January 13, 2022

By Lynda Kiernan-Stone, Global AgInvesting Media

Farmers Business Network (FBN) and the Environmental Defense Fund (EDF) announced the launch of the FBN Regenerative Agriculture Finance Fund (RAFF) – a novel financing program designed to reward U.S. farmers who meet certain benchmarks on factors, such as soil health and nitrogen efficiency, by employing regenerative production practices. 

Row crop agriculture contributes 5 percent of greenhouse gas emissions from the U.S., and is the largest emitter of nitrous oxide – a gas with 300 times more warming potential than carbon dioxide. However, scientists estimate that a 21 percent reduction in row crop emissions is a viable goal over the next 15 years through the optimization of current technologies – and a reduction of up to 71 percent is possible with new innovations. 

Despite being a contributor, agriculture is also one of the most vulnerable sectors to climate change. But regenerative growing practices offer growers the ability to build healthy soils that can protect crops from uncertain rainfall, reduce the need for inputs, reduce farm costs and risks, and strengthen the long-term value of the land. 

The fund will initially be seeded with $25 million, and is currently enrolling 30-40 row crop farmers growing a combination of corn, soybeans, and/or wheat. The RAFF will originate loans from a diverse field of farmers, including from FBN’s network of more than 33,000 members, and will provide underwriting and monitoring for the portfolio at a discounted rate. Farmers chosen to participate must qualify by meeting environmental eligibility requirements developed by EDF and backed by peer-reviewed scientific research, including nitrogen management and soil conservation standards.

Eventual plans are for the fund to scale to $500 million over three years, accessing public markets to securitize and sell its loans to investors looking for liquid, environmentally friendly investments.

“Regenerative practices can benefit farmers in many ways — through improved soil health, lower fertilizer costs, and resilient crop yields,” said Steele Lorenz, head of sustainable business, FBN. “This new operating line will help make practice adoption more economically feasible and can be paired with other incentive programs such as cover crop cost share or supply chain premiums, ultimately making regenerative agriculture far more accessible to growers across the country.”

Participating farmers will input data into FBN’s Gradable platform, which also provides farmers with agronomic guidance for optimal production decisions. Each participant must agree to provide production data for all enrolled fields for at least three crop years, but – importantly – are not required to demonstrate a new practice to qualify. This means that farmers who have already been employing certain regenerative practices such as no-till or cover crops, can still qualify to participate. 

The Environmental Defense Fund will provide oversight related to the environmental criteria required for RAFF eligibility. These criteria are inclusive to farmers who grow corn, soy, and wheat in various geographies, and who use a range of regenerative practices. The Environmental Defense Fund also will establish a clear system for monitoring those practices and environmental outcomes, as well as measuring the success of financial incentives when examining farm financing frameworks.

FBN will then connect farm environmental performance with the financial performance of the fund – generating insights into the relationship between regenerative praises and farm risk and creditworthiness.

It also will provide investors and agricultural lenders with a new investment channel with the potential to scale to millions of acres.

“This fund is a giant leap forward in connecting the environmental and financial performance of farms and integrating the proven value of practices that reduce climate impacts and improve water quality into farm financing,” said Maggie Monast, senior director of climate-smart agriculture, EDF. “The results of the pilot should allow FBN to make the case for rewarding farmers for environmental performance through their financing, at scale.”

– Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan-stone@globalaginvesting.com. 

*The content put forth by Global AgInvesting News and its parent company HighQuest Partners is intended to be used and must be used for informational purposes only. All information or other material herein is not to be construed as legal, tax, investment, financial, or other advice. Global AgInvesting and HighQuest Partners are not a fiduciary in any manner, and the reader assumes the sole responsibility of evaluating the merits and risks associated with the use of any information or other content on this site.