700 acres of farmland in Northern California and Oregon [16].’ They are a highly successful venture capital firm that regenerates land, makes large profits, and offers farmers a successful network with which to learn from one another. Right now, they are concentrating on expanding organic farmland (not quite full regeneration;) but as regenerative agriculture becomes more well known, they will be perfectly positioned to implement carbon sequestration into their program, adding to their soil building and water implementation programs. This model can be replicated on a fully regenerative scale.
New Crowdfunding Legislation and and Self Directed IRA Retirement Plans
Commercial real estate industry is currently being ‘disrupted’ by new crowdfunded investment vehicles, like the electronic Real Estate Investment Trust (eREIT [17].) In the past, wealthy investors were the only people capable of buying shares in Real Estate Investment Trusts. Now, with a low investment minimum of $1,000, Regulation A+ [18] allows many regular investors the opportunity to capitalize on the upside in commercial real estate, without having to be an accredited investor with $250,000 of investable capital.
The IRS Self Directed Individual Retirement Account (SD IRA) [19] has been around since 1972; recent stock market fluctuation is having many savvy investors turn to this investment vehicle for long term return. SD IRAs allow investors the chance to invest a portion of their pre tax retirement money and place it in a real estate vehicle (or other alternative asset class); meaning they can invest in regenerative land projects and be incentivized to take action long term, so come retirement they can cash in on land holdings that have appreciated in value. With a crowdfunded eREIT vehicle, one could, on a pretax basis, invest up to $5,000 per year [20]. This means, that as excited early adopters of the regenerative movement link a portion of their retirement savings to regenerative land development, they will have an incentive to spread the word about regeneration to their friends and family. With a small circle of investors passionately advocating for a new regenerative lifestyle, this agricultural movement has the chance to far surpass organic agriculture in a relatively short period of time. The combination of the social impact story of our generation, with a land appreciation investment return, is something the marketplace has never seen before.
Meeting the Planets Long Term Food Demand
Human population has been growing exponentially on the planet for the last 10,000 years [21]. On the graph on page 6, the red curved line showcases this explosive growth. Global population in 2016 has reached more than 7 billion people, and by 2025, population will surpass 8 billion. For frame of reference, in 1960 there was only 3 billion humans on the planet [22]. This has lead many economists and environmental activists to claim that we have an overpopulation problem, and to repeatedly highlight lack of food as a serious future threat.
Degenerative agriculture cannot keep up with the needs of a population growing exponentially- the blue curve on the graph below depicts where food production will not meet the needs of human population. Agricultural yields in regenerative systems can, according to preliminary research, grow exponentially alongside populations; meaning that growing food regeneratively could increase Earth’s carrying capacity of food production to meet the needs of all. One can infer that either we will swiftly transition to regenerative agriculture globally, or suffer society changing turmoil from lack of basic necessities for global populations. This paper is to encourage the former, and to showcase profitable land regeneration investments leading us toward that future.
As degenerative land projects are showcased side by side next to regenerative ones, the marketplace will quickly respond by increasing the value of regenerative production, and decreasing the value of degenerative production. In the long term (5–10 years) this will force (according to the principle of fiduciary duty [24]) executives of publicly traded, agriculturally focused REITs to transfer their farm assets from degenerative to regenerative; meaning that regenerative intellectual property will be in high demand in coming years.
In closing, share this White Paper with your friends, family and colleagues. It’s time to demand regenerative goods and services from our grocers, our chefs, and our local clothing boutiques. Let’s begin talking about next steps toward pooling a portion of our assets toward regenerative land development, leading to return on investment (ROI) while building a planet fit for future generations.
About the Author
Jon Connors is an activist, social entrepreneur, and author whose passion for regeneration permeates all aspects of his life. His undergraduate degree is from the Culinary Institute of America, where he learned the intricacies of the food system from farm to table. He learned about regenerative agriculture from the Center of Bioregional Living in NY. He earned a Master’s in Financial Statement Analysis and Securities Valuation from CUNY Baruch, where he learned to project the future based on financial reporting. Jon envisions the union of his financial education and regeneration by advocating for public carbon reporting for farms, similar to current financial reporting, helping inform investors and consumers about linking purchases of food and clothing to the intention of reversing climate change.
References
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