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Regenerative Agriculture Holds Opportunity for Investors

The earth's soil holds more than 3 times the amount of carbon in our atmosphere and 4 times the amount stored in all living plants and animals.


[Updated: Apr 01, 2021 ] Mar 30, 2021 by Liz Brumer
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As investors, we must stay up to date not only in regard to the real estate market but also the greater trends across the country. These trends directly relate to both individual markets like real estate and the overall functioning of our nation, including the economy. The Biden administration has been making some major policy changes, including putting climate change back into the forefront of policy issues.

One of the hot-topic tools to achieve carbon sequestration is to shift farming from a large-scale industrial agriculture approach to a regenerative agriculture approach. Continue reading to learn what regenerative agriculture is, what a shift to regenerative farming might entail, and how an investor can utilize this information to make sound investing decisions.

What is regenerative agriculture?

Regenerative farming, sometimes referred to as carbon farming, is a technique for repairing and improving the soil of a farm so that it is better able to support the plants and animals that are being raised on the land. This is done within the existing farm system rather than through utilizing primarily outsourced resources like synthetic fertilizer. Ultimately, regenerative organic agriculture works toward creating a more sustainable agriculture system while producing nutrient-dense food in a more environmentally friendly way.

The primary goal of regenerative farmers is improving the soil health. Healthy soil in turn will allow for more cost-effective and efficient food production in the long run, creating a resilient and productive farmland. Regenerative practices take a multipronged approach, which includes increasing biodiversity, using a cover crop, rotating crops, and implementing rotational grazing to improve soil organic matter. By utilizing natural resources available on-site, farmers are able to encourage a closed-loop farming system that improves overall soil health.

Why should farmers make the switch?

This is a highly touted solution to climate change from many environmental groups, which may lead one to believe it's more of a fringe grassroots movement. But a growing body of scientific research, as well as proven examples from financially successful regenerative agriculture farmers, is starting to bring this into light as a real solution for carbon sequestration. From a climate perspective, it can reverse soil degradation, which creates greenhouse gas emissions, soil erosion, and toxic contamination of waterways from chemical inputs.

While it is obviously ideal to heal the planet and secure a viable food system for future generations, it still has to make sense dollars wise or it just won't create a sustainable farming system long term. From a business perspective, it can aid in reducing dependence on government funding, commercial loans, crop insurance, and a host of other high-cost expenditures while at the same time increase the crop yield. Reduced inputs and increased outputs over time make sense just as with many other business and investing models.

Rules for regenerative agriculture

As of now, there is no official certification program for regenerative agriculture like there is for organic farming. Rather, it's a compilation of practices that have the same overarching approach while adapting to local conditions and needs. As such, consumers should be wary of any sort of unregulated labels, instead opting to research the specific farming approaches used by that farmer. The main components to a regenerative agriculture practice include the following principles:

  1. Regenerative farming practices include as little disruption to the soil and soil microbes as possible so the soil structure remains intact. This helps improve water retention, nutrient retention, and carbon sequestration.
  2. Another key component is building soil fertility using biological inputs rather than chemical or mechanical inputs. This eliminates the effects of synthetic fertilizers, which cause soil carbon to be released into the atmosphere as well as substantial health problems for farmers and consumers.
  3. Biodiversity on the farm is also an essential piece. This comes in the form of interplanting multiple crops on a continual basis and utilizing cover crops when the original crop isn't actively farmed to further improve soil health or support pollinators and beneficial insects.
  4. The last integral regenerative farming practice is to utilize grazers in a well-managed farming system to increase organic matter and soil carbon sequestration as well as to provide more healthful living conditions for the animals, which results in more nutrient-dense product for the human consumer.

How to invest in regenerative agriculture

Investing in regenerative agriculture can fit any investor's budget and time allowance. Obviously, most investors don't have the desire or knowledge to become regenerative agriculture farmers. But some may be ready to purchase or already own land, which can be leased exclusively to farmers who follow regenerative agriculture practices. You could also potentially fund a startup operation as an accredited investor through private platforms like Farmland LP, which support farmers who at times can have difficulty securing funding from traditional financing sources even when the business plan is sound. If you're a smaller investor, you could finance microloans to a farmer utilizing regenerative practices using platforms like Steward, which is a certified B corporation that connects private financing directly to the farmer seeking assistance via interest-bearing short-term loans. You could also invest in private real estate investment trusts (REITs) that support regenerative agriculture, like Iroquois Valley Farmland REIT. These are not investment recommendations but simply examples of various investment avenues. You must do your own due diligence to ensure that the investment is a good fit for you and your portfolio.

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