Silvia owns a thousand acres of wild grassland located in the Argentinian Gran Chaco – a biodiversity hub and the world’s second largest lowland forest. The quickest way for Silvia to make money off their land is to graze it with cattle, and then once it is cleared, plant soy. There is no law against a farmer doing so, and even if there was, there would be no realistic way to enforce it. But, if Silvia had a way to utilize the land more sustainably and measure that impact, her incentives could start to shift. Solving this puzzle is not limited to Silvia or Argentina – agriculture accounts of 80% of habitat loss across the globe.
One way to tackle the sustainable land use puzzle piece is through regenerative agriculture, which restores landscapes to their original state and protects biodiversity. Regenerative agriculture involves practices such as no-tillage planting to improve soil health, the use of cover crops which reduce soil erosion, or using tools to maintain forest cover, such as silvopasture or using previously cleared land. Driving greater adoption of regenerative agricultural practices requires changing the incentives for farmers such as Silvia, which in turn requires developing new financing and technical support mechanisms to help farmers make the transition. To this end, Dalberg and The Nature Conservancy recently undertook a study in six ecological regions (also known as foodscapes) to assess the best ways to drive more financing for regenerative agricultural practices.
The good news is there are major tailwinds supporting the adoption of regenerative agriculture. Momentum is at an all-time high coming out of COP27, with major commitments from players such as AIM for Climate, The Bill and Melinda Gates Foundation, and the Rockefeller Foundation. At the same time, despite this funding, farmers still have limited incentives to undertake these practices and hence much of this financing is still sitting on the sidelines. Regenerative agriculture practices often require more work upfront and there is still not a sufficient price premium to offset these added costs (which is due in part to market distortions such as subsidies for fossil-fuel based fertilizers).
To address this specific challenge, carbon accounting has emerged as a mechanism which can drive agribusinesses to adopt green practices. In the past few years commitments made to reduce the carbon emissions of corporate stakeholders such as Walmart have increased dramatically. Regenerative agricultural practices can be a huge driver in reducing supply chain emissions for major corporations, as many of the benefits of landscape restoration and biodiversity protection also help to reduce and sequester carbon. To help corporate stakeholders measure and set carbon accounting goals for their Forest, Land, and Agricultural (FLAG) emissions, the Science Based Targets initiative released a definitive set of targets this September.
Monitoring, reporting, and verification
A standardized set of metrics for FLAG emissions will help companies deliver on their climate goals, but does not mean much for Argentinian farmers without the next puzzle piece – measurement. Even with clear targets, farmers still need to be trained in regenerative agriculture practices, and have an easy to way to report and verify that they are conducting the practices to buyers that have made a carbon commitment. These monitoring, reporting, and verification (MRV) challenges make it more difficult for Silvia to mitigate the risks associated with adopting regenerative agricultural practices.
As part of our work with the Nature Conservancy, Dalberg identified that, though many large upstream agribusinesses want to invest and support regenerative agriculture, there are three key and inter-related pain points related to MRV that are limiting their investment across foodscapes:
- Measurement systems for quantifying regenerative agriculture impact are still being standardized (though the SbTI FLAG metrics are a good first step).
- Rigorous platforms that verify regenerative agricultural practices on-the-ground have limited capacity for scale, while start-ups that use remote sensing to monitor agricultural land cannot be used for many types of regenerative agriculture (e.g., soil carbon).
- Innovative agri-financing players do not have the resources or institutional knowledge to incorporate regenerative agriculture indicators into their social impact incentives.
However, we also see a significant amount of progress being made to help put the puzzle pieces together to support increased adoption of MRV for regenerative agriculture:
- Adoption of SbTI FLAG targets will help standardize and quantify impact in the sector.
- Legacy platforms and start-ups are working on innovative partnerships to leverage each others’ comparative advantage – a major success story coming out of COP27 is the introduction of a partnership between satellite remote sensing provider Pachama and the carbon credit registry Verra, both are industry leaders.
- Players such as The Nature Conservancy will continue to play a complementary role, building initiatives and platforms such as IFACC in Brazil which help connect agri-financiers to the resources they need to make effective regenerative agriculture investments.
Continued work and innovation on all of these fronts will be necessary if we want to build the MRV systems necessary to accomplish The Nature Conservancy’s goal of helping 100 million people become more climate resilient across the world by 2030.
To learn more about this work and ongoing efforts to drive regenerative agricultural practices, please reach out to Fabiola.Salman@dalberg.com.