Highlights:

Global food systems need to shift rapidly to more sustainable forms of production. Food systems accounted for more than 30% of global  greenhouse gas emissions in 2020, over 80% of tropical deforestation and biodiversity loss and 70% of global freshwater withdrawals, often from already-stressed river basins and groundwater reserves.

The production changes – practices, technologies and inputs – required to improve the climate, water and nature footprint of the food system, improve resilience and help restore the planet are increasingly well understood. The key question is how to make the adoption of these production changes happen at the scale and pace required to meet global goals on climate, water, nature and food security.

At the heart of this challenge are the barriers to adoption – particularly economic barriers, in addition to technical and social challenges – that farmers face. Globally, the full food system transformation needs an additional $300 billion to $350 billion in capital investment annually through 2030. Even though this investment has an expected societal return of more than 15 times and food and agriculture account for a significant share of global greenhouse gas emissions, less than 4% of climate finance in 2021 and 2022 was dedicated to agriculture, forestry and other land use.

This report proposes a breakthrough model for financing and collaboration to support farmers, with a specific focus on their adoption of regenerative agriculture:

What support do farmers need to adopt regenerative practices?

Farmers should be offered a flexible stack of financial and non-financial services. Financial support should include lending and insurance on favourable terms. Farmers also need upfront payments or guarantees that can defray the economic risks they encounter during the early years of practice adoption. Non-financial support should include technical assistance, data services and access to equipment and inputs.

How should support be funded?

A key source of financing should come from the monetization of the full value of all ecosystem services delivered by regenerative practices, including improved resilience and environmental outcomes like healthier soils, carbon sequestration and greenhouse gas emissions avoidance, reduced freshwater use and pollution, and enhanced biodiversity. In exchange for ecosystem services, all the actors that benefit from regenerative agriculture should provide financing.

Who should provide the capital and delivery of support?

Engagement from a broad set of actors is critical, starting with financial actors and others with the advanced financial capabilities needed to assess, pool, price and manage risk, aggregate capital, monetize ecosystem services and re-engineer cash flows for farmers.

Five actions will accelerate the implementation of regenerative agriculture at scale:

1. Build out, scale up and replicate breakthrough models for financing and collaboration.

2. Promote the engagement of financial actors in the adoption of regenerative agriculture.

3. Structure precompetitive collaboration among value chain companies to aggregate demand for environmental outcomes and improved farm resilience. Develop or expand coordinating mechanisms to ensure that all the ecosystem services resulting from regenerative agriculture are fully valued and every actor that benefits is committed to contributing through payments for environmental outcomes and, potentially, procurement arrangements.

4. Establish a consistent and supportive policy and enabling environment.

5. Develop a data commons and accelerate marketplace development for all ecosystem services. Advance the definition, standardization, measurement, reporting, verification and availability of data linking regenerative practices to economic outcomes for farmers, environmental outcomes and resilience to enable the scaling of markets and mechanisms to fully monetize the ecosystem services resulting from regenerative agriculture.