Adaptation10: Regenerative Agriculture & Ecosystem Restoration

Adapting to climate change isn’t just about preparing for, and protecting against, the shocks and stresses of a warmer and wilder planet. While much can be done to strengthen communities, ecosystems — even entire countries — ahead of extreme weather events and slow-onset environmental changes, the uncomfortable truth is that sometimes these measures won’t be enough. Protections can and will be overwhelmed, and painful climate damages sustained.

This reality will drive demand for technology solutions that help human and environmental systems to heal and build back better. Indeed, extreme weather disaster recovery is already big business. Bloomberg Intelligence estimates that the US alone spent nearly US$1trn on this and other climate-related needs over the 12 months ending May 1.

However, recovery and renewal can take many different forms across many different sectors. Two niches highlighted in this month’s Adaptation10 are regenerative agriculture and ecosystem restoration. These cover a raft of techniques, processes, and technologies aimed at restoring — or even improving — climate-ravaged agricultural lands and natural habitats.

These services are sorely needed. Even under a moderate global warming scenario, the world could see the average yields of six staple crops contract 12.7% by the end of this century, according to one recent study. In major breadbaskets, like the US Midwest, the shrinkage could be even greater — with severe consequences for local and international food systems. Adaptive measures, like regenerative agriculture, could head off some of these losses.

Restoring ecosystems, meanwhile, could produce enormous benefits for all manner of industries. Natural capital underpins vast swathes of global GDP, from the obvious — like fisheries and forestry — to the perhaps less expected, like tourism and pharmaceuticals.

Companies operating in these niches may prove to be smart bets for adaptation-minded investors. Not only because the demand for their services is real and growing, but because they are able to leverage proven revenue models to bring in cash at scale.

For example, ‘carbon farming’ companies can monetize the climate benefits of their activities by selling carbon credits to organizations that want to offset their own emissions. Similarly, the rejuvenation of, or creation of entirely new, areas of natural capital can produce ecosystem services — like flood protection and increased biodiversity — that large companies and governments will pay for.

Over the long term, the returns to clients from regenerative agriculture and ecosystem recovery are likely to compound, opening opportunities for revenue-share arrangements. For example, one analysis by consultancy BCG estimates that over time, wheat farmers in the US state of Kansas employing regenerative agriculture could increase their profitability by up to 120%, by reducing spend on fertilizer and pesticides and boosting crop yields.

With these kinds of figures, it’s no surprise the segment is attracting interest from heavyweight investors. Earlier this year, investment firm Renaissance Partners and private equity fund TPG Rise Climate teamed up to acquire a controlling stake in SICIT, a specialist in biostimulants — which are used to enhance soil nutrition and bolster agricultural yields.

Joerg Metzner, Business Unit Partner at TPG Rise Climate, said the transaction represented the fund’s “first investment in the Adaptation and Resilience sector”, claiming the production of biostimulants is essential to relieving pressure on crop yields and available arable land.

He’s not wrong — and many other investment opportunities in the regenerative agriculture and ecosystem restoration space are just waiting to be found.

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Thanks for reading!

Louie Woodall & Daniel Schmitz-Remberg