SLM Partners releases new white paper on investing in regenerative agriculture
We are pleased to share with you our new white paper Investing in Regenerative Agriculture: Reflections from the Past Decade.
This is an update to an influential white paper that we first published back in 2016 titled The Investment Case for Ecological Farming. This paper set out the problems of conventional agriculture, showed how ecological and regenerative farming system could deliver important environmental and social benefits, and explained why this was an attractive investment opportunity. It became a primer for those entering the space for the first time.
But it is time for an update – a lot has happened over the last 8 years. There has been a substantial increase in published research on regenerative agriculture. And we at SLM Partners have gained a lot more experience in the realities of investing in regenerative agriculture through our work in Australia, the USA and Europe.
Synthesising the latest research, and drawing on our experience, this new white paper shows how regenerative agriculture remains a compelling investment opportunity. However, it also highlights the need to separate out the hype and greenwashing that can surround the topic and to understand the risks and challenges when developing investment strategies.
Key takeaways of the paper:
To define regenerative agriculture, it is helpful to differentiate between the principles that lie behind it, the farming practices through which it is implemented, the agricultural systems that are most viable, and the outcomes that can be measured.
Regenerative agriculture has the potential to deliver important environmental and social impacts that are essential to the long-term sustainability of our food systems: improving soil health, addressing climate change, enhancing biodiversity, improving water quality, growing higher quality, nutritious food, and delivering better economic returns to farmers. There is now plenty of academic research to back this up.
Regenerative agriculture has real potential as an investment opportunity. Regenerative agriculture can be more profitable and deliver superior risk-adjusted financial returns to farmers and investors – typically an internal rate of return (IRR) that is 1-3% higher than conventional farmland investing. We call this the “Regenerative Edge”.
The Regenerative Edge is driven by higher yields, lower costs, higher prices, opportunity to tap into payments for ecosystem services, and/or better risk mitigation.
Regenerative agriculture also mitigates a number of social, environmental and economic risks and provides resilience to climate change and natural capital loss.
Investors can have the most direct impact on how land is managed by investing in farmland itself, either via funds or separately managed accounts. This is where we focus our efforts at SLM Partners. Ownership of the land allows investors, via their managers, to specify the type of regenerative farming practices that will be used.
