Regenerative agriculture is among the sectors attracting more interest from nature-positive investors despite facing financial and structural barriers, according to responsAbility.
Nature-positive investing is rapidly evolving, with regenerative agriculture emerging as a promising yet underfunded sector, according to Swiss impact investor responsAbility.
While the sector has at times been viewed by impact investors as high-risk and nascent, there is now an increasingly strong consensus that the threat to biodiversity is unsustainable and urgently needs greater investment. However, industry leaders and investors admit the sector faces major financial obstacles and investment gaps, a theme which was debated at Impact Investor’s 2024 conference in The Hague.
Speaking at a recent responsAbility event on scaling up regenerative farming, Harriet Jackson, head of sustainable food debt investments in Africa at responsAbility, along with Arend Kulenkampff, lead of the innovative finance lab at NatureFinance, a not-for-profit organisation dedicated to financing nature-positive outcomes, discussed some of the key challenges faced by the sector, as well as ways to overcome some of the hurdles.
Overcoming barriers
In order to succeed, the transition to regenerative agriculture requires capital investment not just in farming practices, but also in supporting infrastructure like local processing facilities, according to Jackson. This type of support is necessary in order to reduce emissions from areas like transportation, for example.
“This transition to regenerative farming is a long term one. That’s why intensive agriculture is so widespread, because it’s a very quick win. This is why you need investors to be patient and be willing to take some of the first loss and risk. This then accelerates the amount of private capital that will come in, because risk is protected,” said Jackson.
Despite growing interest in nature-positive finance, regenerative agriculture remains a niche sector, hindered by both financial and structural barriers.
One of the primary challenges is due to the fact it requires significant upfront investment to transition from conventional farming. As such, many institutional investors remain hesitant due to uncertain returns and long payback periods.
Further complicating the investment landscape is the tightening global credit market, as well as the solutions required being both expensive and complex.
Kulenkampff said: “The challenges of deploying resilient and adaptive food and farming technologies are that they are extremely capital intensive and technologically complex.”
Financial instruments
To bridge these gaps, an array of financial instruments are being deployed to attract private capital into regenerative agriculture and nature-positive projects.
Blended finance has emerged as a critical tool, by combining public, philanthropic, and private sector funds to absorb early-stage risks and enhance project viability, according to both Jackson and Kulenkampff.
In addition to that, the duo said that outcome-based financing models, such as sustainability-linked bonds, are also gaining traction.
One such example is the World Bank’s outcome bond in Brazil, a $225m (€216.8m) bond that links investor returns to the removal of carbon from the Amazon rainforest in Brazil, aimed at financing agroforestry projects.
Portfolio
Among the investment cases which give the pair hope is Brazil nut processing company Beneficiadora San Agustín, located in Bolivia’s Amazon region, which Jackson highlighted as a strong example of the potential of regenerative agriculture investments to yield both financial returns and measurable environmental impact.
“Brazil nut trees form a central part of the Amazon rainforest ecosystem, and are around 500 years old, which many animals are reliant on, making it a beacon of biodiversity,” said Jackson.
By sourcing from Amazon communities, the company is not only supporting its local economies but also helps preserve primary forests, which are crucial for biodiversity, stressed Jackson.
“It is these investments which align economic incentives with conservation goals, making them attractive to impact-driven investors,” she added.
Furthermore, both Jackson and Kulenkampff said that looking ahead it is vital for governments, particularly in middle-and high-income countries, to play a role in reducing costs through subsidies, tax incentives, and research funding.
By embedding regenerative agriculture indicators into sovereign debt instruments and corporate sustainability frameworks, the sector can attract institutional capital at scale.
