“Regenerative Agriculture, a Lever Towards Net Positive”
AXA, Unilever, and Tikehau have partnered to create a private equity impact fund dedicated to investing in projects and companies supporting the regenerative agriculture transition. We invited Alice Legrix from AXA Climate to talk about regenerative agriculture, its social and environmental impacts.
How would you define regenerative agriculture?
We, at AXA Climate, in partnership with Tikehau and Unilever, have decided to define regenerative agriculture as: “Agricultural production systems that aim to regenerate soil health and life within the soil. But with a more holistic outlook on impact that looks at environmental impact, social impact, and impact on health.”
There are other definitions on the market that focus more on the soil and environmental impacts of regenerative agriculture. Some even focus on the type of practices that make up regenerative agriculture. However, we believe that focusing on the outcomes rather than the practices helps us account for more potential externalities, notably when it comes to social externalities like farmer health and well-being.
What are the causes and consequences of soil degradation?
Modern agriculture is killing our land. Worldwide, soil is degraded at approximately 40% and in 2050 (source: UN), without significant change, will be degraded at 90%. This could have a considerable impact on our environment as soil accounts for 75% of terrestrial biodiversity, and plays a vital role in both carbon and water cycles.
Drivers of soil degradation include modern/excessive plowing, mechanization, lack of crop rotation and excessive use of chemical inputs (pesticides, herbicides, etc…)
Compacted soil doesn’t absorb water as efficiently which leads to erosion into nearby bodies of water. Soil and the pesticides/fertilizers used by farmers then infiltrate drinkable groundwater, nearby rivers, and lakes.
Inefficient water absorption mixed with excessive use of pesticides and lack of crop diversification leads to extreme biodiversity loss. Modern agricultural practices today are responsible for approximately 70% of biodiversity loss (source: WWF). These organisms (microfauna, earthworms, mushrooms, bacteria etc…) play a vital role in our food chain and in carbon sequestration by digesting/ingesting agricultural residues. Without these organisms, carbon is released directly into the atmosphere instead of being captured in the soil. As a result, almost one third of the world’s emissions come from forests and agriculture.
When did we start talking about regenerative agriculture?
Firstly, the more complete and correct term is agroecology: an umbrella term for agricultural practices associated with an ecological approach. The term was used in the 4 for 1000 initiative which started at the COP21 in 2015. Agroecology can be seen as a continuum where the ultimate goal is to reach agricultural ecosystems that are self-sufficient and sustainable. Regenerative agriculture is one of the forms of agriculture that can be placed on the continuum of agroecology.
For me, 2015 is the real beginning of regenerative agriculture and agroecology. It is when we became aware that soil is alive and vital for future food security. However, the general public’s notion of soil and the awareness of its importance is still quite primitive and progressively improving.
Is it a global reflection or are there first movers?
Overall, it is a relatively global reflection with increasing awareness in both developing and developed countries. For example, in India there is an initiative called Save Soil led by Sadhguru, a famous spiritual teacher, speaker and yogi. With his movement he wants to put land degradation on political agendas and he advocates for improved soil life all around the world.
Even though the reflection is global, developed countries are ahead in terms of government involvement and concrete commitments. Europe ranks first in terms of regulations with the “Farm to Fork” strategy at the heart of the European Green Deal or the EU Soil directive. European as well as American corporations are the most advanced when it comes to business commitments: Nestlé is investing US$1.24bn on regen ag across its supply chain; Unilever’s has created a EUR1bn climate and nature fund; PepsiCo wants to spread regen ag practices across seven million acres, General Mills is targeting 1 million acres by 2030). And finally, Australia is ahead in terms of more animal centered practices like rotational grazing.
What are the social and economical impacts of regenerative agriculture?
Some numbers tell you that in the world, 74% of less developed populations are directly affected by soil degradation. Particularly smallholder farmers that live from their crops. In addition, there is a direct correlation between soil degradation and poverty, and 10 000 billion $ is lost every year due to reduced soil output and health. Needless to say, not changing our practices would have catastrophic social and economic repercussions.
Now, despite the urgency of the issue, in the short term, the transition from modern practices to regenerative agriculture can have a negative impact on farmers. The transition period lasts from 5 to 10 years, and during this time farmers can lose up to 30% of their yield for those with the most radical changes to make. Even though regenerative practices are associated with lower costs (less fertilizer, no pesticides, less mechanization), farmers will need financial support to maintain their already slim margins.
On the other hand, once the transition is completed, farmers will be positively impacted as their crops will be more resilient to changing climate (increased income security) and their crops will be more self-sufficient (less time and money spent). In addition, there will be a significant health impact as farmers will not be in contact with pesticides and other harmful chemical inputs.
Why should we invest in regenerative agriculture?
As highlighted by the IPCC, there is real urgency in dealing with climate change and biodiversity loss. Together with deforestation, agriculture represents the second-largest source of greenhouse gas emissions globally and is the primary driver of biodiversity loss. However, agriculture is one of the only levers we have to reverse this trend and become net positive. Healthy soils can sequestrate carbon, support biodiversity, preserve water, and improve the resilience of agricultural yields. In other words, investing in regenerative agriculture can have an extraordinary impact: it could help reverse climate change instead of simply mitigating its symptoms. From a financial risk perspective, in a time where tech isn’t performing as well as it used to, investing in primary needs like food is a source of security.
Why should we invest now?
This summer has revealed the limits and weaknesses of our agriculture. Harsh weather proved that our current food system will be significantly impacted by worsening meteorological events if we don’t improve the resilience of our soil soon. In addition, the war in Ukraine has highlighted the dependence of certain countries on eastern grain as well as the social and financial impacts of deteriorating food security. If we want to be able to feed our growing population, we need to finance and accelerate the transition now in order reverse the trend and avoid degrading 90% of our soil by 2050.
How do we finance this transition and what are some of the challenges faced?
At AXA we believe that regenerative agriculture is investable. Funding can come from both public and private sources via blended finance schemes, and be driven by governmental regulations (ex: Green deal, Farm to Fork, Common Agricultural Policy). We have seen good signals from the biggest companies in the food sector. The likes of Danone, Unilever, Pepsico, have committed themselves to deploying X% of the crops in their value chain to regenerative agriculture by 2030/40/50. These commitments represent a significant portion of our food source and highlight the business need for regenerative agriculture.
One of the biggest hurdles to investments in sustainable agriculture is the lack of structure and the decentralization of our agricultural systems. Today, for example, it is much simpler to invest in renewable energies than sustainable agriculture. From an impact point of view, a challenge of the agricultural transition is the interdependence of its stakeholders. To transition towards a more sustainable food system, all stakeholders need to move at the same time.
