How impact investors can make a tangible difference to climate change and why 'green is good'
Updated: Dec 12, 2019
Impact Investing is on the rise in Europe. Its time to be active and create a positive impact.
It was heart-warming to see tens of thousands of people march in Frankfurt on Friday in October for “Fridays for Future”, a global protest against political inaction on climate change.
There are also other ways, also, to making a difference.
How we allocate financial resources serves as both an incentive for business to pursue production towards reducing greenhouse emissions and a dis-incentive for chronic polluters to change direction.
We allocate financial capital in many ways – how we invest, the savings investment vehicles we choose, the pension schemes we contribute to or the equities we buy.
In a recent World Economic Forum report it was noted that agriculture is a major contributor to challenges facing the environment: land degradation, aquifer depletion, nitrogen runoff and greenhouse gas emissions.
In July 2019 scientists recorded the highest concentration of atmospheric carbon dioxide in human history: 415 parts per million (ppm). This represents an increase of 135 ppm since the start of the industrial revolution – and is equal to one trillion tons – or a teratorn – of carbon dioxide increase over the past 200 years (world economic forum, July 2019).
We are destroying forests at an alarming rate – mostly for industrial style agriculture or intensive livestock grazing. They still cover about 30% of the worlds land area, but we have felled 46% of all trees since humans started cutting down forest. About 17% of the Amazonian rainforest has been destroyed over the past 50 years.
Whilst industrial agriculture has been a major contributor to the problem, so too does regenerative and sustainable agriculture offer a way to remove carbon dioxide from the atmosphere.
A plant removes carbon from the air and sends it back into the soil as roots (carbon sequestration). These roots then release sugars to feed soil microbes. The microbes work their own magic to convert carbon into organic carbon matter which enriches the soil and assists further plant growth and more carbon sequestration.
Regenerative agriculture involves a set of farming practices that have at the core improved soil health, improved eco-system and outputs of healthy, delicious food. Some of these farming practices include cover-crops, no-till farming, crop rotation, reducing chemicals and fertilisers and planned used of livestock. These practices work to drive carbon into the soil and keep it there.
If we invest in companies that engage in regenerative agriculture, we are assisting deploy funds towards making an ‘impact’. This impact investing strengths their ability to grow, create sustainable businesses and engage in more carbon depleting practices. I would argue it also sends a powerful message to heavy polluters as reduced share buying tends to decrease a company's value which in the long run leads to investor agitation for change.
I am working with an exciting Australian regenerative agriculture company - Wide Open Agriculture Limited (ASX: WOA) and presenting the company to impact investors, family offices and fund managers in Europe.
WOA is the world’s only publicly listed company committed to delivering not just financial returns, but also positive and measurable natural, social and inspirational returns. It is backed by the large Dutch Foundation, Commonland, and they hold 17% of the equity.
The business model is exciting for impact investors in that not only is land improved through regenerative farming, also the company has its own food brand – Dirty Clean Food.
Dirty Clean Food launched with an online distribution platform and sales are expected to reach A$1 million per annum just from the grass-fed regeneratively grown beef and lamb. The company recently commenced negotiations with Asian distributors in Singapore, Hong-Kong, Indonesia and China which could result contracts that substantially lift sales revenue.
Investing in regenerative agriculture is a great example of an impact investment. There is real and measurable impact to the environment, biodiversity and soil health. A company such as Wide Open Agriculture also has a clear business plan to create a strong and sustainable business which creates employment, reduces depopulation rates in rural areas and rewards all stakeholders over time.
It is time to turn the 1980's Wall Street mantra around from "greed is good" to "green is good".