Insights
Financing the transition: Driving investment in regenerative agriculture
Climate change poses an unprecedented global challenge, causing increasingly significant social and economic damage every year. Tackling and adapting to climate change by taking measures to reduce global CO2 emissions has become an issue of utmost importance for the global economy.
November 2023
Ramu Thiagarajan
Senior Investment Advisor,
State Street
Jessica Donohue
Head of Global Investment Insights, Sustainability and Impact,
State Street
Lauren Willington
Sustainability and Impact Partnerships, State Street
Hanbin Im
Global Macro Researcher,
State Street
Priyaam Roy
ESG Research Analyst,
State Street
One important contributor to global CO2 emissions is agriculture, which today accounts for a third of global CO2 emissions and growing. Regenerative farming is one of a number of measures that could address the problem, but there are several barriers that prevent executing the practice at scale, such as fragmented ownership, diverse regulations and misaligned incentives.
Transitioning to, and sustaining, regenerative agriculture practices must become a compelling business decision for farmers in order for regenerative agriculture to scale faster and help tackle rising emissions. A critical financing gap exists, however, related to providing farmers with the capital needed to adopt regenerative practices, which can result in lower crop yields in the early years of adoption. Addressing this financing gap is made even more difficult due to the fragmented and decentralized farming ecosystem.
In this paper, we propose a financing structure intended to help mobilize institutional capital (i.e. asset managers and asset owners) to provide necessary large-scale financing to the diverse farmer community, in conjunction with local government, banks, multilateral development banks (MDBs) and insurers.