154 Kelly Price on why we should focus on nitrogen not carbon and work with banks

An interview with Kelly Price, CEO and co-founder of Agreed Earth, discussing why we should focus on nitrogen as a gateway for regenerative practises. 

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We also talk about the role of banks offering a great way to finance the transition as they are on the hook for the potentially bad credit of their farmers and the regular pressure to report on greenhouse gases.

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The above references an opinion and is for information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

Transcript

SPEAKER_01: 0:00

Nitrogen and chemical fertilizer. We don't talk about it a lot, but with energy prices at record levels in Europe and thus the price of chemical fertilizer is directly tied to fossil fuel gas or quote-unquote natural gas, this means record prices for fertilizer. Last year, plus 300%. That is a three with two zeros. As it is an extremely potent greenhouse gas as well, we need to work with farmers to implement regenerative practices and reduce their reliance on chemical fertilizer. Our guest of today argues that we can do this by working through the banks. Welcome to another episode of In March last year, we launched our membership community to make it easy for fans to support our work. And so many of you have joined as a member. We've launched different types of benefits, exclusive content, Q&A webinars with former guests, Ask Me Anything sessions, plus so much more to come in the future. For more information on the different tiers, benefits and how to become a member, check gumroad.com slash investingbridge.com. an egg or find the link below thank you welcome to another episode today with the ceo of agreed helping farmers to profit naturally welcome kelly

SPEAKER_00: 1:44

Hi, thanks for having me.

SPEAKER_01: 1:46

And we always start with this. I mean, you're a listener of the podcast. We start with this personal question. How did you end up working on soil and regeneration?

SPEAKER_00: 1:55

Yeah, it's a great question. I was a biologist by training and then had a career consulting in the pharmaceutical industry. But I increasingly became concerned about the planet's health as opposed to humans health. And I really wanted to transition and use my background to focus on entrepreneurship that would help the the climate crisis. And as a biologist, I know that soil is the foundation of everything. The only energy that we're harnessing on the planet for the most part is coming from plants, which depend on soil. So if we don't have soil health, we're not harnessing that energy and we won't be able to feed ourselves. So that's how I came to it.

SPEAKER_01: 2:33

And as a biologist, you mentioned, we know that soil is the foundation. I don't know if all biologists, I mean, they should know, but they maybe don't. Do you remember when that realization came. Okay, it all starts with soil or oceans, obviously, depending on what we're eating. But do you remember when that realization came? And how was it a smaller process? Was it a book? Was it a movie? Was it a tomato you ate straight from the plant? What was that trigger?

SPEAKER_00: 3:01

Yeah, well, you know, it's funny, it definitely wasn't from my biology courses, which, you know, I thought, wow, I'm a bit late to the party here to be figuring this out well after university. But it was reading Gabe Brown's book, Dirt to Soil, that really brought that light bulb moment to me because that's when I had that aha of, oh yeah, the soil is alive. It's a living organism. It's an ecosystem. And that's what feeds the plants. That plus sunlight. And if we only have one half of that equation, we're not going to have healthy plants. And that was that epiphany for me. And if we don't have healthy plants, we can't have healthy humans because we can't feed ourselves.

SPEAKER_01: 3:43

And I mean, I think many people will be nodding now I say okay Gabe Brown of course I read that book as well it's super interesting but it's quite a niche book like you don't pick that up on an airport normally like how did that come to you how did somebody say you should really read this dirt to soil like soil like what was the trigger to open that or to get that book or open a book of quite a niche subject of a farmer in the US

SPEAKER_00: 4:05

yeah well this is kind of how did I come to focus on regenerative agriculture which is a whole other story but just to answer your question quickly we

SPEAKER_01: 4:13

have time we do

SPEAKER_00: 4:13

have It was watching the film Kiss the Ground, which he features in. And that's what really got me understanding. You know, I knew that there were problems with the food system from some previous work I'd done in food waste, but it was watching Kiss the Ground and understanding how we're killing the soil with the way we're currently growing things that helped me get on this mental journey. And then, of course, I picked up Gabe's book and I actually got to speak to Gabe a while back. Wow. And that was, yeah, that was a really great moment. He honestly, salt of the earth, genuinely nice guy. He took a call from me while he was just sitting at DFW airport waiting for a flight. He's that nice.

SPEAKER_01: 4:54

Wow. And I've seen him speak virtually and that's the closest we got, but that was already fascinating. Shout out to Jan Giesbert who might be listening, who's very close to Gabe as well. I think it was at a small gathering we organized close to Berlin where he spoke virtually because we're still communicating. So it's now but he comes through even through a scream. He comes through very, very warm and incredibly engaged in this topic. So that's okay. And that starts to make sense. You see somebody like the entry point of a documentary, I think they had an impact with that documentary, which has been quite astonishing, and then picking up a book and going deeper. And then you decided to found a company or to start working like putting your your working energy and working hours and not just your your thinking hours and maybe after work on this project. Yeah. Well,

SPEAKER_00: 5:47

I've always found in my career that I'm best when I'm able to funnel a passion. And, you know, in my previous career in pharmaceuticals, that was helping cancer patients. And I really, really enjoyed that. But as I said, when I became more concerned about the planet, I wanted to pivot to entrepreneurship that would help the climate crisis. And of course, with the background in biology, I was drawn to things in that area. And I had worked briefly at various climate tech startups working in the food space. One was a company called Winnow that was helping to reduce food waste using AI and computer vision, which was a great experience and helped me understand how much waste we have in the system, which is just

SPEAKER_01: 6:29

really terrible. Yeah, when you see it, I mean, you're saying with visuals, it's when you see the food waste is very different when you hear 30, 40%. We're like, oh, 30, 40%. That's like massive. But when you see like how much, and I think this company was is mostly based on restaurants or the, and they like, it's just the sheer quantity through imagery is, you cannot see it, the listeners, but Kelly's closing her eyes and remembering the sheer quantity of the mountains of food waste. Yeah, no, that triggers something.

SPEAKER_00: 6:58

Yeah. And just a little bit about that, you know, there's the amount that we're wasting. And then when you think about all of the energy and chemical inputs that went into growing that food and transporting that food, and then you think about how that food, if thrown into a Which is 30 times more potent than CO2 as a greenhouse gas. Then you just really, your jaw starts dropping, doesn't it? All that waste. It's mind boggling.

SPEAKER_01: 7:24

And still, I mean, you're working with cancer patients and you're working in food waste. These are big, hairy problems to talk. You can work your full career in that. But you decided to start focusing on soil and farmers and the transition to more regenerative practices or practices that have a regenerative outcome. What led you down that path further? Like what led you to, because with Winnow, you could probably work for the next 20, 30 years. There's no issue there whatsoever. Like food waste is going to be there for a while, unfortunately.

SPEAKER_00: 7:53

Yeah, you're exactly right. It is a big, hairy problem. And in fact, that's what they call it in Winnow. And I think, you know, work can be stressful no matter what you're doing. And I think that I found that if I'm working on something I really care about, it's not stressful because it's a good kind of stress, right? You don't mind working hard when you know it's something that's really important and you really care about it. And so as I got more into the problem of food waste and the food system, I started understanding about the problems we face in the production side of things. I thought about all that energy that was going into growing it and that was then wasted. And that, and I worked with a company called Tried and Supplied, which is trying to get sustainable growers matched with restaurants here in the UK. And I learned more about the supply chain side of it and how difficult it is to source sustainable produce. And so that further informed it. And And then I had a little detour working for a clean fintech company, which further informed the solution we came to agreed. But that company was basically trying to help create investment vehicles for decarbonization tools. Because right now, if you want to put your money in a good way, like an ESG fund, right, there's myriad funds out there to choose from. If you peel back the wrapper, you find that most of the companies in that fund are the same ones. You They're banks, financial services and tech companies like Google, because they have a lower carbon footprint. They're doing less harm.

SPEAKER_01: 9:23

Directly. Yeah. The scope one and two is a lot lower. It's the easy ones. Yeah. But nobody's tackling the difficult ones.

SPEAKER_00: 9:31

Exactly. Exactly. Nobody's tackling the real source of the problem and coming up with solutions. And so I wanted to create something that was actually becoming one of those solutions, you know, to help draw down carbon and really help fix the system itself rather than just So that was the thinking behind it. The actual impetus was I did a program through Cambridge and their Sustainability Leadership Institute on sustainable business. And I learned about this program called Carbon 13. It was a new venture builder for the climate crisis that they were creating. And they were going to create companies to draw down carbon. And I thought, this is it. I've worked for and with startups. I want to start my own business. my own. And it was a vehicle to meet like-minded founders who are also passionate about the climate crisis and using entrepreneurship to solve it. And so I joined that program. It was last, I think, middle of March, and we were the first cohort. And it was very interesting and exciting because we started during COVID, during lockdown here in the UK. So we had to meet people on Zoom and do everything by Zoom. And the program, you could kind of liken to Love Island meets Dragon's Den because it took, you know, from 600 applicants, 60 individuals. And then we were supposed to meet each other and team. And then those teams had to come up with business ideas that would draw down 10 million tons of CO2 with their business practices and then work on those ideas and then pitch to the Dragons at the end for funding. And so during the teaming, it was meeting people on Zoom, kind of like trying to decide to financially marry somebody when you've never actually met in real life which is interesting

SPEAKER_01: 11:18

sounds tricky yeah

SPEAKER_00: 11:21

definitely and then teams formed and then there was intrigue and teams broke up and you're like is this person with this team or that team we don't know what's going on so that was kind of the love island you know excitement of it and then uh 23 teams eventually formed and pitched for funding and eight went on to receive that funding and we were one of the eight and so it was a really great adventure

SPEAKER_01: 11:44

this is a dangerous question to ask because things in startup life as you said we're recording this actually in February 2020 2022 and you started in March 21 so we're even less than a year in and I've followed this since November last year so for like three months four months and it's already I wouldn't say changed dramatically but changed over time and morphed into something else and so I'm going to ask a dangerous question which might be irrelevant when we not when we put this out but if you're listening to this in three years it might be a bit different but what is agreed at the moment like what are you if you had to i mean you're doing your fundraising so you're doing this elevator pitch 6 000 times probably if you had to explain agreed in a few sentences and we have more than a few sentences because i will be asking follow-up questions but what would you what would you say you are at the moment we're in feb 2022 i love

SPEAKER_00: 12:30

that and i always ask the question back for the elevator pitch well how how tall is the building

SPEAKER_01: 12:34

very tall we're in london it's like we have a few minutes yeah

SPEAKER_00: 12:38

is it the shard are we in the shard okay

SPEAKER_01: 12:40

it's definitely

SPEAKER_00: 12:41

great um i'm this this The answer is very simple. We're mission-focused, and our mission is to accelerate the transition to regenerative agriculture. And so as long as we keep our eyes on the prize and we're in love with the problem, the solution follows. We're not focused on a solution that we're trying to shoehorn into a particular problem. And so that's why it's evolved over time, because as we focus on this problem, we understand more and more about what would actually move the needle. And so just kind of taking a step back, my team there's three of us myself uh my co-founder sarah who comes from a farming background and has an expertise in behavior science

SPEAKER_01: 13:22

always nice to have somebody with a farming background on the team and always like the technical decks i get and i'm scrolling very quickly to the team page and think okay none of them has visited a farm recently it's tricky but i think robin o'brien of replant capital says yeah i would just delete the deck no maybe she didn't say that but she definitely said the amount of technology companies i see and say Silicon Valley that have not visited a farm recently at all raised an insane amount of money, burned most of it because, yeah, they were searching for a problem with the tool they had, with the solution they had. So, okay, sorry, go ahead. But anyway, your co-founder has a very concrete farming background, which is great.

SPEAKER_00: 14:00

Oh, yeah. No, it's great because she keeps us real. You know, my co-founder, Reid, who comes from a tech background, and I'll say something and she's like, do you know what a farmer would say to that? It's great. Yeah. You're laptop

SPEAKER_01: 14:11

farmers. Yeah, me too, by the way. Yeah.

SPEAKER_00: 14:13

Completely. I'm Farmville, basically, compared to her

SPEAKER_01: 14:17

spreadsheet

SPEAKER_00: 14:20

farmer compared to her muddy boots. So it's really great to have that perspective. And like I said, she keeps it real and she helps us understand the farmer mindset so that we're starting where they are, as opposed to trying to run to catch them and make them see things our way. And then my co-founder, Reid, comes from engineering tech background. He commercialized weather data, satellite weather data for NASA, and then had a lovely career pivot, as many of us do, and founded his own craft rum distillery. As he likes to say, his fun fact is he's an international award-winning rum distiller. But that's where he learned about the sustainability issues and sourcing through the supply chain and really got interested in agriculture. So the three of us came from different directions, but coalesced on this passion for agriculture, not only because it's such a source of emissions around one fourth of the world's greenhouse gases, but because it's such a solution, a potential sink with so many co-benefits and a way we probably still want to keep eating. And if we do, we need to change things. So that's why we focused on this mission. And we're very passionate about helping farmers, because as we see it, farmers are stuck in a system that They really, it's hard to get out of. They have been conditioned by the markets, by the CPGs. By us. By us, by the companies chasing cheap food products and everything to chase yield almost at all costs. And I mean financial costs and I mean environmental costs.

SPEAKER_01: 15:57

And mental costs, social costs as well. If we look at the countryside everywhere around the world, I'm not just picking on the UK, it's not going amazingly.

UNKNOWN: 16:06

Yeah.

SPEAKER_00: 16:06

No, no, no. They're literally being run into the ground. Sorry, there's so many puns that one can do in ag. It's a little dangerous. But they are by the system. And the system needs to change. And that's difficult. System change is very difficult.

SPEAKER_01: 16:22

So in system change, you want to look at that the easiest off ramp you can possibly even not ramp, it should be an off, tiny off road that is very easy to take. I mean, friend of the show, Jeroen Krompo is like to say, it's like it's very dutch analogy but you're sort of stuck with your bicycle in a tram track if you've never been on a bicycle in a tram city you don't know what i mean but you can imagine if you're stuck with your little wheel in that tram track you you're gonna follow the tram because if you move or left or right you try to steer if you even try to have some kind of agency you'll fall over and so that's where most farmers are because of all of us and not because of their not because we want them to be there or they want to be there but because they ended up there so the question is how do we how do we get the wheel out of the tram track it's in the least disruptive, painful revolution way, because that's probably not what we want.

SPEAKER_00: 17:11

No, no, exactly. The last thing we want is a whole bunch of our farmers who are some of the best stewards of the land to then go out of business and maybe have to sell their land to developers who will just build a bunch of flats or whatever. So we really want to help them stay in business sustainably, both financially and ecologically. And we did all kinds of background research when we decided to tackle the this problem and accelerate the transition to region ag. We attended Groundswell here in the UK, which is this wonderful event. I kind of liken it to the Glastonbury, or for American listeners, Lollapalooza of region ag, just this massive festival, so feel good, wonderful community there. And we talked to so many farmers and really started understanding the issues that they faced, what drove them to transition to region, the impetus that they had, and what that journey was like for them. And that really helped inform our thinking. But something, you know, Kun, you were talking about how much we've evolved since you last spoke to us in November. When we first started working on this problem, we understood that there were two main barriers that farmers faced to even thinking about becoming regenerative. And one was an informational barrier challenge. They didn't know what to do on their specific land and their fields because they might see their neighbor doing something different, right? regenerative, but they would say, well, my fields are different. My operation is different. My land is different.

SPEAKER_01: 18:42

Which is true because it's, as we know, extremely context specific.

SPEAKER_00: 18:46

200%. That's exactly it. It's so context specific that you can't take a cookie cutter formula and just plunk it down on another farm and expect it to work. So that's very challenging right there. It needs to be a very customized and adaptive approach as you go. Regen as a journey, not a destination. And whether things I love about it is they're always looking to improve. I think region farmers are some of the best scientists on the planet, the way they're always reacting to what happens and trying to find something new and better that works. So that is a challenge, you know, if you're used to doing things in a more cookie cutter conventional way to all of a sudden have to completely adapt what you're doing. But the other thing was, of wonderful book, Farm to Fork, it's hard to be green when your finances are in the red. And you and I just talked about how difficult these farmers are finding it, how the system isn't working brilliantly in the UK because of Brexit. The farmers here are losing the subsidies that they had been receiving from the EU. And farming hasn't been just the most profitable thing in the world to begin with, with the low food prices and how much the grocery stores are willing to pay for produce and things like that a lot of the farms here had been relying fairly heavily to even depending upon these subsidies just almost like you know insurance in case they had a bad year with the crop or things like that and so with that going away that makes it all the harder for them to think about doing something new that might be risky

SPEAKER_01: 20:28

there's a lot of tension or stress in the market now as the new system is coming into place it's not very clear yet if i I mean, we could spend hours on this alone. It's a very interesting opportunity. I think everybody in the space globally is watching because it's this sort of forced reset of a subsidy system. And there at least is a lot of intention to move into more, let's say, outcome-based schemes and not just very simply pay because you have land for whatever reason, whenever you took it, stole it, bought it, etc., or inherited it. And so that it's a very interesting experiment. But of course, if you're right in it and you are the dependent, let's say most of your profit comes from or your living income comes from subsidies that are disappearing almost overnight, it's very stressful. And then we're adding the input crisis we have at the moment. We're living in a time where input costs went through the roof. And yeah, that I can imagine creates a lot of stress in not the right places.

SPEAKER_00: 22:14

Yeah, exactly. developed here in the UK. And so with the loss of that, they're losing that buffer that what functioned as insurance and the land management scheme that may be coming in that, as you said, is more outcomes based. There's a few issues with it. Nobody knows exactly how it's going to play out. But

SPEAKER_01: 23:00

that's issue number one. It's difficult to plan for if you're running your farm, obviously, as a company.

SPEAKER_00: 23:07

Yeah, exactly. I think that the National Farmers Union, the NFU here is having a conference next week. And one of their talks is like, is uncertainty the new business norm or something like that. So yes, it's very hard to plan.

SPEAKER_01: 23:21

And I can tell you it is, and it will be because nobody's going to be super happy with 100% happy with all of these, but it's coming. Like there's massive changes coming.

SPEAKER_00: 23:29

Oh, the one thing is certain is change.

SPEAKER_01: 23:31

Yeah. The one thing is certain is change. So how does that, you're saying we want to help create this offer. I'm going to help farmers transition. What's the entry point? What's the least, I wouldn't say easiest because none of this is easy, but what's the first step or the first entry point for a new company like agreed it's not that you're you've been around for a long time you have a stable business somewhere else and you're going to do also some new things now this is the main business what did you decide as the focal point like is that the knife edge there are many other facets obviously but the point of the knife to to enter this and to meet the farmers where they are aware and then help them where they want to go

SPEAKER_00: 24:06

yeah exactly well if you think like a farmer and you you're losing this subsidy that was kind of your insurance buffer and your input costs arising at the same time it's basically a perfect financial storm that farmers are facing here. And we realized that nitrogen actually was the key to everything. It was the starting point of the journey because the price of nitrogen fertilizer last year alone rose about 300%, which is just huge.

SPEAKER_01: 24:36

Three and two zeros, listeners, three and two zeros. That's three times. So imagine your main input cost, one of the main input costs overnight went 3x. Okay. That's Yeah, significant.

SPEAKER_00: 24:48

Exactly. 3x. And that's the thing that kind of ensures you get that yield that you are incentivized to chase. And so that was huge, to say the least. And we realized that nitrogen is the key because, first of all, it is one of the biggest sources of the carbon footprint of a farm. I think a lot of people are focused on carbon and rightfully so. But in some ways, this is almost like an etymological problem because actually what we're focused on is greenhouse gases and warming. And if you think about that, nitrogen is one of the biggest causes of greenhouse gases and farming because of the Haber-Bosch process that's used to produce it with methane, which consumes about 2% of the world's energy, which is just mind-boggling when you think about it. And then you spend all that energy and fossil fuels to create this nitrogen fertilizer, when you put it on the fields, you have the other 50% of the emissions, which is actually in the form of nitrous oxide, which is a potent greenhouse gas, 300 times more potent than CO2 that is released in the fields. Nitrous oxide is actually a component of smog as well. So you've got an air pollution factor. So it's just this huge carbon footprint, all just to grow our food.

SPEAKER_01: 26:15

Carbon equivalent that's i think the important part here so we just to summarize and then we get to the part it doesn't even get it or its effect basically because most of it is wasted but just to understand this is a greenhouse gas that we say always carbon equivalent or we should always say carbon dioxide equivalent or greenhouse gases as there are many different ones this is one that's 300 times more potent than carbon dioxide or co2 and it's created with a lot of energy which i know people are working on but they say the fertilizer issue on just the production side and then You write it on your land or you spread it. And most of it doesn't end up on a plant. Most of it is being like the oxide comes off, which creates huge amounts of smog and all of it. So it's a massively wasteful stuff, which by any means has created a lot of benefits as well. A lot of cheap calories we've been producing over the last, what is it, more or less a century, probably a bit more. But it's creating an enormous wasteful process that has to change. Like if we, like either if you're concerned by energy use, this This has to change. If you're concerned about smog and long health, and I mean, we've just been in two years of mayhem because of a lot of issues, let's say, around breathing and issues of smog. It's definitely a thing. I mean, many people die of smog every year. Or if you're worried about farmers' financial health, because this is a massive cost that went up 300%, this is something we don't talk about enough. Nitrogen, nitrogen, nitrogen. And it's an essential thing for plants to grow. The issue is when you put chemical fertilizer, most of it doesn't end up in plants. right? What's the percentage?

SPEAKER_00: 27:48

Yeah. Oh goodness. I mean, there's so much variation in that, but what I can say is that vast majority about, let's say, you know, the first, you know, 50 to 60% of the nitrogen that you put on the ground is probably going to be going into the plant and producing that yield. And the rest that they put is just chasing incremental yield because it's not bioavailable to the plant. And that leads to the other problem. There's so many, but the big problem of runoff

SPEAKER_01: 28:16

What is runoff? It sounds weird, but what just for anybody doesn't live next to a farm on a rainy day, what

SPEAKER_00: 28:28

is a runoff? But that is a big component of it, for sure. And it causes algal blooms and eutrophication in the waterways. You know, it's... It's just so

SPEAKER_01: 28:59

bad. It's a massive issue. can dramatically reduce or completely reduce the need for chemical fertilizer. But as we know that, and we've seen examples, the Kate Browns and many others that have shown that, like the question is now, how do you make sure that a good chunk and as many as possible of the farmers in the UK start with them? And what's the best start, best point? And how do we incentivize them? Because of course, we cannot ask them as they are deeply in red to also start paying for new machinery or stay paying for crop, cover crop mixes and And because this transition costs money, or at least you have yield drops, et cetera, to take care of it the first year. So as we know that, we know it's an issue. And now, how do we attack that?

SPEAKER_00: 30:40

Yeah, exactly. We have to meet the farmers where they are and understand things from their vantage point. They are financially squeezed. So even if they had the information and totally understood how exactly to do it on their land, you know, again, they are financially probably unable to take on that risk without this buffer there anymore.

SPEAKER_01: 31:00

Nobody would. Let's just be clear. Nobody would take on that risk. If you would be the company owner, you wouldn't take on that risk.

SPEAKER_00: 31:06

Farms are businesses. Farms are businesses and we have to speak their language, which is fine. And so that's where we realized that there was a real opportunity here, actually, as they're losing the subsidies and as prices are high and likely to stay high for quite a while, it's an opportunity to help them switch on to regenerative practices, which reduce their reliance on chemical nitrogen fertilizer through very simple gateway practices like using cover crops that help fix nitrogen naturally from the air. So that's where we started. But again, if they start on this journey, they're going to need to figure out how it works best for their land, their practice. That's that context again. And so what we realized the opportunity was, was to help them access finance that would de-risk that transition for them. Because as they figure things out, they may have a drop in yield. They're going to have to try things, experiment a little bit, figure out what works on their land, and honestly rehabilitate their soil and build back up that natural fertility because the one thing about nitrogen fertilizer you and I didn't cover yet is the fact that it actually kind of kills the soil microbial life that provides that natural fertility. It disrupts the natural market that exists between a plant and the soil microbes where the plant is exuding carbon to feed the soil microbes and they then release minerals and nutrients back to the plant. It's a virtuous cycle. It's like a market, underground market that you didn't know was happening all the time. And so if the plant is getting a lot of this nutrient from above in a chemical form, it kind of doesn't need to work as hard to feed the microbes and they don't get as much carbon and then they don't exude as much nutrients as well. So yeah, it's disrupting that and the farmers aren't building their soil organic matter as much as they could be by relying on nitrogen and that keeps the farmer on this input financial treadmill where they're reliant upon it to chase that yield.

SPEAKER_01: 33:09

And so how do we get them off the treadmill like what's the angle i mean you can of course go out and we've had them on the podcast a perennial fund and replant capital to a certain extent and some others that are trying to build transition finance too and are building transition finance funds which we've seen it's a lot of i mean a lot of work of course but also you like to raise money for this is not easy at all you decided to take another route you decided to see where the money already is or where the risk already is which is a very interesting one so how where did you say okay let's get transition finance, but let's not set up a massive fund or a crowdfunding platform or lending platform on our own.

SPEAKER_00: 33:46

Yeah. And first of all, a shout out to you and your podcast, because that really helped inform our understanding of the issue with the, you know, the Mad Agriculture Perennial Fund interviews and the one with, or the many, I should say, with New Foundation Farms and really understanding that there are people creating funds and trying to purchase land to then switch it over. And we're actually working with one of those funds, which I can mention later. But we realized, again, go back to the mission since we're mission driven and the mission is to help farmers transition we realized that in order to move the needle at scale we needed to work with people who had those relationships with farmers already rather than trying to go farm to farm

SPEAKER_01: 34:26

knocking on the door yeah

SPEAKER_00: 34:28

knocking on the door exactly and we also as part of our mission just just to make things more challenging for ourselves you know because you know trying to save the planet um and you know entrepreneurship in agriculture weren't challenging enough, we have a mission where we do not want to charge farmers. We want to help farmers and put money back into their pockets. And so we needed a way to do this at scale with people who have relationships with farmers, but in a way that could get finance to them where they're not paying themselves for this transition. And so we realized that there was an opportunity with banks. Banks have relationships with the vast majority of farmers in the country. And also, thanks to some recent developments, banks now have a statutory obligation to report on the carbon footprint and exposure of their book of debt and to also be moving that book of debt towards net zero by 2040, which is wonderful.

SPEAKER_01: 35:29

But nobody knows how to do that.

SPEAKER_00: 35:31

Well, it's also a problem for the

SPEAKER_01: 35:33

banks. If you're an agriculture bank, yeah, your emissions are going to come from practices, are going to come by your clients your farmers and so you're going to need to work with them to help them implement different ways just like you have to work with your real estate portfolio if you happen to be large on that to start changing the light bulbs insulating i mean depending on what's the state of the real estate but there are a lot of things you can do to bring it i wouldn't say to net zero immediately but actually energy positive if you wanted to but very close i mean they're huge there's a lot of low-hanging fruit there which is interesting for a bank as well because most of these are financial finance questions like yield drop in three years but then interesting returns after that's a financial question if you want to go to organic there are premiums we can model it out we can we can figure it out if you want to go i mean i know they're even i heard yesterday some interesting premiums for a region organic in the u.s if you're certified like there are brands now like there's this is a finance question at the time with finance you can sort of travel you can bridge the three years to five years whatever your field needs if they're obviously interesting financial incentives Which could be great contracts, offtake agreements, which could be homes that finally wakes up at that time or other things. But this should get bankers very excited because this is a financial, we need financial products to bridge that. But then we need intermediaries or at least people to connect with the farmers to do that.

SPEAKER_00: 36:52

Yeah, absolutely. We need to help these

SPEAKER_01: 36:55

farmers. being like, oh, we need to, oh God, we need to move now because this thing is coming and we're going to report and we have to. There's a lot of extra reporting we need to do because as banks, we already need to do so much. What have you seen or do some of them see it as an opportunity now?

SPEAKER_00: 37:19

Oh, definitely. I think the reaction that we've gotten with the many conversations we've had, while mixed, everybody has been interested and supportive. And in fact, we actually have three letters of interest from three banks about this particular solution that we're working on, which is really wonderful. One of the things to mention, you don't need to be an ag-only bank for this to be a real issue because many banks lend in many different areas. Ag might even be a small portion of their lending. But the fact is, is that because agriculture has such an outsized footprint of carbon, it's actually an outsized area of exposure and risk.

SPEAKER_01: 37:59

Reporting, yeah. And risk is interesting here because if these farmers keep going bankrupt because we put them there the bank at the end is on the hook for because they they have a lot of money outstanding there especially in bad seasons so there's a huge risk component not just the reporting there's a risk component here as well and the better financial health your farmers are your tenants just if you have a real estate building the easier your job is as a bank obviously so how do you work with banks how do you or are you going to work with because you have letters of interest what's the idea i mean this can change if you reach out to kelly in a is slightly different. But at the moment, how do you envision that?

SPEAKER_00: 38:37

Yeah, well, just taking a step back a little bit about the opportunity for banks here that we realized, and this is what really aligns those incentives along the lines of what you were talking about with the tram lines, right? It's aligning interests and incentives. The banks, of course, have this reporting obligation. One of the problems they face is just such a massive thing to quantify, you know, just trying to quantify it. I talked to one ESG manager in a bank And she was saying, well, we're taking averages of averages to figure out how much carbon is sequestered in a hedgerow. I was like, yeah, well, how long is a piece of string? I mean, that's just such an impossible question to answer and an impossible or useless method to arrive at the answer. So the point is, is that they're scrambling, trying to fill in these numbers. And we realized that nitrogen actually is a wonderful component area to focus on, because as we talked about, it's such a part of the problem, but it's also incredibly easy to quantify. Farmers know exactly how much nitrogen they are putting to the kilogram, most likely, on their fields. And there are many ways of tracking that and looking at it over time. And so we realized that we have an opportunity through our data to help banks not only quantify their exposure on this one key metric, but also benchmark them against region farmers who have reduced using region practices so that we could say, hey, bank, you know, your farmers are way up here. And let's say five years time, based on our data, we could see that they could reasonably reduce, you know, 10 to 15% of that, which is a huge chunk of carbon, CO2E, you know, equivalent. And at the end of that period, they would be more financially resilient, because they would be less reliant on this expensive and fluctuating input. So, you know, most likely, you know, data says that region farms are at least if not more profitable once they've reduced those inputs. And in addition, they're going to be more resilient ecologically because region practices, for example, using cover crops, keeping the ground covered throughout the year and having living roots and relying more on natural fertility means that those farmers can weather weather events better like floods and droughts, which we know are increasing with climate change. So here you go, bank, your farmer is hurting right now, your customer, you have a means that can help them through this difficult time as input costs are high and as they lose these subsidies, that at the end of it will mean that your customer is better off and you have a lower risk customer. So you save them from going out of business and you help them future-proof their business for going forward. So that's a

SPEAKER_01: 41:23

real win-win. And so how will they be financing it? Is it lowering the, maybe it's both, lowering the interest rate if a farmer, let's say, start with the program, there's no the program, but with the practice and starts learning from nearby region farmers, starts learning, etc. Or is it actually let's finance your machinery and let's finance the cover crop mix or let's increase the depth, which is a risk to do that transition. Where do you see that? Let's pile on more depth on farmers, which some people will cringe now when I say it, or let's lower the interest rate, which I know some people are working on, like replant capital. If you're doing certain things connected to soil health, we can lower the interest rate you're paying, which what the Triodos Bank is doing, if you have a house that is on a lower level of energy use, you actually pay less in mortgage because the risk is lower.

SPEAKER_00: 42:10

Yeah, well, the answer is, I see it as all of the above. I see this as a real opportunity for innovation in region finance, regenerative finance, because, you know, of course, it could be a lower interest loan. And I think it should be, to be honest with you. One of our missions is to shift the needle on risk.

SPEAKER_01: 42:31

For the bank or the farmer or both?

SPEAKER_00: 42:33

For both. For both, because both banks and farmers now see conventional farming as normal and regen as risky. And the truth couldn't be any further from that. It's actually regen, which in the long run is going to be much less risky, much more resilient, and conventional, which is driving farmers into the ground and driving the climate into crisis. And so we want to make the case for regen being lower risk, and therefore it should be rewarded as such through lower rates, just like you were talking about with Triodos Bank and mortgages and things like that. So we want to make that case and we want to take it straight to the banks who can then take it straight to their customers and offer creative finance. It could be lower interest loans. It could be other things like grants up front simply because it reduces that bank's risk. There's all kinds of ways that they can do it. And I think that comes back to one of our other ethos, which is optionality. We don't believe in telling farmers, you have to do this. What we think is the better way to go is to help them see a goal that would be beneficial to them, like lowering their reliance on nitrogen and then putting options in front of them, ways they could achieve that goal and letting them choose the one that's right for them. So that's why we've built our platform to help connect farmers to other farmers who are doing region practices so that they can.

SPEAKER_01: 43:57

They don't necessarily have to be just a customer of the same bank. I mean, this could be any farmer nearby that is in a similar position Exactly.

SPEAKER_00: 44:13

Seeing is believing. We know that getting farmers to visit each other and having those farm walks, that's very, very helpful in bringing these practices to life for them. Farmers learn best from other farmers. And that's how this is really going to spread. If this were just a data issue, it might be solved by now because there is a lot of data. There's a lot of decision support tools out there and more powerful tools out there. But to get that mental shift and the confidence for that farmer to begin on that journey, they're going to need the financial security that even if they do have a drop in yield, they're not literally betting and losing the farm. And they also need that psychological just kind of security of knowing that there are other people who've been there before, who've done this, and, you know, kind of give them some advice. If X happens, that farmer knows what it's like and has some thought process. So I think you cannot eliminate the human element of this. You know, farming is a competitive sport, but it's also very collaborative at the same time. It's one of those central paradoxes of it that I love. And so we want to facilitate that. So we've built this platform to connect farmers to each other and help visualize what region looks like.

SPEAKER_01: 45:26

So a farmer arrives, let's say a farmer arrives now, registers him or herself on the platform, and then you suggest like, look, actually, not so far. away from you there are people doing very interesting things you might have heard about them etc but it's actually and those farmers that like these let's say the region farmers that are a few years ahead are they open to getting because they might get a lot of these requests now from I would love to have a farm work I would love to see like how do you manage that that process of because seeing is believing but these farmers also have to farm it's not that they can do farm tours all day every day the whole month I mean then nothing gets done so how do you manage that process without overwhelming the let's say the management Yeah,

SPEAKER_00: 46:04

well, that's a really great point. So I think that connecting with other farmers is important, but also connecting with agronomy advisors who specialize in region is important. And these farmers exist, and we are aggregating them on our platform. So you can kind of have one-stop shopping, find somebody near you who fits your philosophy. But region advisors right now, most of them, and I was talking to some at the recent BASE conference here in the UK of region farmers, they do region advising, but it's not just region advisors. It's not their entire book of business. They couldn't probably support themselves right now only on Regen. And so we'd love to change that. We'd love to funnel new farmers getting on this journey to them so that they can only focus on Regen, which is their passion.

SPEAKER_01: 47:24

And again, in this case, the farmer wouldn't pay, but the advisor would pay you or even not. Like in terms of business for agreed, the farmer doesn't pay, which means that it has to come from the agronomist advisor.

SPEAKER_00: 47:36

So what we are doing is building this platform free for farmers. And we're not... as it currently stands, charging anybody to be on the platform. We want this to be a freely available resource for the agronomy advisors, for the farmers, for brands like you talked about. You know, there's brands like Root Zero Potatoes, which are growing carbon neutral potatoes, and Wild Farmed Wheat, which you may know of.

SPEAKER_01: 48:02

I'm smiling because they should come on, but it might take a few more months. But yeah, we're in touch with Wild Farmed. I'll put a link below if you want to know more about grain and very innovative ways of farming. Oh

SPEAKER_00: 48:14

my goodness, we could do an entire podcast session on just on wheat and nitrogen, I think. That's a whole other topic. But at any rate, we're putting these resources for farmers to plug into even the carbon markets. You know, a lot of times we've gotten questions, well, there's so much happening in the carbon market space. How are you going to be different? And we don't see ourselves as in competition at all with the carbon markets. We see ourselves as the beginning of that journey by getting off of nitrogen reliance, the farmers can then really begin sequestering that carbon in their soil. So if they want to go ahead and sell those credits later, they can. And we have put different markets on our platform for them to potentially plug into, you know, markets like Agrina. So we support that, but it's up to the farmer. All we want to do is help them reduce their reliance on nitrogen. And we are working with the banks to do that. And so that's where our funding, our financial model comes from, is working with the banks

SPEAKER_01: 49:12

business model comes from

SPEAKER_00: 49:13

yes exactly so we want to be free to farmers

SPEAKER_01: 49:16

i mean in terms of finding a business model go where the money is to a certain extent and

SPEAKER_00: 49:21

banks are known for having money

SPEAKER_01: 49:23

are known for managing large amounts and having small margins but they are still managing to be remarkably profitable over the last years and yeah it's so it's that's definitely an interesting choice and not trying to take a spread on the carbon side of things or it's where a lot of noise is happening a lot of focus but it is very interesting, I think, of this conversation is that the actual, that the big elephant in the room is nitrogen and nitrogen oxide, which is very potent. Let's not underestimate that. And it's very visible, literally because of smog and very visible, literally because of runoff. And probably, let's say that the rest of the general world, as we're going into the carbon hype, will start paying attention to, hopefully paying attention to nitrogen because it's much more eminent also on the balance sheet of a farmer and the balance sheet of a bank, apparently.

SPEAKER_00: 50:09

And the balance sheet of a bank. And that's exactly And, you know, shout out to Mark Carney for really bringing the financial system into the climate crisis solution and driving this change. And, you know, I think he's been a big part of this focus on getting banks to report on this and also shift their financing away from the source of the problem or trying to reduce it. And, you know, banks have played an outsized role in funding the sources of the climate crisis. And I think that I think that they are really starting to step up and recognize that and then try to instead fund the solution. And my goodness, this is a big part of that

SPEAKER_01: 50:47

solution. It can be very long, long term. I don't

SPEAKER_00: 51:17

care. But what would you focus on? hair. For example, I can think of, you know, more sustainable farmers, regen farmers wanting to sell more directly to customers because right now it's very difficult for them to get any kind of premium on their produce. There's not a regen certification like there is for organic. There's not a known crafted market for those products. Consumer awareness of what regen even is right now is still quite low. So that would be a real problem area that the farmers in are facing. And, you know, we've talked about the challenges with the transition. Well, once you have transitioned, how do you get rewarded for having done that transition? You need markets. Exactly. You need markets. Another thing would be, you know, you could sell direct to consumers, but combinable crops, they have a real challenge because their produce just gets lumped in with unsustainable, high input produce and sold at the same low price. So somebody who can help solve that problem, that would be huge. And you'd probably be able to, for incentivize a bigger shift, these massive crops, away from high inputs if they knew that they could get rewarded for it on the other end.

SPEAKER_01: 52:46

Yeah, the more we talk about it, actually, it should be live. No, maybe, no, it will go live today, actually. Paul Lightfoot, in the interview, I always mess up the production schedule. Lightfoot, Paul Lightfoot, I'll put it in the chat as well, or in the description below, runs a newsletter, is an investor himself, and we interviewed him on carbon negative foods, or negative foods, as he calls it. So that's the biggest lever for him, at least, We had a very interesting discussion on creating these markets. Consumers want it. Carbon labeling is coming. And now it's up to us to create the brands that pay the farmer and the farmers, but also make sure we tell and explain and share that story of soil and the complexity. But there's some very interesting things happening. I mean, you mentioned wild farmed, but there are luckily others that are moving that needle because we need much better brands. We need much better produce products, process things, because not everything can be sold fresh. Drain is a great example. So get it in our house to get it in our shopping carts or to get it in our home which is a yeah probably can put a billion dollars to work there or a billion pounds if you wanted to

SPEAKER_00: 53:47

yeah absolutely so when those brands pop up or crop up i should say then we can put them on our platform because at the end of the day we're an ecosystem player and we want to support all the players who are doing good in this space so yeah we are going through banks to reach their customers to help get them financing for this transition to de-risk it for them And that's how we see ourselves as moving

SPEAKER_01: 54:13

the needle.

SPEAKER_00: 54:38

And so if we simply costed in the environmental cost of this nitrogen, the chemical inputs, then it would not be remotely economical to farm this way. It's already kind of becoming that way because the cost of nitrogen is predicated on the cost of natural gas and energy, which as we know, all know, especially here in Europe has risen a lot. a lot recently. So I would cost that in and that would drive system change. But I also understand that that's very politically unpopular and would lead to all kinds of other problems like much higher food costs, which could hurt a lot of people too. So I don't want to pretend that it is a simple solution, but I think that those externalities are a huge driver of the problem that we've found ourselves in, this massive rut.

SPEAKER_01: 55:34

Absolutely. The true cost of the food we pay, I think they did the study the Rockefellers paid for the study in the US, I think it's 3x what we pay in the US yearly for food, and the true cost in terms of health and environmental and social, what they could calculate, so imagine it's still a lot higher, is about 3x. That's saying we should charge it now and everything should be 3x, because of course, that would lead to huge disruption. But we need to figure out an off ramp of that as well, because we're paying it anyway. It's not that it's coming, the bill is coming. And we're for a lot of this indirectly and directly

SPEAKER_00: 56:14

on the health side of things. So it's definitely coming. We have a problem and we really need a lot of creative minds to work towards solving it. And I hope that maybe your podcast can really inspire a lot more to get working on this.

SPEAKER_01: 56:47

Let's hope so. We need more people in this space building things. That's for sure. I want to thank you so much, Kelly, for your time in this wild journey that you're on and looking forward to follow it, to check in over time and to see how we can get some of those big banks to start changing, working with their customers, actually working with instead of

SPEAKER_00: 57:06

working with their

SPEAKER_01: 57:07

customers and being part of the solution just as we want farming to be part of the solution.

SPEAKER_00: 57:10

Exactly. Well, thank you so much, Kun. I really appreciate it.

SPEAKER_01: 57:14

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