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Rita Herzog (MBA/MENV'24) earned a competitive spot in the inaugural cohort of the . That program involved completing a research project, the output of which is below.

Abstract

In a world grappling with environmental challenges and food security concerns, the spotlight has shifted to a revolutionary approach to farming known as regenerative agriculture. This innovative practice not only holds the key to restoring the planet's health but also presents a promising avenue for investments in the ever-expanding realm of agricultural technology. This piece will delve into the significance of regenerative agriculture from both environmental and societal perspectives, explore the investment potential of regenerative ag tech, and highlight investment areas poised for success in the field. Additionally, this report will discuss the vital role of public-private partnerships in nurturing sustainable agriculture and address venture capitalists’ relationship with this industry while showcasing alternative investment solutions to food and ag tech that supports the scaling of regenerative agriculture. 

Acknowledgments

Thank you to theTeam for providing resources and community to ideate about and complete this research. The cohort of ClimateCAP Fellows has created a wonderful and insightful group of peers that are curious and motivated to change the status quo of business. was also integral to my understanding of climate and health impacts of the agricultural industry and has provided a network from which to draw information and ground-breaking innovation. Finally, thank you to the ��«����Ƶ Leeds School of Business and the Center for Ethics and Social Responsibility (CESR) for highlighting my work. My time at Leeds has been profoundly shaped by the work done by CESR. I look forward to continuing to engage with all of these groups, and more, that have been so valuable in my education and career development.

Introduction: Reviving the Earth Through Regenerative Agriculture

Regenerative agriculture is a holistic approach to farming that focuses on rebuilding soil health, increasing biodiversity, and fostering resilience in agroecosystems. Unlike conventional methods that often deplete soil nutrients and contribute to greenhouse gas emissions, regenerative practices emphasize cover cropping, rotational grazing, minimal soil disturbance, and other strategies that work in harmony with nature . This approach not only reduces carbon emissions and enhances water retention but also boosts crop yields and improves the livelihoods of farmers, producers, and consumers.

From a societal perspective, regenerative agriculture plays a pivotal role in promoting food security, especially in the face of a growing global population and climate change-induced disruptions. By nurturing healthier soils, these practices create more robust and adaptable crop systems, leading to better yields and improved access to nutritious food for communities around the world .

While some farmers and ranchers are transitioning to regenerative agriculture practices overall, there can be financial and yield challenges that come with this. Due to this matter, there have been significant forward bounds within the food and agriculture technology sectors that support regenerative agriculture’s position in the industry. Capital providers are investing in both the practices of regenerative agriculture and the technologies that support it, both of which will be highlighted in this report. While there has been investment in this space to date, with increased deal volume in the last five years, investors should prioritize investment in sustainable agriculture with just as much weight as they may consider other climate tech innovations.

Climate and Human Health Impacts of Conventional Agriculture

Agriculture is both a lifeline for humanity and a significant contributor to climate change. The way food is produced has profound implications for the planet's climate equilibrium and long-term human health. There is an urgent need to move away from business as usual in this industry to more sustainable solutions through regenerative agriculture and the food and agriculture technology that supports this transition. 

According to a McKinsey & Co report, there are certain key impacts that stem from agriculture that create negative climate impacts:  

GHG Emissions: Agriculture, in its current form, is responsible for a staggering 27% of global greenhouse gas (GHG) emissions. If we maintain our present practices, these emissions are expected to surge by 15% to 20% by 2050. 

Water Usage: Agriculture is a voracious consumer of freshwater resources, accounting for a staggering 70% of global freshwater withdrawals. The impending crisis lies in the projection that global water demand for agriculture will surge by 55% over the next three decades. This intensifies the risk of water scarcity and heightens competition for this finite resource. 

Petroleum Based Inputs: Synthetic fertilizers, while historically vital for crop productivity, come at an environmental cost. The production and application of these fertilizers release CO2 and N2O, contributing significantly to the sector's emissions. This further underscores the urgency of transitioning to more sustainable and efficient farming practices.

Human health impacts associated with traditional agriculture are becoming more prevalent, and the following details will shed more light on issues like pesticide exposure, antibiotic use, and the degradation of soil quality affecting the nutritional content of our food. 

Consumer and Producer Pesticide Exposure: 

• Consumer Exposure: When you take a bite of that juicy apple or savor a salad, you might not realize that traces of pesticides and herbicides can often come along for the ride. These chemicals are used to protect crops from pests and weeds, but they can also pose risks to human health. Residues from these substances can linger on fruits and vegetables, leading to potential ingestion.
• Producer Exposure: On the other side of the coin, those who toil in the fields, planting and harvesting our food, face even greater exposure to these chemicals. Pesticides and herbicides can be absorbed through the skin, inhaled, or ingested during agricultural activities.

Antibiotic Use in Livestock Farming: Traditional livestock farming often involves the routine use of antibiotics to promote growth and prevent disease in crowded and often unsanitary conditions. This practice has raised concerns about the development of antibiotic-resistant bacteria, which can undermine the effectiveness of antibiotics for treating human illnesses.

Soil Degradation and Nutrition: As soil health declines from overuse of synthetic fertilizers and monoculture cropping, so does the abundance of essential micronutrients in our food. Studies have shown that the nutritional quality of crops grown in nutrient-depleted soil can be significantly lower, leading to deficiencies in vitamins and minerals for those who depend on these crops for sustenance.

Recognizing the profound climate and human impacts of agriculture, the United Nations Sustainable Development Goals (UN SDGs) align directly with efforts to mitigate these effects. Below are the key UN SDGs that are associated with climate change and human health impacts from the agricultural industry. Detailed explanations of each UN SDG below can be found in the appendix and the full list of UN SDGs can be found on the United Nations Development Programme’s website

"Agriculture is both a lifeline for humanity and a significant contributor to climate change,"

- says Rita Herzog 

Investment Potential of Regenerative Ag Tech

The intersection of agriculture and technology has birthed a plethora of investment opportunities, and regenerative agriculture is no exception. As demand for sustainable food production rises, startups are harnessing innovative technologies to drive the regenerative agriculture movement forward. These advancements include precision agriculture tools, data-driven insights, and AI-powered solutions that optimize resource usage, predict pest outbreaks, and enhance overall farm efficiency.

According to Pitchbook emerging spaces research, of the 146 highlighted categories, the regenerative agriculture market has had $2.61B invested into 159 companies in the last five years, with the number of deals increasing by 2.31% in the last quarter While this is certainly not the largest investment space, there are other emerging spaces highlighted that are seeing significant growth and traction supporting the growth and implementation of regenerative practices. 

Due to technological advancements, focusing on the agricultural industry provides significant opportunity to improve the industry through productivity, sustainability, and profitability. Agtech applications, such as precision agriculture, plant genetics and breeding, robotics and automation, and even digital tools all contribute to the promotion of regenerative agricultural practices, despite not often being spoken about historically in the same conversations. These technologies will allow farmers and ranchers to transition to more regenerative, yet modern, systems of food production. In the last 10 years, based on the Pitchbook 2022 AgTech Vertical Overview, there has been consistent growth in investment in the industry, with exception to the last year. 2022 posed significant economic concerns that impacted investment activity across industries, not specific to ag tech that supports regenerative agriculture efforts (Source).

According to the 2023 AgFunder Global AgriFoodTech Investment Report, Farmtech is getting attention from global investors, and has seen $10.2 billion of investment in 2022. In addition to the above categories that can tangentially support regenerative agriculture, this $10.2 billion can directly benefit the efforts to make farming and ranching more sustainable.

Not only is the regenerative agriculture market seeing growth in investor action, large corporations are also investing in the future of on-farm innovation. For example, Bayer has invested 220 Million Euros in research and development efforts in their facility in Germany, with a focus on crop protection innovations. This investment is to strengthen Bayer’s commitment to innovation in regenerative agriculture and to enhance the environmental and human health safety when it comes to input application on crops While Bayer is known for their chemical production for agricultural inputs, this shift in focus to more environmentally sustainable solutions is a signal for peer companies to follow suit and could be compared to oil and gas companies shifting focus towards renewable energy sources. 

Startups in all industries raised $445B in 2022, which was a 35% decline year over year It is important to note this larger economic activity when assessing the exit activities in the food and ag tech industries. While liquidation events have slowed in 2022 and 2023 due to the overall macroeconomic environment, there have been significant exits in the food and ag tech industries that are noteworthy. There has been continuous investment into this space throughout the years leading up to 2022, so well-funded and profitable startups are ripe for exit possibilities through public listing or M&A. Below visualizes the exit activity in the Agtech industry through Q2 2023.

As consumers and businesses navigate the changing global landscape, Agri Food Tech will have a significant role in addressing the major climate and health-based crises, and the investment ecosystem for the industry is ripe for more influx of capital with continuous innovation and proven exits. 

Promising Investment Opportunities to Support Regenerative Agriculture

Below are highlighted sectors within the ag tech space that show opportunity for strong investment return and the capacity to significantly change the future impact of the agricultural industry on climate change and human health. While these are only three sectors, with examples of companies within each, there are many other technologies that are growing within the ecosystem that could be considered. Plant Data & Analysis has been chosen because there cannot be change without understanding what needs to change through data, while Robotics and Biotechnology have been chosen because they both offer the opportunity to reduce environmental and human risk while providing returns that venture capitalists can appreciate. These technologies are not just backable by venture capitalists, but have been receiving government funding and could be valuable to growth stage private equity or more creative capital that is covered later in this report.

Plant Data & Analysis: Despite the perception that those that provide the world with food are not technologically savvy, the reality is that farmers and ranchers often simply lack tools to implement shifts in their systems. Historically, farmers have been left out of the conversation; however, when included to determine what the key needs are to increase productivity and minimize costs, farmers and ranchers are eager to learn more and adopt the necessary technology, according to the co-founder of AgriWebb, Kevin Baum. During Q2 of 2023, farm optimization analytics was the top funded category within AgTech, according to Pitchbook. The company, BiomeMakers, could be a strong investment in this space, as they are providing soil microbiome analysis tools to better understand soil health and what inputs may be necessary to reduce the risk of crop disease and increase yields

Robotics & Smart Field Equipment: Advanced field equipment within the precision agriculture market sector allow for minimized utilization of synthetic inputs for growth while also solving for labor shortages that have been prevalent across industries. By investing in on-farm robotics, farmers can increase their own margins by reducing labor costs. Despite this seeming negative for overall employment rates, oftentimes, as mentioned previously, agricultural labor workers face severe health impacts from their work by being exposed to harmful toxins and dangerous equipment, leading to long-term illness and, in some cases, death. According to the CEO of Monarch Tractor, Praveem Penmetsa, the agricultural industry is the third most deadly in the world behind construction and mining Monarch Tractor has created a fully autonomous, electric tractor that is less expensive than similar products on the market The Monarch tractors can reduce GHG emissions produced by traditional tractors used on farms while also mitigating human risk and exposure to elements, chemical inputs, and dangerous machinery. Thus, the technology can improve the social, environmental, and health impacts of traditional farming by creating better profits, less emissions, and less exposure. Additionally, companies like Stout Industrial Technologies, that make small, solar-powered, autonomous on-farm robots, and are backed my tractor and robotics giants like CNH Industrial , have the ability to precisely apply water, fertilizer, or pesticides to specific plants. This technology can reduce the use of chemical inputs while maintaining high yields, margins, and worker health and safety

Biofertilizers: Biotech firms are designing biological fertilizes to replace synthetic inputs that are derived from petroleum. The biotech firms are able to improve plant and soil health via their biological inputs, rather than synthetic, which ultimately will help the longevity and productivity of the soil, protect water from toxic chemicals, increase water storage by soil, and improve crop nutrition by having more nutrients in the soil . Kula Bio is an example of a bio fertilizer solution that provides crucial crop nutrients to plants through active organisms and renewable energy. They use microorganisms to fix nitrogen in the soil to create more productive crop development Kula Bio has thus far raised over $70M and has a post-money valuation of $210M. Lowercarbon Capital led their Series A round that was supported by 15 other investors

Understanding the VC Perspective

While venture capitalists have historically been drawn to the tech sector, the slower adoption of regenerative agriculture in VC portfolios can be attributed to several factors. Agricultural ventures often require longer investment horizons due to the seasonal and iterative nature of farming, which might not align with the shorter timelines VC firms typically follow. Moreover, agriculture involves complex variables like weather patterns and soil conditions that can be challenging to predict, introducing additional risks for investors.

Despite these challenges around regenerative agriculture that traditional thinking faces, VC funds from early to growth stage investments are investing in technologies that will support regenerative agriculture and replace certain inputs and practices that are used in the industry today For example, a local-to-��«����Ƶ VC fund, Trailhead Capital, has consistently invested in technologies that support healthy soils, which is a trademark characteristic of the regenerative movement. Trailhead Capital has built its portfolio around companies they believe will protect and regenerate the soil, promote regenerative systems, and honor stakeholders that are impacted by the “ripple effect” of industries and the economy One of their portfolio companies, Ascribe Biosciences, fits within the biofertilizer category recommended in the section above . Trailhead Capital is just one example of countless VC firms that are investing in food and ag tech that further engrains sustainability in the new status quo of the agriculture industry. 

The Role of Public-Private Partnerships

Investing in sustainable agriculture necessitates a collaborative effort between the public and private sectors. Public-private partnerships provide the resources, knowledge, and support required to drive sustainable agricultural practices on a large scale. Governments can provide regulatory frameworks, research funding, and infrastructure development, while the private sector brings in innovation, technology, and investment capital

In our local Colorado ecosystem, the Colorado Office of Economic Development and International Trade (OEDIT) creates a positive business climate that encourages the sustainable growth of jobs and economic development in the state . Oftentimes, private capital will depend or rely on the previous deployment of grant-based funding to prevent dilution in the company. For example, Oso Meals, which aims to utilize local farmers and ranchers for their freeze-dried meals, has received OEDIT grant funding and is also seeking private capital through VC funding and angel investors. This is a perfect example of how public-private partnerships can play a meaningful role in promoting sustainable products to create a more environmentally friendly economic ecosystem. 

At the national level, the United States Department of Agriculture (USDA) is recognizing lenders, such as Patwhward, to provide loans to rural communities in order to support vital infrastructure, equipment, and renewable energy and energy efficient grants for small business and rural communities across the country These funding sources can be used in conjunction with private capital to advance success in innovation and technology for all industries, including sustainable agriculture. Additionally, the USDA is seeking to promote growth and  innovation in the agricultural sector by providing millions of dollars of funding through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. These opportunities support businesses conducting “high-quality research that address critical scientific challenges and opportunities in agriculture”

While government investment in the United States may be smaller than private market investment into food and ag tech, the relationship between the two, in addition to legislation that pushes forward expectations of the industry, is integral to furthering technology that will support regenerative agricultural practices throughout the United States and beyond.

"Regenerative agriculture and supporting technologies hold the potential to transform our food systems, revive ecosystems, and address some of the most pressing challenges of our time,"

- says Rita Herzog 

Alternative Investment Solutions

While venture capital is the go-to strategy for raising capital in the entrepreneurial ecosystem, innovators, farmers, and ranchers have a variety of solutions that could help with creating a more regenerative landscape for food production. Below are two alternative investment solutions besides venture capital and grant money that provide creative capital to innovators looking to create a more sustainable solution. These highlighted solutions are local to ��«����Ƶ, Colorado; however, alternative investment solutions exist nationwide and internationally.

Galway Sustainable Capital (Galway): is a private equity-backed specialty finance company with a diversified portfolio of return-driven investments aimed at accelerating the global transition to a sustainable economy. Galway invests in seven key themes to further the sustainable economy, one of which is sustainable food, land, and water. Through their investments, Galway finances next-generation (modular, distributed, localized) infrastructure that is more efficient and resilient. Galway provides flexible, full stack capital solutions that focus on deployment of proven technologies into the marketplace, filling the critical capital void for early commercialization. 

Galway is an example of alternative capital to venture money that industries like regenerative ag tech can benefit from. The nature of investment in infrastructure may require more time for returns than traditional equity investments; however, Galway continues to invest in companies that will deliver high internal rates of return (IRR) and multiples on invested capital (MOIC)  while providing non-dilutive funding for their investments.  

Mad Agriculture’s Perennial Fund: Mad Capital (Mad Cap) is a specialty finance company that provides customized, one-stop credit to regenerative organic and transitioning farmers. Mad Capital offers farmers operating, equipment, and infrastructure loans, as well as mortgages, working capital, and transitional loans . MAD! is the larger ecosystem that Mad Cap exists within that has grown from the original business of Mad Agriculture. The MAD umbrella supports farmers and ranchers who are transitioning their land from conventional growth to regenerative agriculture through their branches of Mad Lands, Mad Markets, Mad Revolution, in addition to Mad Capital . Because of the longer time horizons and high levels of risk that come with investing in land and the industry overall, there are limited financing options for farmers and ranchers who want to utilize more holistic land management practices. Mad Cap fills this gap by providing a unique blend of traditional and modern debt to growers who want to transition their land to regenerative practices. While Mad Cap is not looking for high returns, they provide an alternative to the limited loans and subsidies that are provided by the USDA . 

Closing Thoughts

Regenerative agriculture and supporting technologies hold the potential to transform our food systems, revive ecosystems, and address some of the most pressing challenges of our time. As startups continue to innovate within this space, the symbiotic relationship between sustainable practices and technological advancements becomes increasingly evident. The investment potential is undeniable, offering not just financial returns, but the opportunity to be stewards of positive change for both the environment and society. Food and agriculture technology should be regarded as one of the most investable emerging spaces for capital providers of all types, as existing and emerging technologies can benefit from a variety of different funding sources and structures. While investors are key to the commercialization of such technologies, the responsibility is also on consumers to demand higher standards and transparency of production across the value chain. 

Appendix

Sustainable Development Goals associated with Climate Risks related to agriculture  

Goal 2: Zero Hunger (SDG 2) - Addressing the climate impacts of agriculture is essential to ensuring food security for all, as changing climate patterns and extreme weather events can disrupt food production and availability.

Goal 6: Clean Water and Sanitation (SDG 6) - Sustainable agricultural practices can reduce water pollution and ensure the efficient use of freshwater resources, thereby supporting clean water and sanitation initiatives.

Goal 12: Responsible Consumption and Production (SDG 12) - Reducing food waste, adopting sustainable farming practices, and promoting efficient resource use in agriculture all contribute to responsible consumption and production.

Goal 13: Climate Action (SDG 13) - Agriculture's role in GHG emissions makes it a central player in global climate action efforts. Sustainable farming practices and emissions reductions are essential for combating climate change.

Goal 15: Life on Land (SDG 15) - Protecting and restoring ecosystems, such as forests, that are vital carbon sinks is crucial for mitigating climate impacts. Sustainable land management practices in agriculture can help achieve this goal.

Goal 17: Partnerships for the Goals (SDG 17) - Collaboration between governments, the private sector, and civil society is imperative for addressing the climate impacts of agriculture effectively. Partnerships can drive innovation and the adoption of sustainable practices.

Sustainable Development Goals associated with Human Health Risks of Agriculture (Source): 

Goal 1: No Poverty (SDG 1) - Transitioning to more sustainable agricultural practices can help lift farmers out of poverty by improving crop yields and reducing health-related expenses.

Goal 2: Zero Hunger (SDG 2) - Healthier agricultural practices contribute to food security by reducing the risks associated with pesticide residues and enhancing the nutritional value of crops.

Goal 3: Good Health and Well-Being (SDG 3) - Reducing pesticide exposure and antibiotic resistance can directly improve human health outcomes and well-being.

Goal 10: Reduced Inequalities (SDG 10) - Sustainable agriculture can bridge the gap between urban and rural communities, promoting equity in access to nutritious food and reducing health disparities.

Goal 11: Sustainable Cities and Communities (SDG 11) - Transitioning to sustainable farming practices can help mitigate environmental pollution, creating healthier living environments in both rural and urban areas.

Goal 15: Life on Land (SDG 15) - Sustainable agriculture practices contribute to soil conservation and restoration, protecting the vital ecosystems that sustain life on Earth.