Achieving 'Growth Within'

A €320-BILLION CIRCULAR ACHIEVING ECONOMY INVESTMENT OPPORTUNITY AVAILABLE ‘GROWTH TO EUROPE UP TO 2025 WITHIN’ 82 | ACHIEVING ‘GROWTH WITHIN’

10 INVESTMENT THEMES

DEPLOYING REGENERATIVE AGRICULTURAL 4 PRACTICES Regenerative agriculture could be for major crops starting to decline broadly defined as the synergistic around the world. 150 The annual cost of combination of as many practices soil degradation in Europe amounts to as possible, including permaculture, €38 billion. 151 Indeed, gains in European organic, no till, 147 holistic grazing, and agricultural productivity have fallen keyline land preparation. steadily from 2.5% per annum in the 1970s to 1.3% per annum in the Shifting towards an agricultural 2000s and 0.9% in 2010. This slowing model that regenerates the soil and of productivity gains has continued revitalises ecosystems through farming despite significant increases in the management practices and technologies use of fertilisers, chemicals (such as could bring Europe onto a pathway to pesticides, herbicides, fungicides, and achieve overall economic benefits of insecticides), fuels, and other inputs up to €35 billion per annum by 2030, designed to increase yields. 152 Currently, against an estimated investment of 73km 3 of water is poured into the €15 billion between now and 2025. The European agricultural system each year primary areas of potential investment are (of which only 40% actually reaches the in providing funding to farmers to bridge plants), 153 alongside 16 million tonnes the transition towards regenerative of synthetic fertiliser (of which only 5% practices, as well as investments in actually goes into nutrients absorbed specific technologies and machinery by humans). Excessive application of enabling these practices. This transition chemical fertilisers creates dependency would see economic rewards based on imports 154 and heightens risk within largely on a reduced dependency on the system. For example, nitrogen fertiliser and pesticides throughout fixation and phosphorus have already the agricultural industry, alongside an exceeded the safe operating limits of overall reduction in agriculture-related the planet by a factor of two. 155 At the greenhouse gas emissions. same time, conventional agriculture does not always produce healthy Relevance of outcomes. In a recent report, the investment theme nutritional content of several types of fruits and vegetables, including cucumbers and tomatoes, was shown It is becoming increasingly evident how to have fallen significantly during the deeply harmful conventional agricultural second half of the twentieth century. 156 practices can be. 148 Our current farming Some foods also often contains traces model has resulted in 30%–85% of EU of toxic chemicals and plastics. 157 agricultural land being affected by soil degradation 149 and productivity gains ACHIEVING ‘GROWTH WITHIN’ | 83

However, emerging practices and that produced with the help of synthetic technologies are providing increasing fertilisers and other chemicals; evidence that one does not have to • Giving farmers greater control over their choose between preserving the soil and cost base, as inputs such as fertiliser are using it for agriculture. In fact, profitable generated by the farm itself. agricultural practices exist that not only preserve the soil, but regenerate The idea at the core of these ‘regenerative it. These practices revitalise the farm’s agricultural’ practices and technologies entire ecosystem, resulting in many is that everything in the farm should be benefits, including: reinvented to mimic nature: in the words of agri-pioneer, Leontino Balbo: ‘If we • The removal of greenhouse gas can restore soil to natural ecosystems emissions from the atmosphere to be conditions, nature will do the rest’. 159 stored in the ground in the form of This shift goes far beyond resource carbon; efficiency, which focuses on using water • Greater yield stability due to a and other inputs more economically. reduced reliance on fertilisers (crops will Pioneer farmers, landowners, and eventually become more resistant to scientists are starting to think outside viruses and weather changes because the box on many levels, such as in the healthy soils cope better with droughts choice of crops and livestock on farms, and floods); 158 the harvesting methods and equipment, • Decreased water usage; and the management techniques for • Production of healthier food with water, waste, energy, and above all, land. a higher-quality nutrient profile than A shift in all these factors could mean

FIGURE 22 OVERVIEW OF AGRICULTURAL PRACTICES REGENERATIVE AGRICULTURE

The combination of as many practices as possible

Permaculture CONSERVATION AGRICULTURE • Introduction of trees and bushes • Swales for water retention

• Crop rotation Organic agriculture • No till • Crop rotation • Heavy use of herbicides • • Use of chemical fertilisers No use of chemicals and genetically modified organism INDUSTRIAL AGRICULTURE • Mechanical weed control

No till polyculture • Monoculture • Mix of different crops (only for grazing) • Use of turning plough • No use of chemicals • Use of chemical fertilisers Holistic grazing • Short time and limited space grazing plans • Soil regeneration thanks to manure

Key line land preparation • Cultivation along contour lines • Optimised water retention

Sources: Volterra Ecosystems; Rodale Inst., Gabe Brown (No till polyculture); Allan Savory (Holistic grazing); P.A. Yeomans (Key line land preparation); 160 http://ec.europa.eu/eurostat/statistics-explained/index.php/Organic_farming_statistics; http://www.sciencedirect.com/science/article/pii/S209563391530016 84 | ACHIEVING ‘GROWTH WITHIN’

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that nature is able to revive the entire • Regenerative fruit/vegetable/cash ecosystem, generating strong levels of crops multi-culture; natural capital on which to build highly • Holistic-planned grazing for bovine, productive agricultural businesses. ovine, porcine, and poultry farming; • Agroforestry systems with alley Current organic agricultural practices cropping; 163 can be considered as regenerative to • Low-input pasture-based dairy some extent, as it implies stopping systems. 164 the use of pesticides and conventional fertilisers, and allowing the soil to start regenerating once these inputs Figure 23 gives an overview of the have been removed. However, organic business case for three examples of agriculture is just one step towards regenerative practices 165 implemented the soil regeneration and ecosystem by Volterra Ecosystems. This Spanish revitalisation that are essential to company focuses on integrating various regenerative agriculture. Also, existing practices into coherent management organic agricultural practices fail to systems aimed at regenerating farmland capture most of the potential economic within profitable enterprises. The and environmental benefits if they are profitability results assessed in Figure not combined with other regenerative 23 are based on initiatives that have practices. As shown in Figure 22, already achieved such profitability levels combining several regenerative in Europe. 166 practices (rather than implementing one) unlocks tremendous economic Another player in this space, SLM value for farmers. For example, a 50% Partners, scales up profitable higher profitability could be achieved regenerative practices by acquiring and by shifting to organic vegetable managing land on behalf of institutional monoculture (i.e. by stopping using investors. Direct investment in corporate conventional inputs). 161 But a 200% vehicles gives investors the security higher profitability could be achieved of land ownership, but also maximum by shifting to regenerative vegetable control over how the land is managed, multi-culture (i.e. by introducing and full equity exposure to the returns a mix of annual and perennial from regenerative farming. SLM Partners plants, and implementing holistic has identified a number of proven ecosystem management in a way regenerative agricultural systems that that mimics nature). 162 are applicable at commercial scale and provide economic returns that Recent developments are as good, or better than, industrial production models. 167 They are currently Multiple transitions to regenerative investing in one of these systems agricultural practices have started in (holistic-planned grazing for beef cattle Europe, specifically over the last years. and sheep) and are exploring others for Advanced regenerative agricultural further investment opportunities. practices with a positive business case These examples demonstrate not only and successful proof-of-concept are: viability, but also a willingness to start embracing these methods in key parts ACHIEVING ‘GROWTH WITHIN’ | 85

of the industry, making now a Current barriers conducive time for investment. to investment Investment opportunities The present-day barriers that prevent identified farmers from shifting towards regenerative practices at scale can be Although a set of regenerative broken down as follows: agricultural practices are profitable, leveraging innovative technologies • Most farmers are not familiar with designed to mimic nature – such as regenerative practices and may be Big Data and robotics – has good risk-averse or resistant towards them, potential to further enhance profitability as the shift to organic farming has and substantially reduce the payback been challenging on some farms. In time as shown by the Balbo Group’s addition, incumbent suppliers, such as innovations, detailed in the case agrichemical and heavy land equipment study below. The opening up of this companies have vested interests regenerative agricultural market offers that prevent them from proactively four key investment opportunities: supporting the move to regenerative practices. • Investment by farmers or farming • New skills are required to manage companies and landowners in innovative regenerative farms, as the machinery, tools, technologies, practices involved are more knowledge- proprietary agricultural practices, trees intensive and need to be tailored to local or livestock to shift to regenerative conditions. agriculture. • Consumer awareness of regenerative • Provision of finance solutions to practices is very low overall, even farmers during the transition phase though it is increasing in regard to to bridge the temporary cash flow organic practices as shown by the reduction they face when shifting to growing sales of organic products. specific regenerative practices and/or • The shift towards regenerative meeting their needs for capital to invest practices is challenging for farmers or in machinery or other assets when farm owners, as income is more unstable required. 168 during the transition period and • Development and dissemination of investment payback times are medium innovative technologies and services to long term, especially for tree crop designed to drive the transition, such models. as Big Data, robotics, apps, and farm management methods aimed at Interventions to enhancing current agricultural practices scale up investments (e.g the Agros Fortis model in the case example). To escalate the shift towards • Creation of cooperative, not-for- regenerative practices would require profit or public bodies to develop the farms to be incentivised to switch and deploy programmes to increase at scale. This could be achieved by farmer awareness of and capabilities in increasing the demand/pull for products regenerative agricultural practices. 86 | ACHIEVING ‘GROWTH WITHIN’

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FIGURE 23 OVERVIEW OF THE BUSINESS CASE FOR THREE REGENERATIVE PRACTICES DEVELOPED BY VOLTERRA ECOSYSTEMS

STEP 1

STATUS QUO STEP 1 TOWARDS REGENERATIVE AGRICULTURE

STARTING POINT SHORT DEFINITION INVESTMENT NEEDED NUMBER OF YEARS PROFITABILITY BEFORE SIMILAR/ ACHIEVED AFTER BETTER PROFITABILITY THIS DELAY ACHIEVED

1. Fruit/vegetable/cash Organic fruit/ €500 euro per hectare Two to three years, 50% higher than crops conventional, vegetable/cash crops (ha) to introduce the depending on how profitability at starting modern monoculture monoculture (defined right micro- organisms contaminated and point, but losses in the (defined by the use by no use of chemical and other elements depleted the soil is; the first two years have to of chemical inputs, inputs and absence organic certifier decides be taken into account such as pesticides or of GMOs); use of on the number of years fertilisers, and the likely chemicals can be for conversion presence of genetically reduced gradually modified organisms (GMOs)); irrigated with excess of water

2. Traditional Remove underwood €400,000 to provide One to two years, Profitability dependent agroforestry (defined and use biomass in a French state-of the- depending on the type on type and by presence of trees production of energy, art mobile biomass of trees application of biomass on land that is not compost, animal feed, harvesting and and time needed to used anymore/ charcoal, etc processing machine for (re)introduce livestock unproductive, but in at least 2,000 ha per into the system principle is suitable for Promote natural annum (pa) producing feed and/or regeneration, and livestock) diversify tree, bush, and grass species

3. Unproductive (bare), Activate soil with €300–500 per ha Two to three years for 50% higher than rain-fed land destroyed cover crop and the land to become profitability at starting by agrichemicals and micro-organisms productive again point, but possible monoculture (mainly (mycorrhizae) in first (defined by the presence loss of crop in first two cereals) year and crop rotation of weeds, fertility, pests, years for corn/sugar OR and associated crops etc) without chemical beet has to be taken Unproductive in years thereafter products into account (bare), irrigated land destroyed by Decompaction, if Yield per ha on irrigated agrichemicals and required land is about two or monoculture (mainly three times that from corn and sugar beet) rain-fed land ACHIEVING ‘GROWTH WITHIN’ | 87

STEP 2

STEP 2 TOWARDS REGENERATIVE AGRICULTURE

SHORT DEFINITION INVESTMENT NEEDED NUMBER OF YEARS PROFITABILITY BEFORE SIMILAR/ ACHIEVED AFTER BETTER PROFITABILITY THIS DELAY ACHIEVED

Regenerative fruit/ €200,000– €500,000 Three to five years, 200% higher than vegetable/cash crops for GPS on a 50–100 ha depending on the type profitability at starting multi-culture (defined farm, special weeding of crops and trees (for point, with requirement by a mix of annual and equipment, and cold example, three years to be organically perennial plants and storage of product for almonds and five for certified holistic ecosystem pistachios) management in a way that mimics nature, including the management of the land, soil, air, water, biodiversity, etc)

Introduction of bovine, Dependent on livestock One to three years, Higher than ovine, porcine, and prices, which will vary depending on the type profitability at starting poultry livestock widely based on type of of animals and the point for best practices (defined by a mix of animals and number potential of the land (several projects one to two cows per to demonstrate ha and three to six and quantify the sheep per ha, plus one profitability are to two pigs per ha, ongoing 169 ) alongside poultry, such as chickens and/or turkeys)

Introduction of rotational grazing (holistic approach)

Agroforestry 170 with or Dependent on trees: Three to four years, 200% higher without irrigation depending on the type profitability against €500 (almonds, of trees (for example, a starting point of chestnuts, hazelnut, three years for almonds, cereals and 300% walnuts, wood trees) five for pistachios, and higher profitability 25 to 30 years for wood against a starting point Up to €2,000 (50 if the starting point of corn/sugar beet (pistachios) was cereals)) (with requirement to be organically certified) 88 | ACHIEVING ‘GROWTH WITHIN’

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from transitioned farms by large players that applies for each tier; and a up the food supply chain. A push by clear definition of key performance governments through the provision of indicators to measure the level of financial incentives to switch would also transition needed to qualify for certain accelerate the shift. subsidy allocations. 173 As the CAP aims to provide guidance on supported • European Commission: The European practices, partnerships could be set up Commission could leverage existing with cooperative/not-for-profit training policy and funding frameworks, such bodies deploying capability-building as the Common Agricultural Policy and awareness programmes delivered (CAP), the European Innovation by farmers for farmers. Partnership for Agricultural Productivity and Sustainability or Horizon 2020 to • National, regional, and local provide incentives for farmers to shift. governments: Concurrently with the This could be achieved by supporting European Commission, the public innovations 171 and pilots that are sector in Member States could support improving regenerative practices or the deployment of capability-building providing specific funding solutions and awareness programmes, both for to farmers for the transition phase. farmers and consumers. The public Additionally, support could be given sector could also provide direct to the rollout of farmer and consumer support to the transition phase or awareness programmes, as well as the towards innovations and pilots related building up of skills and knowledge. to regenerative practices. Moreover, it could provide markets for food These initiatives could build on existing products from regenerative agriculture European Commission initiatives, for through public procurement and example the creation of an EU market procurement guarantees. A good for organic and waste-based fertilisers example of Member State action aimed at stimulating agroforestry and towards regenerative practices is the crops diversification. 172 4‰ or ‘4 per 1,000’ initiative driven by the French government that aims to Using the CAP could also be an increase the soil carbon stock at a rate effective mechanism. Some adjustments of 0.4% per annum, thereby halting in current policy could include: the the current increase in atmospheric

adoption of an accurate definition of CO 2. The initiative helps contributors regenerative practices, including the in the public and private sectors to concept of a two-tiered transition; commit to a voluntary action plan the identification of the CAP pillar to implement farming practices that maintain or enhance soil carbon stock. Financial support mechanisms and favourable policies and tools are in ACHIEVING ‘GROWTH WITHIN’ | 89

place for farmers innovating to this the most powerful enabler of driving end. 174 Projects, practical action, and change among farmers is simplicity. results relating to regenerative practices The shift should follow a step-by-step could also be shared on a blog, enabling approach, starting with the practices all participants to benefit from pooled that are the easiest to implement and experience. the most relevant based on the farmer’s own experience, expectations, scale, • Private sector: Retail companies in and climate area. For example, Volterra particular can have a significant impact Ecosystems’ experts support farmers on farming practices, as has been shown and landowners to identify which in the past. 175 Impact can be achieved regenerative practices they should start by retailers either changing their implementing, and tailor these practices requirements for the food products they to local conditions. Farmers are also purchase, or by supporting farmers by supported on the ground throughout providing volume and price guarantees. the transition period to review Recent digital developments 176 are benefits achieved, train staff, fulfil the providing retailers with additional conditions for the land to be certified tools to measure the benefits of as organic, and prepare for the future switching to buying food from commercialisation of the produce. 177 regenerative agricultural systems. These developments are also enabling retailers Lastly, finance providers could structure to explore the possibility of launching specific products geared towards a collaborative effort to shift to transition finance, such as the MilkFlex regenerative models in their extended loan fund. This fund provides a financial supply chain. Digital technologies could solution designed to match the cash be further used to increase the reach of flow generated during the transition to regenerative products in the market and regenerative farming. This provides the establish customer loyalty to them. affordable and flexible capital farmers need to shift, with no repayments In addition, farmer awareness, during times of low prices and increased capability-building, and technology- repayments at times of high prices, as transfer programmes would need well as inbuilt ‘flex triggers’. Glanbia to be designed and financed. These Co-operative Society, the Ireland would most likely require involvement Strategic Investment Fund, Rabobank, from cooperatives, NGOs or private and Finance Ireland have announced the companies. The lessons from existing planned creation of a new €100-million programmes should be taken into ‘Glanbia MilkFlex Fund’ in March 2016. 178 account during this process. Indeed, existing programmes have shown that