Investing in Regenerative Agriculture and Food

256 Ivo Degn and Philippe Birker - Does a low interest, 3,5% on $2,5 million loan, really qualify as a regenerative investment?

October 27, 2023 Koen van Seijen Episode 255
Investing in Regenerative Agriculture and Food
256 Ivo Degn and Philippe Birker - Does a low interest, 3,5% on $2,5 million loan, really qualify as a regenerative investment?
Show Notes Transcript Chapter Markers

A conversation with Ivo Degn and Philippe Birker, founders of Climate Farmers, about the reason why they picked carbon credits as the first business to focus on, how they recently raised $2,5 million in a very unusual way, at least for a startup, what they consider a regenerative investment and much more.

How a beer in the summer of 2019 in Mauerpark in Berlin at the then hottest day ever recorded led to the foundation of Climate Farmers, a non-profit and for-profit focused on accelerating the regenerative transition in Europe.
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Speaker 1:

How a beer in the summer of 2019 in Maurer Park in Berlin, at the then hottest day ever recorded, led to the foundation of climate farmers, a non-profit and for-profit focused on the acceleration of regenerative agriculture in Europe. We dive deep into why they pick carbon credits of all business models to be the first business to focus on, and what the plan is to do next, and how they raised over two and a half million euros In a very unusual at least for a startup way through a loan with a whopping wait for it, 3.5% interest, which was negotiated down by the investor, not the entrepreneurs. I'm sure you've fallen off your chair by now. Anyway, we unpack what they consider a regenerative investment and what the rest of the startup world, which might unfortunately not get so lucky with these kind of terms, can still take away from this. This is the investing in regenerative agriculture and food podcast investing as if the planet mattered. Where we talk to the pioneers in the regenerative food and agriculture space to learn more on how to put our money to work to regenerate soil, people, local communities and ecosystems, while making an appropriate and fair return. Why my focus on soil and regeneration? Because so many of the pressing issues we face today have their roots in how we treat our land and our sea, grow our food, what we eat, wear and consume, and it's time that we, as investors big and small and consumers, start paying much more attention to the dirt slash soil underneath our feet. To make it easy for fans to support our work, we launched our membership community and so many of you have joined us as a member. Thank you. If our work created value for you and if you have the means and only if you have the means consider joining us. Find out more on comroadcom slash investing in Regen-AG that is, comroadcom slash investing in Regen-AG or find the link below Welcome to another episode Today with the co-founders of Climate Farmers.

Speaker 1:

Welcome, ivo and Philippe. Thank you, ivo, and you've been both listening to a few episodes. You know the first question that's coming. Plus we said the questions don't we? We just don't, don't, just throw them at people. And I'm going to start with you, ivo. I'm going to start with you, ivo. I'm going to start with you, ivo. I'm going to start with you, ivo. We just don't, don't just throw them at people. But your journey into this field, into the climate farming field, which, of course, is an amazing title for a company. How did that happen? How did you end up focusing on soil? You can both choose whoever wants to pick at first. You can point at each other. That's maybe the easiest. But what was this journey for both of you to end up focusing basically all your I would say awake time on the topic of soil?

Speaker 2:

It's a good one for us because we actually come from a similar context and there will be some similarities and some differences. So, for me personally, I grew up in a farming context in western Germany Also the German Dutch border in a tiny village, and I got mother having a conventional farm of 140 hectares, so kind of saw the struggles of conventional farming early on, and then I did what nowadays most people do on the countryside. I left and I went to the Netherlands. I spent 10 years in Amsterdam and Berlin, having had the luxury of working for a variety of amazing impact companies, really getting to know the impact tax scene. Also spent some years in the nightlife, had a nightclub for three years and really indulged in city life. But at the same time, I also missed the countryside and I definitely prefer looking at trees to looking at houses. And so in 2017, me and some friends bought an abandoned village and a few hectares of land in Portugal. Portugal has a beautiful law that you can rebuild broken down houses and you don't need any planning permission or anything. And that's what got me looking back into agriculture and then, through that, into regenerative agriculture Through, among others, alan Savry's TED Talk through, among others, yours podcast advancing ecological agriculture podcast. So this stuff that was out there back at that time and me and Ivo we are both part of a change back exchange from Ashoka like a use program from then Through different organizations that we had. So we had contact for a while. We've always been bouncing ideas of each other and essentially always talking about what we think are really impact areas to focus on. And then there was a very and this, I think, where we'll stop for now Then there was a very memorable beer in Moa Park in Berlin in 2019.

Speaker 2:

I think it was the hottest day ever measured until that point, with 39.2 degrees, and me and Ivo were both saying if we don't work on climate change, then we will look back at the space of our lives and we will say, hey, this is not something we could, we could justify towards our children or any future generation.

Speaker 2:

And we're both saying regenerative agriculture seems to be the single best answer that we're having because it's the only thing where we can turn some saying that's one of the main causes of climate change was 24% of our greenhouse gas emissions into a solution by essentially reversing the effect, and we have so many other amazing side effects next to it. So we both said, hey, this is this thing or thing that we want to focus our time on, and basically since that summer in 2019, I think we both have dreamt about region ag, woke up with region ag, fell asleep with region ag and have not regretted this for a single second, because it's such a beautiful scene. You meet amazing people, you get to hang out with Regenerative Farmers, eat good food, and I think it was one of the best decisions of my life.

Speaker 3:

Yeah 100% either. Yeah, what I think Philip said most of it, what I, what I would add. So my, so I grew up on a small farm in Western Germany and, and, similar to Philip, left and worked in the in the social impact sector for pretty much all of my professional career, and so you know, some things are working, there's people doing amazing work. There's also a lot of hot air in this space, and in at some point got introduced to Project Together, which was a very young company looking to sort of mobilize an ecosystem for social innovation in Germany, and joined as an interim CEO and developed their product together with the, with the team, and at a certain point, like amazing stuff, got to the point where Project Together is now sort of the open social innovation agency for the, for the German government, sort of in officially.

Speaker 3:

And what we were looking at is always how do you create systemic changes?

Speaker 3:

How do you not only make a change here and there, but how do you create a systemic change that is not, you know, a bit more sustainable, a bit less waste, a bit less flying me.

Speaker 3:

But how do you make this and this is what Philip and I talked about from the beginning how do we build an organization that contributes to a change in how the Agri food system is working, and so, as Philip said, the potential that we have is that we can turn this into one of the only industries, one of the only areas in which can contribute more positive effects than negative, and this is the incredibly hopeful side. I think this is for me. Why am I in regeneration? Because it's an incredibly hopeful approach, right Like when we were talking about using this very scary crisis that we are in for a transformation towards a system that is actually what we all want, which is a future in which humans, in nature, are not, you know, in conflict with each other, and I think this is really the key thing of our work. How do we create that shift of the system from where we are right now, really a destructive element, towards one where we take our road back within the larger ecosystem?

Speaker 1:

And we met for the first time I think it was the first time, pretty sure at a congress you organized in a farm at Elm Castle. A whole different story, a whole different podcast. I think it was 2021. And you were really and I think we had a call before that as well you really made a long trip, I think, through your visiting a lot of, a lot of farmers and then bringing them together, because the moment you decide in a park, you're in Mara Park, you're drinking a beer.

Speaker 1:

I mean, I think many ideas come up in, either with a beer or because of the hot temperature. But then where do you start? Where do you start to? Okay, regen egg is already the decision, that's the focus point is great. But then how do you turn it into action? Turn it into a company, turn it into investments, which we're going to talk about later. What was the next step? What was after that? The beer in the park and hopefully some cold shower somewhere, because 39 in Berlin doesn't sound fun at all. What was the next step and how did that lead? To a big congress with a lot of farmers and then, of course, to a company and then to so much more?

Speaker 2:

Yeah, I mean, I think the interesting part that we realized when we started diving into this that there is already a lot of knowledge about Regen agriculture out there. At that point right, we found some research studies from Varan University, even from the 80s and 90s, already speaking about the carbon sequestration, the biodiversity increase. So it became very quickly clear this is nothing new, right? A lot of the practices are indigenous practices. A lot of the knowledge is out there. It just happens to not be practiced.

Speaker 2:

And so where we started was with the farmers and essentially we tried to identify who are farmers in Europe which are already on this regenerative path and which are practicing regenerative agriculture. And we didn't find that many of them, but we found around 60 of them across Western Europe. And then at that point I was already able to work remotely, so I was traveling a lot and visiting these farmers and speaking with these farmers and trying to figure out how did they get into regenerative agriculture, why do they think it's not scaling and what could we do to help them. And essentially, from those conversations because these farmers were ranging from half a hectare to 1400 hectares and the answers were essentially almost always the same across the different countries, and the answers that they gave us were essentially the ones that led to the founding and to the organization of climate farmers.

Speaker 1:

And what were those answers?

Speaker 2:

I'm thinking of being mindful of the time, but I think we can go into it a little bit. So I think one thing that also still doesn't talk about enough is, essentially, I always say it's not sexy to be a farmer, so young people are not going into agriculture. Sim is the farm of my godmother ended in her generation and nobody in my high school wants to go into farming. Essentially, farmers have been consecutively receiving not recognition in society and receiving less money out of the whole agricultural value chain, and a lot of young farmers are also seeing their parents struggle so they don't want to take over the farms anymore, and this led now to the average age of farmers in the European Union being in their late fifties, and anybody that has been looking into regenerative agriculture. It's definitely a challenging journey, especially in the first years, so when you're in your late fifties, you're not very likely to go in that path. So one of the biggest demographics that we're seeing is that younger farmers are leading the change towards regenerative agriculture, and so that's also why we picked the name climate farmers and why we really focused a lot on storytelling and saying hey, why we believe that regenerative farmers are the heroes of our times and why it's definitely a lot more sexy to be a farmer than to be a consultant or a life coach, and essentially we were also doing a lot of storytelling through our social media. We also looked into working on the documentary. There's still some funny videos of us out there, but then can kiss the ground around the corner and we were like, okay, that job is done. They got Rudy Harrelson. We could never do that.

Speaker 2:

So we moved on to the second issue, and this is the one that also led to the Congress, which is that a lot of these regenerative farmers felt lonely. Essentially, they were sometimes even almost bullied by the conventional neighbors, because suddenly they're in southern Portugal and they start rotating their cows on a daily basis and the other farmers are like what are you doing, joe? And so we realized that a lot of what we can do is to give these farmers a sense of community, and we started connecting these farmers with each other. We first thought about Slack and my gathering. All of this didn't work, so in the end, all farmers that I ever met have is WhatsApp, so we started connecting them in WhatsApp communities. We started organizing online events.

Speaker 2:

We were amazed at the global regenerative agriculture community, because no matter who we reached out to if it's Alan Savory, if it's John Kemp, if it's Elaine Ingham they all said, of course, I do a call with your farmers for free. And we were like, really, and we had some amazing skill calls there. I think one of my favorites was also Will Harris coming on as a strong Georgia accent and then 10 farmers trying to listen to everything that he's saying and, in the background, whatsapp. We were like Philip, I love this, I think I love this, but I don't understand every word. And then in the end, there came also this strong desire from this community to meet in person and to really catch up and to be able to connect on a human level.

Speaker 2:

And then, at the same time, andre, who was one of the farmers that I visited back then in Portugal very impressive market guarding that he was wanting visited Rudolf Bühler, who is essentially the 14th generation farmer who led to this crazy story of owning a castle by farmers, and he invited us to come there and to do the Congress there and that led us to essentially starting this Congress and to having this first gathering of farmers in person, also because we saw that farmers were very often excluded from the conversation, and this is something that has been flabbergasting me always how there's so many people talking about regenerative agriculture and about farmers but not with farmers, whereas farmers are at the core and at the center of all of this, and I think one of the most important missions of climate farmers is to put farmers at the center of the agricultural system, which is, I think, the place where they belong. Maybe that also go ahead.

Speaker 3:

Sorry, just to add a few sentences on that note. Like what we were seeing back then is they were incredible what Philipp was saying, incredible pioneers doing work out there. And then we talked with them about the other incredible pioneers and they were like really, there are others. I didn't know and I was like you know, like I thought I was the only one here, so this is incredible, can you connect me?

Speaker 3:

And then we were seeing suddenly these large commitments from corporates in regenerative agriculture and the growing interest in regenerative agriculture and, as Philipp said, nobody was talking with the farmers. We asked all the farmers that were pioneering this like have they reached out to you? Nobody has talked with me? Interesting. And we're like, okay, well, if we are going to create a regenerative agricultural movement that is going to create that shift that we want, then the only way to do that is if it is with and by the farmers. And we are not going to have a movement that is by and with the farmers if the farmers have never met and there is not a common platform from which to project that voice. And that was really the starting point to bring, to start a community to sort of to end that that issue of loneliness that is really a big problem on the one hand, and, on the other hand, to create a platform from which farmers can project their voice into the policy and into the industry discussion around regenerative agriculture.

Speaker 1:

Which sounds really like non profit work like this is work, that that is done.

Speaker 1:

And that was like point number two I think you mentioned for the loneliness and the non let's say organizational piece, as it seems like people are where they thought they were the only people on Mars doing this and suddenly they found out like just across the ridge on the other valley there's somebody else doing similar things and just not feeling. That loneliness, I think, is a massive piece. But then you decided to not focus only on the policy work and non profit work or the organizational community piece, but actually start a company and you both have company background, so that makes a lot of sense. But still, it could have been very easy and comfortable to continue in the way our representing farmers and we're in Brussels and we're in wherever places they need to be represented, and we make maybe a nice documentary at some point. But you decided no, we actually we go one step further and maybe answering the third question that all the farmers answered or asked, or the fourth or whatever, but actually go into the company space. What was that decision process like?

Speaker 2:

Yeah, I mean very, very well observed.

Speaker 2:

So there's the third one, and that third one is, I think, the one that's that's by now obvious to everybody it's the issue of transition finance, right.

Speaker 2:

So when you're going on that journey to transition towards the general agriculture and to change practice on your farm, that always includes to some extent costs, right, and these costs are right now covered by nobody else but the farmer. There is also, at least in the initial years, doesn't have to be, but there's a risk of produce loss. I would say it's a bit like an alcoholic that's trying to get off the alcohol and that just comes with a little bit of a rough patch in the very beginning. And as part of that, we identified and I think I speak from you know when I say we both don't like it, but we identified the fact that of the many benefits of regenerative agriculture, the one that back then and unfortunately largely still today, is the easiest to pay farmers for is carbon. And I'm fully agreeing with, I think, a lot of the smart people out there saying that, at least by diversity, increased nutrient density, soil to storage capacities at least as important as carbon. But I haven't found a lot of people which are willing to pay for it.

Speaker 1:

And you have, and you have because that that that begs the question and hopefully it's true, but that you found a lot of people willing to pay for carbon, because also that we've, we know is isn't that easy. I mean they're very cheap carbon credits out there that are, let's say, questionable to say the least. But you have been able to find people willing and interested in an able because interested in willing is one thing, but able to put real money on the table for carbon coming soil, carbon credits coming from real farms that did real things, etc. Etc.

Speaker 2:

Yes, the issue has not been for us to find people which are interested in carbon credits, it's more the issue of generating them in a scientifically proper way, I would say right. So essentially, the way how we have been looking at this is that we would have to have at least the proper methodology, which is verified, in order to generate this, and so we applied in 2020 this was to the Google Impact Challenge on climate and we received a 650,000 euro grant from Google. Very nicely, I have to say. They just transferred the money, never asked any questions again. You could have done anything with it. We spent it back then on salaries. We build an amazing team. We got some coaching and training from Google as well, and it took us one and a half years to write a known methodology.

Speaker 2:

Huge shout out here to Katarina, who's been doing the main work of this, was in climate farmers, and this got verified by the German verification agency TÜV in September last year. So it took us one and a half years to get there, and now, since this year, we essentially generating credits for farmers and the next audit route. We're currently in our audit round by TÜV and the credits of the next audit round already be already sold, which is happening now in October, and this was kind of the starting point to get farmers paid. We're right now also working with other organizations like Nature Metrics together in order to get biodiversity credits out there and to also get pay for biodiversity, which seems to be a lot harder. And we're also trying and I think right now is the drought and the floodings there's more and more of a movement happening to finally hopefully also be able to pay farmers for for salt water storage capacity and then men's potential that it has to prevent floodings and prevents droughts, and I'm sincerely hoping here to get insurance companies to get involved there.

Speaker 2:

But carbon was definitely back then the first one that kind of sprang to mind where people are willing to pay for it, especially in the European Union, because the voluntary carbon market is a mess. I think there's no question about it and I think everybody knows that, especially if you have something in the global south where you have no connection to, so you have to track it. So what we do is we connect the farmer and the organization on a very direct level. So essentially we say adopt the farmer, visit the farm yourself and build a relationship with the farmer so that you see with your own eyes what's happening with the money, and that you don't have just to rely on a verification stamp, but that you can actually see and experience what the impact is of the money that you're giving to the farmer.

Speaker 1:

And I mean you said, you said a few times back then has the world changed now, in a sense, that I had a feeling, I think last year at some point, that there was a marketplace for solar carbon popping up every other day or every week, at least A lot of colleagues, let's say, in this space. Has that changed, because you've been focused on this since 2019. How is that market changed? Is there a lot of interest? I mean, how is the market changed and how has it also affected you as one of the pioneers in the space? But, of course, farmers are free to sell their credit somewhere else or how does it work for companies? How has it been? We are talking in the summer, the end of summer 2023, what is your feel of the market, your lay of the land at the moment in the solar carbon space, which hugely debated within the EU and outside the EU, if it really gets real money into the hands of farmers, which definitely seems to be happening. What's your lay of the land at the moment?

Speaker 2:

I mean we definitely see that there's finally coming more and more regulation coming in, and I think Evo can say something on that as well. We're working with the European Commission together as well on potentially bringing out some regulation there. We see that there is a strong, let's say, increase in demand. I think farmers are still also very often skeptical, which I think is good. And there's still a whole issue of essentially permanence, where you kind of always have to balance between how long can you have a farmer sign a contract and commit and for how long can you sequester the carbon in the market. In our case, we decided to go for 10 years, but I can also understand for farmers, even if you're committed on the regenerative pass, to sign a 10 year contract. It's just always a weird feeling, right. So I think that's definitely an issue that we're still having.

Speaker 2:

We see that it at least is moving in the direction that we have more and more kind of clarity on what is a good, what is a bad carbon credit and under what circumstances can it also help farmers.

Speaker 2:

And we also see an increase in the prices of the ton of carbon, which is also good because, let's face it, 50 euros per ton, which is what we are selling for, so we're giving 65% straight to farmers of that is still not enough to cover the transition, right Like there's a lot more money that is needed. So it is some support structure but it is not and it is not enough to actually finance a large scale transition of farmers. So I think it can always be just one of the tools that can be used. I believe we have to move a society towards payment for ecosystem services in general or farmers, and once we have real payment for ecosystem services and ideally, something like true cost accounting in place, then there's a very much economical case with carbon credit. We can try to move things in that direction, but we will not be. It will never be the solution to the problem.

Speaker 3:

Yeah, I think what I would like expand on is exactly that last point that that Philip made, like the reason we got into carbon markets is a because it's a way to provide finance right now, not a potential payment for biodiversity or other things that you know we're just not really seeing, Because just to be clear, right now and not in 10 years yes, yes, yes, farmer signing up gets money within a year of of starting their project.

Speaker 3:

The point is, as Philip said, what we need to get to is a system where we, as society, pay farmers for the numerous services they provide us as society. As we all know, carbon is one of them water, biodiversity, clean air, etc. Etc. And this is a conversation that is taking place, is a conversation that is taking place on the policy level within the EU, which is very energizing to see, but the only system that we have so many years is the word energizing a policy in the same sentence is always interesting.

Speaker 3:

Actually, actually, actually, I have to say I was surprised, right, like when you get in your policy, you expect things to be slow when you get into also system change and agriculture.

Speaker 3:

I thought this would be a frustrating experience, but the last couple of years have just been incredibly energizing on so many levels because there's so many actors really wanting to contribute to a good system.

Speaker 3:

The problem is, how do we do it? In a lot of cases, right, and what we have right now in the carbon market is an existing system with a lot of scrutiny, like the issues that we have in the carbon markets also lead to a system of scrutiny which allows us to develop really good methodologies. Right, which allows us to really think through every single detail of how do you measure, quantify carbon, how do you think about additionality, etc. So it allows us to develop good methodologies for positive externalities, and that is what we can take from the carbon market and expand it to other positive externalities in the ecological side of things, but then also beyond, in the social and in the economic, and begin paying farmers for it. So the carbon markets is a stepping stone to get to the system where we actually want to be, which is a society paying farmers for the numerous ecological, economic, social services they provide to other society.

Speaker 1:

And a question that always comes up, and especially as you're working with the absolute pioneers in the space in Europe. What about the ones that have been doing this for 30 years? How do we make sure we benefit and not get the effect of I don't remember who said it, but let's, if I get paid for building soil carbon, let's get my soil carbon destructor, aka the plow, out of the shed, and then we'll do the baseline after that after, and then we'll start again. How do we make sure? It's very cynical, of course. How do we make sure that doesn't happen and the pioneers are rewarded as well, because they pay many of these costs, if not most.

Speaker 3:

Yeah, 100%. So what I can say is the soil carbon destructor does not work right, like if you have at least if you have a decent carbon credit system. You do take into account the previous usage of the space. So this would not work. I know that a lot of people bring that argument up, that people would do it. It would not work. Please don't do this, because, of course, having carbon in the ground is, in the end, an economic benefit in and of itself, but it is a problem. It's an unsolved problem. We cannot pay farmers for 30 years of previous work. It simply can't be done through the carbon market. It's the wrong tool for this. We can, depending on the system, pay farmers for a couple of years in the past as long as there is good documentation about it, but we cannot go 30 years back. At that point we do hope that regenerative agriculture has paid for itself and it has made economic sense.

Speaker 3:

So the risk that people talk about is not there and we find another tool.

Speaker 1:

And so how do you measure and check and what's the uniqueness there or how difficult or also costly it is to. So let's say, let's start with a case. Maybe you can mention some. But a farmer approaches you and I like the tagline on the website get financial support to transition your farm. You are not mentioning carbon there right away. It's not a carbon cell machine, but what happens when a farmer? What's the typical process looks like and how should somebody is listening to this? Think about that or keep in mind what a process like that actually entails.

Speaker 3:

So the challenge that everybody each of the carbon initiatives that has mushroomed over the last couple of years has continuously run into, is the problem of quantification and Laps are expensive.

Speaker 3:

Yeah, laps are expensive. Not only are they expensive, the margin of error is significant. And carbon soil carbon growth in the soil is slow. So you are asking before do we pay immediately or do we pay after 10 years? Exactly, if we go with laps, we can only really measure a change in 10 years thereabouts. So what we need to do is we need to be able to provide a payment before that.

Speaker 3:

And what we know from decades of soil studies is that certain practices tend to lead to certain changes. They're not perfect and you can never say that practice leads always to those changes, but you contextualize them. This is why we have complicated models that have been developed. And so basically, you say with this soil, with this amount of rainfall and this practice, we can expect an average, a conservative average, of this amount of carbon that has been captured. And then in this, this works decently well, especially on soil that has been used conventionally for a long time. So soil that is mostly dirt will be relatively reliable. The more biologically active the soil becomes, the more unreliably it behaves.

Speaker 1:

Exactly, which is an interesting effect of being on the journey for a long time probably.

Speaker 3:

Yeah, exactly, and so at a certain point it is not enough anymore to model, and at a certain point you need to necessarily also take samples. But as a starting point and in order to get money to farmers in a way that is scientifically acceptable, you can model the changes quite well, based on the practices and based on what has been there in the beginning, and then a couple of years down the line when the soil is more biologically active. At that point you also need to take samples. The good thing is we have a lot of development in this space and we do hope that in a couple of years spectroscopy is going to allow us to take better measurements. And everybody says soil samples are expensive. Yes, they are, but it is also doable. So for the amount that can be paid out, it can be tested.

Speaker 1:

So, if I'm summarizing it correctly, at the moment you're modeling and saying modeling only, and saying specifically, especially for farms that are quote unquote mostly dirt. It's quite reliable and if we're taking a conservative number of carbon per year, we should be good and then, as the science evolves and also, obviously, your capacity of doing soil sampling, in a couple of years will start doing more. Hopefully there will be a nice surprise in terms of addition carbon stored, but for now that's not the biggest issue. Is that an issue on the first one? Is that correct? And second, like on the buying side, do people accept this as good enough, Not perfect, everybody knows it's not perfect, but good enough to buy credits, because that's what I mean. You can generate all you want, but if nobody buys it, that's not going to get us anywhere and definitely it's not going to get money to farmers. So is that correct and is it good enough for the buy side?

Speaker 2:

First of all, that is correct.

Speaker 2:

Second of all, that that also works on the buyer side.

Speaker 2:

And I said again, I think our buyers generally are not people which are just interested in a quick carbon fix right.

Speaker 2:

Our buyers are usually interested that have an interest in regenerative agriculture and then have an interest in doing something on a local level. So, again, for me the carbon is a tool and essentially the carbon credits is a tool to funnel money from people that want to support farmers in regenerating our soils into the pockets of farmers. The much stronger part about this, I think, is to make the connection with the farmers and to actually really say that you visit each other and that at some point ideally, it doesn't even matter how much carbon you sequestered in the soil. You want to support that farmer in what they are doing. And I think a lot of our buyers are also interested in this added benefit of essentially contributing to a systems change in agriculture and the ecosystem services that are coming around the carbon Even though direct payment is, of course, still going to the carbon, because that's the thing that companies are calculating and that's the thing where you can very easily put on your balance sheet.

Speaker 1:

There's a lot of push in on balance sheets in general in Europe to have, I mean to. A lot of people are part of of the carbon markets, but that's not a voluntary one, that's the definitely government regulated one. Do you see a path where where these credits are soon part of that and or if they are already? Maybe it's been a long time since we did a carbon Deep dive on the podcast, mainly because it's been mushrooming, exploding and just got less and less interesting for for us in terms of just biodiversity, as you mentioned, probably more interesting Nutrient density, so water capacity search, etc. But how far are we from a moment where this, where all companies that are admitting and are part of these official markets are the more official markets actually can look at so carbon or we're not there yet?

Speaker 3:

There is a day's talk about it, and so a couple of months ago I was part of the of an event within the Commission and that asked so different stakeholders in the system and for their opinion on report that has been written to explore. You can trade market for agriculture and it's I think the report has not yet been published and I don't know if it actually will be and it's commission internal and but basically they have been exploring different versions of how this might work like. Would you have a cap and trade market only for agriculture? So could, let's say, one farm or one agriculture supply chain trade Credit only with another one? Could you transfer it out of this space into the other industries, fossil based industries, and should it be done at all?

Speaker 3:

And it's a it's a big discussion, and so one strong argument within that event has been the EU has committed to a polluter pace principle and as part of that, there is not really a way around the cap and trade market for agriculture. So currently, as a farm, you do not pay for pollution, in the same way as you are not paid for beneficial effects On the other side. Can we make farmers pay for pollution? No, we absolutely cannot. Farmers are already, you know, not not only with their backs to the wall, but they've already backed into the wall, so to say. So this could not be done practically, and so we are sort of trying to bring together, on the one hand, the ideal situation of such a system where polluter would pay and, on the other hand, somebody who's having a positive effect Would be paid. With the reality of farming today, and so I'm not expecting it anytime soon, but yes, there are conversations about it, and the current market.

Speaker 1:

You mentioned 50 years a ton and 65% goes to the farmer. So that's about 3250. With a conservative model, obviously, of what's being sequestered you mentioned. It's interesting for the farm but it's not enough. Like, what does it mean for An average farm? Obviously doesn't exist, but is it significantly enough to have to to, let's say, accelerated transition, because that's what you're looking for, that's what we're all looking for, or is it still not Significant to move faster to have that acceleration, like you have examples of that where this has a meaningful impact on on the transition of a farmer that in many cases maybe already was taking steps, but in this case this is help to speed up.

Speaker 2:

Yeah, I think we need a hundred, or two hundred ton.

Speaker 1:

I mean, is it better? Is a different price absolutely needed?

Speaker 2:

I think a different prices is definitely needed, or at least more payment to farmers for ecosystem services.

Speaker 2:

That's no question for me, but it is definitely already helping.

Speaker 2:

So one example, for example, is a man who is the farmer that we're working with in southern Spain and he has received don't quote me on the exact number, but I think something like sixteen, seventeen thousand euros For the last year and was that he was able to set up a new water irrigation system on his farm and through that he was able to implement a better holistic raising system with his cows, because the watering system that he could set up with a carbon credits and able to use this fields better. So this is the direction I think that we're going with this like that it is support and that it can enable some things, but it is nowhere near enough right. I think we should never say that the market works. It's great, with carbon credits we can find a transition to us, which are not very culture. I think we're very, very far from an ideal state, but it is a good step in the right direction you mentioned before, like the word you're selling is not just a cheap carbon credit.

Speaker 1:

You can get that somewhere else, but that connection with the farmer is that a hint towards in setting, as in this is mostly interesting for food companies or companies that touch food Want to transition their suppliers and because then there's a lot of other added benefits obviously of potentially better quality, resilience in your supply chain, etc. Etc. What's your offsetting versus in setting conversation you're having or you're seeing in the market?

Speaker 2:

Definitely both. I mean, we're also involved in with corporates in supply chain transition, and I think this is something that I Very much like, because then you're able to take more of the risk array from the farmer right and you're able to have the corporate supporting farmers with large amounts of money. I think the very interesting situation that I'm seeing there right now is and I think everybody is listening to this, probably aware of all these Very interesting claims that have been made by these corporates out there right there, in this me and Hector's acres, 1.2 billion invested, etc.

Speaker 1:

Etc.

Speaker 2:

What is the million? My favorite is the percentages, right like 100% region act produce until 2030 and you're like when is the most?

Speaker 2:

important project, right, there's all these pilot projects running and then you're speaking to a company that I can't, we love, which neck, and we're doing this and we have six pilot projects running with 120 farmers. Out of how many farmers do you have? 8000, right. How many percent of what is it we want to have to 2030? 50%, great. So that's the situation that we're having right now. Right, but it still shows at least the public commitment and it still shows that at least there's a willingness and this is the amazing thing on this that we see who cooperates, which are willing to put down money to make the transition happen. Other gold, ambitious, certainly. Am I doubting whether we reach them? Certainly do I have to collaborate with them in order to pay the transition of farmers? Also, certainly, and we do see a lot of potential. Then, actually, we've building the relationship that also has been quite a broken relationship between the farmers.

Speaker 1:

Yeah, yeah, because over the last 40 years to decommodify their supply webs or change into webs is the big question here, because it's not gonna be If the pay like. There's gonna be comfortable long term agreements, not even a higher price, with just long term relate, just like you said, relationships and webs with their suppliers and their farmers, instead of just buying it wherever it's too sense cheaper on the global market.

Speaker 2:

Exactly.

Speaker 2:

But this is exactly the point where we're operating a club and farmers and I think we're both me and evil.

Speaker 2:

What we really enjoy is finding these people where we have to feeling their allies and they truly care and those exist in politics, those exist in the corporates, those exist in the farmers and then connecting them and building these relationships and building these long term and deep relationships and usually the partnerships that we have with corporates are over several years and usually corporates are also very much willing then to support these farmers over several years in that transition.

Speaker 2:

And I think that is again another step in the right direction. And I think now the next step is that we need to make sure that the public claims that are made I backed up by actual science, by actual truth, and that people don't start calling things regenerative produce which are not coming from, which are regenerating the soil right, and I think that's a whole topic for another podcast episode. What I think that's one of the crucial issues that I'm seeing right now, what is an amazing interest there is an amazing commitment is very ridiculous ambitious goals. Let's make sure that the people that reach these goals can also back that up with the data from the farms to solve the true regeneration is actually happening, and then we can hopefully work on bringing this into the scale that we need and having everybody in Europe or in the world for us, for your focus, but knowing what we're gonna do, agriculture is and why it makes more sense.

Speaker 1:

And it's a good bridge to climate farmers in the company itself and the investment you raised recently and an article you wrote on. We're entering the era of regent of investments. We can spend hours on that as well, but let's unpack that here and see where we get to. You were, I think, in the market for quite a while, or on the market or visiting the market of impact investors and trying to raise money for climate farmers, and decided and not to do it. I'm not even gonna call it the traditional way, but traditional impact investing way. And what have you learned of the journey of trying to raise money from from investors in general for something like climate farmers?

Speaker 2:

Yeah, that's been a very challenging journey. I think I will start and then I will hand over to you at some point. I think, yeah, it's been a it's been very, very frustrating. To a certain extent, I would say, because I'm going into this, I was very much Sinking. Hey, there's a lot of impact VCs out there, right, they keep the seem to be popping up more quicker than carbon credit companies, and that's that says something.

Speaker 2:

What we found out? That most of these Impact VCs are still stuck in a system in which they are receiving money which is based on giving a high return on investment right and returning on return investment to their shareholders, and so very often, the impact metrics are the second line, I would say, like the background dancers, and the front dancer is still always the financial metrics. And so, for example, for us Trying to really work on systems change and, as you correctly pointed out, doing a lot of different projects which are not related to our core product, which is the car markets, it was very often the focus was on what is the, what is the carbon market gross? What are the numbers there? What is the revenue there? I'm not really the whole impact story around it.

Speaker 2:

Why are you speaking with again, with people that seem to be very caring and very passionate, but they're stuck in the system where they have to report back to the LPs, right, and I think also to mention a lot of and I think to be very fair, there also a lot of impact.

Speaker 2:

The sea funds are still struggling to be profitable because it's also very high risk investments which they're doing In the startups, and what we realized is there's a very big gap kind of between the classic impact VCK, which I think for some organizations it can really work when you have a very straightforward product which you need to scale up. We need some investments tech world, yes, but if you are working on a complex issue that ours, then it's not that straightforward, because a lot of things which we need to do to achieve the system change I'm not directly relevant to the, to the product which we're working on to generate a revenue is, even though both of them make sense, and I think that was kind of the situation, that that that we were facing, and and then we were looking at me to start to start with like.

Speaker 1:

This also is like could be a case of screwed with your ourselves organic growth, and why would we Give away part of the company or sell part of the company or get other captains on the ship and lose a lot of time of fundraising To to basically not be in full control anymore?

Speaker 2:

Not being in full control was never an option, so it was. It was never an option for me or even that was also the struggle of this to essentially give, like a board of directors, seat To someone externally or to even give a majority share away. So that was never something that we discussed and it was also something that we have been. That we have been discussing with VCs is that we give a golden share to our nonprofit To always hold the company accountable for, for, for the mission that we're on, which is to scale with John and you're right, so the mission was always coming before the profit, essentially, of the organization but at the same time, we're also running out of time, right? I mean, we can all see climate change happening around us, we can all see the droughts, we can all see the flooding and, essentially, with financial influx right now, we can definitely scale quicker, we can definitely work with more farmers and we can definitely have an impact faster, and that is also something that we have.

Speaker 2:

There is a certain sense of urgency which I think everybody should be feeding right now, because we're going towards a food crisis, we're in the middle of a climate crisis, we're going towards a planetary collapse and we need to scale with genotaph agriculture fast. And for all of these reasons, we need investment, because we need to grow the team, because we want to be able to work with more farmers, because we need to make this push happen as soon as we can, and I know there's a lot of other actors out there which we're working with, but also for us there's definitely the biggest restraints that we have right now Is this capacities like. Everybody in our team is incredibly hard working. They're all working, I think, more than the normal amount of time, and there's still a lot more work to be done.

Speaker 1:

So any hand that we can get on deck Is the hand that would find useful work to do, and for that reason, it just makes sense to raise an investment fund, but it's an argument also to Say you're raised to a half million now, which is Europe, which is a lot of money, but nothing at the same time to say, yes, but there's also a lot of impact VC money out there at the moment or other VC money. Let's take 25 million. Let's take who cares 100 million because we're running out of time. Just speed it up as soon as possible and then we'll worry about the high returns if the money is there. I'm not saying trick the system or trick that, but also just go big or not and probably will fail or slowly will explode. And I'm not saying it's the strategy, but if, if the urgency is so much money now, more money now means more impact soon, and thus I will worry about the, the returns of what the LPs of these funds think and five, seven, eight years down the line when they come knocking.

Speaker 3:

Yeah, I very much understand that argument. Now we're talking about regenerative agriculture, right? So if, if the argument, if, if what we were trying to work on was Reduce the amount of plastic cups that I knew I would get that more is better, saying that, say, more of our innovation that is going to reduce a plastic cups is better, 100% More in regenerative does not necessarily mean better, right? This is still a logic of off, is a very mechanistic Approach to changing something, and we're talking about the system change with talking about shift in mindset rather than more. And this is exactly the issue with impact. We see that we find, right like impact, we see is still in more is better. That is inherent in that model there and that's just simply not the case, right? So we're talking about regenerative.

Speaker 3:

We need to do different, and that often means careful decision making and where you have to balance, you know, growth with quality.

Speaker 3:

And this is exactly the point where we have said we cannot bring in, we see, decision makers onto our board of directors because that is the mindset and that is even the legal requirement that they have to have more. We don't necessarily want more, we want the right thing and to be done, and so this is where it becomes super, super tricky. We, as Philip said, we need to grow fast, and then we need to act as if we were a good, traditional company that you know sort of acts responsibly and grow sustainably. And the problem is the moment that you, that you take the kind of money that you're talking about, you are locked into a hyper growth path. You are right, like you have stakeholders, shareholders that will expect you to go into that hyper growth model, which is where we don't want to go. So it was basically either we take very little money and grow very slowly but surely, or we take a lot of money and lose our soul, and that was constantly the conflict we had completely get it.

Speaker 1:

But at the same time, the sense of urgency we all feel I think I can say we here would probably eat your soul if you take 250 million I'm just saying a crazy number but might have a little impact on a lot of hectares, which might not be what you're looking for. There's the tension that I think many impact entrepreneurs feel with not taking that money. But you found I'm not saying in a middle way, but you found another way. You raised 2.5 million, as I said, but in a different structure than, let's say, traditional VC money. Can you unpack a bit how you raised this money and as much as you can share? I would love to know the details. But let's unpack the 2.5 million you've raised and why you call it a regenerative investment.

Speaker 3:

Happy to just quickly on your on your previous point 250 million. You know to take that and put that into solutions would be if we had the right solution for the right public. But we have to say in regenerative agriculture we are not quite there yet, right, like it's not yet that if you just put more money into it it is going to grow more, right? So we are still at the stage. Let's say, in the same way as you would not recommend a farmer to transition 100% of their fields, all at the same time you're going to say make experiment and learn and understand your ecosystem and do the right thing.

Speaker 1:

I think it depends on their what like. If they have the capacity to survive 578 years without eating from the farm, it might be a strategy. I know some people that did that. Of course, you're in a lucky position of not having to take money every year from from the farm and be in a different but I absolutely.

Speaker 3:

But I think it's an important point with what you're saying is, if you have 5710 years in which maybe you don't have any results, right.

Speaker 1:

By over 10 years in which we invest.

Speaker 3:

That means farms dying Right. The equivalent of a field not getting giving you any result in our case is a farm that we are supporting in the wrong way. We can't do that Right, so we have to be very, very careful and appreciative of what we're dealing with. But anyways to your actual point.

Speaker 1:

But there is an countercase, of course, with some colleagues of yours that have a significant amount of money and we're going to see how this plays out. Nobody knows the scenarios. I mean, we know the scenarios but nobody knows how this is going to play out. Obviously, globally, a lot of money has gone into the hype of carbon. So carbon, I would say I definitely call it a hype, Not saying it's not important and not saying it's not real money, but it does feel a bit hyper, hyper, hyper. But now they're getting to to the investment you raised. And how? How did that come about? Because you said you were got a bit. It was a frustrating process. I think flip side, I'm imagining you got a bit desperate at the same time not desperate, annoyed, and at the same time you need to run this organization, you want to grow, you need to pay people. It's not that people can work for free for very long, so money needs to be come in at some point. What happened there?

Speaker 3:

Exactly, it was exactly this. So we had conversations with pretty much everybody in this space. So we talked with most impact VCs, we talked with all sorts of potential funders and said, look, you know, even before we pitched, we said, look, we are a company that is for mission. We are very happy to make a profit, we are very happy to reinvest that profit into our mission and if you give us money, you're going to get a fair share. You're going to get a fair return. We are not the most profitable investment that you can ever make and you will not get a company that is optimizing for your return. You have to know that before you invest in us.

Speaker 3:

And you don't get control and you don't get a whole lot of control. Of course we're going to listen to your advice. As you know, we're building a company and you have a lot of experience building companies. We do that with our current investors and they give us really important insights. But we are not going to optimize for your return. If we have to choose between the right thing for the farmers and the right thing for your return, we are going to choose the right thing for the farmers always, and at that point of the conversation that usually took a three minutes into the conversation, they said good, then we're out and usually, as Philips said, it's very much sounds like the Stuart ownership conversation we've had.

Speaker 1:

I mean you mentioned on the web in the articles. Well, with Ecosia we've had Armand Stor and I go. I will put the link below. It doesn't mean you are Stuart owned. She said we're going to give or we're giving a golden share to you. Is that already in place, like was it before the fundraising? Is it going to happen at some point? How do you look at Stuart ownership?

Speaker 3:

Yeah, exactly, it's a very interesting question. I've been following this development very closely because we were sort of in very, very close in the same ecosystem in Berlin. I love the Stuart ship model. There's only one aspect there that I'm missing, which is the mission bind, and so a company that is in Stuart ownership could shift its mission. It just can't be sold. In principle, you can be Stuart owned without necessarily being bound to your mission. You just cannot, you know, deviate the company could be around for 100 years and a mission might change.

Speaker 1:

I mean, we might like regenerate agriculture in Europe. Might not be the most important thing climate farmers should work on in 15 years.

Speaker 3:

Exactly, and that is the key. So what you're saying is makes perfect sense. So let's, for example, a company like the Robert Bosch right, like the company that sells power drills and stuff. They are in Stuart ownership since forever and that makes perfect sense. And you know they can. They can shift their mission around and they have and they're doing great work. The Robert Bosch Foundation, in our case, our company, is there for this mission and it's not there for anything else. So if that, that that vision is achieved of a society in which nature and humans live, you know, together and humans have found a new system, we are, we are okay with it.

Speaker 3:

Dissolving A company does not be need to be around forever. This will take some time, right, like we're not, we're not expecting this to happen in the next few years, but this company does not need to be here forever. And also the aspect of the selling the company I see the point in the Stuart ownership model. It makes perfect sense. But for climate farmers, I don't see the reason why, if it would serve the mission, it could not be done. Climate farmers and this is an important element we haven't mentioned and climate farmers has two companies. We are a nonprofit company, which is a German, german entity that exists, and so we are for purpose companies, so to say, and we are for profit company. We have two entities we could potentially sell. The for profit company, let's say somebody you know at a certain point we have established that outcome based payments is completely normal, and this is this. The next cup is working in this direction. We have proper methodologies, proper measurement technologies, everything is there. Somebody offers us 50 million for the for profit. We take that money, we put it in a nonprofit and we do important nonprofit work with it. That would make perfect sense, potentially right. So the question is is the company fulfilling its mission for us personally? And then we're doing the right thing. And so this is why we're tweaking the existing stewardship on model slightly. And again, full respect to the stewardship on model, to the purpose foundation, to Armin, because it makes sense for what they are trying to build, but for our context it needs to be slightly different. So to your question, no, the golden share idea was is not yet implemented. We're working on it. I hope I can sign the documents in September, but it is something that we put in the room.

Speaker 3:

This was basically a good test, a good filter for any funder that we will talk to, we would say this is what we want to do. How would you feel about that? And that's where every conversation ends right, because, like, if I accept one exactly, not true. Actually, we had several, to be fair. To be fair, we had several at the at the finishing point that were that were fine with it, but most conversations ended there because to have a company that optimizes for its mission is too risky for impact, we see, up until now. So what we did is we had a lot of conversation with the classic VC world and, at the same time, with a lot of other funders. So we were talking with banks, with basically individual wealthy people, about what would be possible in order to fund us. And there's a funny story, philipp Schrag, go ahead and tell the story.

Speaker 3:

Yeah, go for it, and I think this actually speaks a lot to an important power in regeneration, which is relationships. Right, like a lot of what we do is in the business world is about what can I do for you, what can you do for me? And then we have a good trade In climate farmers. From the beginning, we've always optimized for great relationships. We've always tried to build a really good network with our partners in the space, even our competitors. So with almost all of our competitors we're in regular and positive exchange.

Speaker 3:

And what we did? We put a lot of focus in our team and our team retreat, and so we have this amazing location that we often go back to close by Berlin, and in this retreat we did what we call a place making challenge, which is to bring the team together to work on a local challenge and build something beautiful that stays in this place, to sort of connect with the place that we're in. And so in this retreat location we built a bar. So there was a backyard that was abandoned, and so we cleaned it up and we made it beautiful, and we built a bar out of wood and very, very beautiful, and we called it the regeneration bar A couple of months later. This was why we were in the middle of the fundraise.

Speaker 3:

A couple of months later, a group of philanthropists a group of people thinking about the future philanthropy visited. They were gathered there by Project Together, which is the company I used to work with previously, and they had been thinking about what is our responsibility as philanthropists in contributing to a regenerative future. And they were standing at the bar that we have built and the host, markus, told the story of how we have built this, of climate farmers, and one of the members of our board of advisors stood next to Kai, which is now our investor, and told him hey, you know what? You should really talk to climate farmers, and there's a pre-story that we're very grateful for for organizations such as Project Together that help philanthropists understand the importance of acting differently and giving money differently.

Speaker 3:

But, in any case, kai, after this retreat, reached out and said Evo, I've heard of you. Seems like you're fundraising right now. Seems like you have trouble finding funders that are going to let you really focus on your mission, and I think this model that you're developing is the exact right thing. This is exactly what we need to do, and it is really upsetting for me that a lot of funders are trying to optimize for their own return rather than for the change that they're trying to fund, and I was like that email came out of nowhere. So I get that email. I'm like, okay, kai, let's talk. How much money do you have?

Speaker 1:

Pretty much, that was the conversation, and so it's amazing to have this conversation, of course not knowing, but to get that response, to get those emails. And, with all respect, it's not that you need 200 euros, you need more to run and you need to especially allies that somehow I don't know how he made the money, but somehow have access to a wallet that is significant. Otherwise, it's amazing. Great support, great email. Good for a Monday morning, but not more than that.

Speaker 3:

And we have been very lucky in the past to get similar emails in the size of, let's say, 50,000 euro or 100,000 euro, which make a big difference and something I was very grateful for. In this case, it was a very short conversation where I came in with my presentation and I showed him what we do and after 10 minutes or so, kai friendily interrupted me and said you don't really have to convince me, I'm already convinced. Just tell me how much do you need? I said well, 2.5 million, that makes sense.

Speaker 3:

And I what do you mean? Says well, you know, that's fine, I think I'm going to do that. And I, kai, what do you mean? You're going to do what? He says I'm going to fund you the two and a half million. I'm like oh, okay, all right. And then I asked him to take two days to think this through, and you know whether after two days, he would still want to do that. And after two days he still wanted to do that. I offered him a mix of the subordinated law of a loan, of a loan 15% interest, I believe and and and.

Speaker 3:

I don't think five zero, right, yeah, One five, yes, yeah, and and equity. And after two days he came back and said, yes, under the condition that it can be a subordinated loan, and that is too much interest. I was like, all right, we can talk. So we were very, very like, I mean this, this does not happen usually. This is important to know, right, Like if you're out there fundraising and you wonder why does this never happen to me, this does not happen. Very simply, this does not happen. So we were extremely lucky. We were also extremely lucky to have the, have the right network and with the, with the generosity and and and willingness of Kai. But the point of this was that Kai wanted to make a point, which is that funders should fund system change in order to fund system change, fund the people that are experts. So don't go around trying to find experts and then trying to control them. Right, Like a lot of, a lot of foundations.

Speaker 3:

Fund and get out of the way Fund and get out of the way If you have found somebody that you believe is able to change a system or to have the money and you have the money, then fund them and get out of the way because you don't know enough, no matter how highly you so how does it work?

Speaker 1:

in practice, this is a normal look Like what is what are, as far as you can share the terms like, because I think if he says too much, like where did you go and and what is it revenue based? Is it when do you start paying? Like what's the? How long does the loan take? Or maybe forever. Like what are the the terms for people that are in these conversations that we love to structure something.

Speaker 3:

But it's relatively simple and and what is important for me is that, especially when we talk about regenerative, not to say this is these.

Speaker 1:

These terms are now regenerative, which your title sort of suggests that we're entering the era of regenerative. I know you need a good title for, but the title of your blog, like it, is quite definitive and we, we, we move from one one space to another, and this is the moment that the the sea has changed.

Speaker 3:

I'm fully, fully with you. I think the. This is why it's important to say this. Like we, same, as with regenerative agriculture, we don't want to say well, experiment, no till, is regenerative, your context, what is going to? So you were there when we wrote the, the manifesto in the in the first Congress. So the in the first Congress, we wrote a document from the farmers in Europe to, as a manifesto, to say what we understand as regeneration and what was important there, and the really important element, the really important sentence there is that regeneration is about continuously increasing the life holding capacity of the system, and this is what this is about.

Speaker 3:

So when we talk about a regenerative investment I'm going to get to the terms, no worry. But when we talk about a regenerative investment, it is about an investment that increases the life holding capacity of the system that you are supporting, and what we are seeing a lot is that loans and that equity investment decrease the agency and decreased resources that the system has available. So basically, it's a bit like taking out too much biomass from your system and not returning enough in. When we talk about a field, so what it is in our case, what is life? What is enhancing the life holding capacity of our system in our case is a 10 year term, so we pay that loan back an over period of 10 years.

Speaker 3:

We have a grace period of a couple of years in which we are not paying back, in which we can get to profitability, and we have an amount of 2.5 million, and then we have an interest rate. That interest rate is the one thing where I would say this is not representative, because I believe that an interest rate of even 15% would have been fine, is something that we could have paid back quite well if our business model works. In this case, Kai insisted on it being at 5% and then, a couple of years later, he called me and said Eva, I've been thinking about this. I don't think that's right. I think we need to set it at 3.5%. So it is an interest rate of 3.5% it's gonna hit.

Speaker 1:

no, no, I'm joking. Okay, that's not.

Speaker 3:

Inflation rate had already been there. So in this case and this is in- our specific context. Because in this case, kai will lose money, even if he gets all of his money back just because of inflation, right? So, and we're talking so this is why I say fair share. The question is, what is a fair share for you as an investor? And is what we as a system can return and what you, as an investor, need aligned.

Speaker 1:

The same again Did the 3.5 come out of, like research into old grown forest and the growth rate, like what is his efficiency come from, that it should be 3 or 3.5?

Speaker 3:

I think it was a strong gut feeling.

Speaker 1:

But is there a reason to choose because we had Charles Eisenstein on as well and there's a very strong case, let's say, against interest bearing loans to go for an interest rate and not a profit share or revenue share, or to really align yourself Very low one could be that he still loses money but to align yourself with the investor even more, because now you're still quote unquote on the hook for a fixed amount, even with a grace period, even with all the time you have, and he doesn't quote unquote profit when you're doing really well or suffers when you're not doing so well.

Speaker 3:

But so this is really important for me the investor should profit. In this case it was an individual choice. The investor should profit. Of course I could have paid 15%. We're not saying you could have paid 15%, but still the investor could profit.

Speaker 1:

even if you're not doing amazingly or a number of years, you're suffering for whatever reason. So has there been talk with Guy and in general of aligning yourself even more with the investor?

Speaker 3:

Not in this case. In this case, there was a strong preference of him to do it via subordinate alone, mainly because he wants to get out of the way. So, going back to the previous argument, the best way to invest in system chain to find people that you believe are able to do that and then get out of the way and let them do their work I can totally see the case for profit share or revenue Because you're getting more out of the way, as it's like really, you do what you do.

Speaker 1:

If you're right, I profit, if not, I don't. But it's much more complex and complicated.

Speaker 3:

Definitely fair, I would say. It incentivizes involvement of the investor, which might be positive in some cases. This might be what you want in some cases, so it depends on your case. So we're not saying that our terms and our setup is what makes this regenerative. What we're saying is an investment that enhances the life-holding capacity, that enhances the ability of that system to act according to its purpose. This is what makes it regenerative and up until now, most of the investments that we have seen for an organization such as ours are still extractive.

Speaker 1:

And does it have to do? I mean, you mentioned we were able to pay. We were able, but of course we don't know in the 15% if the business model works. I mean it makes it much more life enhancing the fact that it is such a low interest rate. I think you've mentioned it here.

Speaker 3:

I'm not saying for the first time, but definitely on. The Go ahead. I think a certain challenge is definitely life-giving, so I would not say that free money. And I tell you for the system you mean, like plant grows more when they're being challenged a company might grow more if you know you have to pay 15%.

Speaker 1:

Yeah, it sounds a lot Like. It sounds like a lot, and I'm not saying it sounds extractive, but it sounds like a lot. It would be more extractive.

Speaker 3:

So in our case the VC model would have worked only because it was a lot more than it was in the first place and the VC model would have worked only because we are not planning to sell the company unless right Like, we cannot guarantee you a sale of the company. So the only way that the VC model would have worked if we had paid you back the model, which the lowest that we have found any VC would have been willing to accept would have been a 6X multiple, which is significantly more than 15% interest.

Speaker 1:

Yeah, and for anybody out there, then that's saying I'm gonna be able to find somebody for 3.5%, what would be? I'm not saying investment advice, we're not going there. And for investors as well. Because Kai wants to make a point why didn't you shout it off the rooftop, that, like the terms as well? I mean, you mentioned it here and I'm very grateful for that openness. Like to also tease funders a bit more. Like look, this system shades needs another type of investment. I'm not saying it should be 3.5, it could be 10, 15, et cetera, but it needs another type of relationship. What is the reason to not shout that off the roof? Like, look, this is what the sector or a systems change sector like Ag and food needs.

Speaker 3:

We think so. For us also in the conversation with Kai, it was really important to talk about it in especially and this is really important this is not directed at other startup project company founders. So, again, these are very unique terms and I really hope other people are as lucky as we are. But the public that we're directing this at is people with the means family officers and high net worth individuals and that give money, and so in this case we have a direct relationship, right Like. So the person that has the money is able to give money.

Speaker 1:

Not through a fund or anything Exactly.

Speaker 3:

If you talk to any fund, if you talk to foundation, if you talk to VC fund, the conversation we would always have is that VCs would tell us we really like what you're doing there, but we're not allowed to do that. They did not say I don't like what you're doing.

Speaker 1:

Basically, if I had the money myself and I was in control, I would have done it, but otherwise. I am not because I'm the OPs.

Speaker 3:

That's a nice thing to say, if you don't have to do it, of course.

Speaker 1:

So what are the effects of that? But that's an interesting point. So you're appealing to people with the means and the control to say, look, you can do more, and you can do more to push LPs, or you push as an LP, because maybe Kai I don't know Kai, but he could be an investor in some of these VCs as well to push there. But that's changing a model that might be set in stone for a while, but it's not going to change. But there is a portion of your portfolio that you could just do and you don't have to follow these trend rails that we have been following for way too long.

Speaker 3:

Exactly so. The funders need to enable the people managing their money or they need to do it themselves to fund system change, and the way you fund system change is not through Impact VC. When you report a study that details that out much better than I could say it here, that shows how funders could fund system change and how that is not being done, that exactly the strategies that you need for system change are right now disincentivized by funders specifically. So this is a really, really important element. So, as funders, you need to enable system change and not doing that yet.

Speaker 1:

And so what's next? Like 2.5 million again, like I said, it's a lot and it's nothing. I mean, I don't have it on my bank account, but it's also with a large team and with the ambition you have, it could go quickly. Like, is this enough to give you a bit of breathing room and not being on the fundraising threat mill for too long? What are you planning? A bigger round with I'm not saying even better terms with other terms as well? Or like what's next for climate farmers? Or now it's let's go to work. Not that fundraising isn't work, but let's go to work. And this will get us pretty far, and we don't have because it's also a brutal time to fundraise. What is next for climate farmers now, with this investment which is in?

Speaker 3:

So I think one very important learning from this last fundraise is never stop fundraising. So I definitely my tendency would definitely be to say, okay, let's drop this and go and go and build products. But building relationships is extremely important, and so this is what we're doing. This is why we're shouting it from the rooftops and this is why, in September, we're doing a series of events on exactly that to build a group of funders around this idea of regenerative investments. So this will continue and we will continue hosting that conversation, because we really believe that for regenerative agriculture to scale and we need these kind of investors. But what is next for climate farmers is, on the one hand, like we've just invested that money into the for profit company. So one thing is to make that company not for profit anymore but for mission.

Speaker 1:

Right, we make that mission bind legal, and number one and number two is I heard you're going to sign a document in September, so you should be that. That should be done when this almost when this come out. This is end of August 2023.

Speaker 3:

Yeah, Number two Product, market fit. So we were working with a lot of farmers, we're working with a lot of funders for farmers and there's still a lot to be done to build systems that really work for farmers. So a lot of the work still needs to be done manually. A lot of the conversations are still like to make it to make it work. So building the perfect systems that, at scale, can help farmers in the transition this is the next thing for climate farmers on the business side. On the other side, we, of course, continue our work in community building and in connecting farmers connecting farmers with, with consultants, with coaches, and building a European grassroots movement that can really participate in the policy and industry discussions.

Speaker 1:

Perfect, and I want to end with a few questions. You know they're going to come even though we're one hour and 20 in, but I really think this is absolutely worth it. You can choose to both do them or to do them one by one. I don't know what you, what you prefer, but I definitely want to start with the question if you had a lot of money to invest we usually use a billion euros in this case to put to work, which could be any kind of model, any kind of loan structure, whatever structure you choose, but it's an investment what would you prioritize? What would you focus on first?

Speaker 2:

I think for me, this has definitely been changing. I've been thinking a lot about this, right, because I listened to your podcast a lot. This has been changing and at the moment, I think one of the most exciting things that's happening is that this whole issue of young people not wanting to go into farming and farmers aging which I think is the key issue that we're having is, thanks to regenerative agriculture, slowly changing.

Speaker 1:

So there's a whole new generation coming out. Many were young At the Congress two years ago. Many, many people were young Like the age was definitely 50 plus.

Speaker 2:

This is the biggest demographic that we're seeing, and sometimes it just happens to be lucky. Let's say that the son of a farmer, femini, is getting bitten by the regenerative agriculture buck and takes over the farm and turns it around Very often, what I've seen happening as well. There are other people which get bitten by this regenerative agriculture buck, but they're not children of farmers, and nowadays you're living in the European Union, which is where we're working, and try to buy a farm of a few hundred hectares. Unless you're a millionaire or your parents are a millionaire, that's not going to happen. So access to land is, in my opinion, a massive blocker that we have right now.

Speaker 2:

So if I would have a billion to invest, I would take 10 million euros and I would work with the biggest experts. I would work with climate farmers, with advancing ecological agriculture, and I would build an online database on learning the basics, let's say, around regenerative agriculture. I would make this open source. I would enable this for everybody. Then I would set up around 90 million. I would put up in another fund that gives out scholarships to people that rent through these online courses, show that they master that knowledge and want to learn how to do regionally practically, I would enable them to do a three-month internship on one of our farms. I would pay them 1000 euros a month.

Speaker 2:

I would also ensure that that fund actually is even more available for people that are right now very often excluded from farming. So very often women, very often people not from a wide background. So make them unable to go there After those three months, ask the farmer how they were and then have them go on to another farm. At another farm Then, after they have went to four different farms, did a three-month internship, had a positive recommendations from the farmers that they worked with. I would give them access to land. I would spend the other 900 million euros on buying land, giving this land to these farmers and then having a profit share from the farms that are running the operating, cover all the costs of setting it up. Measure what's going on in the farms, make reports of this, make studies on this, showcase that regenerative agriculture is working and take a profit cut of the farm to reinvest into the fund, to buy more land, to enable more people to go into farming, to basically raise a whole new generation of young farmers that are operating farms regeneratively and profitably.

Speaker 1:

This is probably the I'm going to say definitely the most detailed, one of the most detailed since John Kemp. I'm going to say the most detailed answer to this question, and I'm just speculating here that this land is never going to be speculated with. This is a permanent land. This land cannot be sold, developed et cetera. But I see finger now yes, yeah, I forgot one part.

Speaker 2:

So with the profit share that the farmers are giving back to the, let's say, mother organization, the farmer has an option after 10 or 20 years to buy that farm and the profit share that he gave up goes down from the price. So let's say I pay the farm initially for 2 million. The farmer pays me over 20 years 1.6 million in profit share. Then he only has to pay 400,000 at the end of it and he owns the farm. So the person that's farming the land over the period of time gets the chance of owning that land, so that we actually get a new generation of farmers which are owning the farmland and all the land in Europe is not going to massive corporations as it is at the moment.

Speaker 1:

A whole different topic land ownership we're going to cover in another time. Why does this be sold back to the farmer? It cannot just be 99 year leases et cetera, but it's a different one. I want to hear Eva before we get to, also a new record of the longest interview we have ever done. Eva, what about you with the bear in Europe?

Speaker 3:

I think I'll do it a bit shorter than Philip. I definitely agree on the sort of educating new farmers coming into this and land ownership, but I think, to be honest, I would do what we're doing right now. I don't think I would make massive changes. I really believe that building an ecosystem is the most effective thing that you can do and this is what our work is about building an ecosystem for skating regenerative agriculture in Europe. I think I would focus on bringing more really dedicated people that have really undergone their own mindset shift towards regeneration, that are able to take on some of the challenges that are going on. I think our limiting factor is not money, or limiting factor is people. I think this is what I would focus on finding the people and investing in them. I think, since as a collective I would say we have that fund, let's focus on finding the people, making sure that we undergo ourselves through the necessary mindset system shift towards regeneration and investing those that's an amazing point actually, probably as a collective listening here, but also in your network, et cetera.

Speaker 1:

I'm not saying easily, but probably get to a billion relatively easily. And then, to stay with you on the magic wand question what would you change? We take away your fund. I'm very sorry, but we do give you maybe something way more powerful and more interesting the ability to change one thing overnight. What would it be?

Speaker 3:

For me to be honest, supporting the Bionutrient Association and getting their measurements done and putting the data online Nutrient density interesting. I think making nutrient density measurements available to everybody is going to be such a game changer that this will boost regenerative agriculture like almost nothing else.

Speaker 2:

For me.

Speaker 2:

For a very long time I would have said true cost accounting, but lately and this was also inspired by a conversation, amazing bonfire conversation at the last time at Thomas conference I think we have to get to the core of the issue, which is the the deconnection of humans on nature, and I think the core of that issue starts in education and it starts at the school level.

Speaker 2:

So if I would have a magic wand, I would turn every school in the world into a regenerative agriculture ecosystem where we have farms integrated in the school. So the children, from very early on, learn that they are part of an ecosystem and that humans can be a key species which can live in line with nature and enhance nature. And they start learning how to enact with animals, how to grow their own vegetables, how to take care of plants and animals and how to live in harmony with the planet, because essentially that's the overarching goal that we're having with climate farmers that humans find their space in the ecosystem. And I think this starts with education and this starts with us being so detached from the food that we're eating.

Speaker 1:

It's such a good end, but I still have another question, which I usually regret when I do this. So let's see, in this case I did want to bring up John Kempf, who has been fundamental to your journey and mine as well, and he always asks the question what do you believe to be true about agriculture in general? But I like to ask it about regenerative agriculture. So what do you believe to be true about regenerative agriculture that others don't believe to be true? You must go to and I know that because I follow you, I'll link into a lot of conferences, a lot of bubbles around Regen egg. Where do you feel really different, or where do you feel really I would say contrary and where do you think fundamentally different than the rest in our little bubble?

Speaker 2:

I mean, I'm not sure if it's really different to our bubble, but something that I still hear and I think this is probably an answer you have been given up, but something that I still hear way too much is the fact that we cannot feed the planet with regenerative agriculture Right and regenerative agriculture.

Speaker 1:

One hour and 28 minutes to get here. Yeah, it didn't come up yet. Good point, yeah. What do you do then? What do you say?

Speaker 2:

I mean I give examples right. I mean we have a lot of farmers that we are working with which just have seen their yield increase. They have seen their farm getting more resilient, and for me, it's beyond the doubt that regenerative agriculture is the only way going forward to feed the planet, because with conventional agriculture we will not be able to do it in very soon time and I think unless we transition fast, we will all get to experience that. Unfortunately, we will be ending up in a food crisis and I really hope that we manage to make the shift in time to avoid that.

Speaker 1:

And you, Eva.

Speaker 3:

I think it's not only about regenerative agriculture but adaptation in general. I think generally we believe that adaptation is slow and we look at how things have adapted over a period of time and therefore believe that it will continue to be this way. But if you look at healthy natural systems, they can adapt incredibly fast if necessary, and I think we're going to see the necessary adaptation in both in agriculture, but also beyond that, extremely fast once it gets going, If we have the necessary foundation that we're building in terms of mindset shift and enough cells that are able to guide that shift. So I think we're underestimating the capacity of our system to adapt and I think we're going to see how quickly that will go once it really gets going.

Speaker 1:

I think I was underestimating the power of your answers to end this conversation. I think it's a perfect one. I want to thank you both so much for the work you do, the time you took out of partly your holiday, I think, eva to be here. I am not sure if it's, but it's definitely in the top three of the longest conversation we had here, but I really enjoyed it, your openness and, of course, what you bring to this world. So thank you so much for coming on here, both of you, and wish you all the luck, of course, with raising more if needed, if you want, whatever conditions and criteria you feel that are needed. Thank, you.

Speaker 3:

It was an honor and a pleasure.

Speaker 2:

Yeah, thank you so much for everything that you are doing. I think you're definitely one of the places that unifies the global movement and I know I'm listening on a weekly basis and I'm always excited when a new episode comes out, and it's an absolute honor to be part of this now.

Speaker 3:

Yes, and thank you to anyone who has listened up until now. There was a lot of your time. We hope we didn't bore you.

Speaker 1:

I'm pretty sure we did. But yeah, shout out to everyone who made it until this far. See you next time.

Speaker 3:

See you at the next yeah, get in touch with you.

Speaker 1:

Yes, Thank you so much for listening all the way to the end. For the show notes and links we discussed in this episode, check out our website investing in RegenderEcologycom forward slash posts. If you like this episode, why not share it with a friend or give us a rating on Apple Podcasts? That really helps. Thanks again and see you next time.

Climate Farmers
The Journey of Climate Farmers
Creating a Regenerative Agricultural Movement
Carbon Credit Market Changes and Challenges
Carbon Credit Systems
Transitioning to Regenerative Agriculture
Climate Farming Funding Challenges and Alternatives
Regenerative Agriculture Funding and Mission Alignment
Regenerative Investment and Funding System Change
Enabling System Change for Regenerative Agriculture
Investing in Regenerative Agriculture and Education