Investing in Regenerative Agriculture and Food
Investing in Regenerative Agriculture and Food
341 Laura Ortiz Montemayor - Ecology without social justice is just gardening
A conversation with Laura Ortiz Montemayor, Chief Purpose Officer and co-founder of SVX Mexico, and managing partner at Regenera Ventures Fund, covering the global nature of regeneration exploring what has been happening in Mexico and the rest of the Spanish-speaking countries in LATAM. They hold the key to many of our biodiversity challenges, and many tropical or subtropical commodities are farmed there. What has Laura learnt since the last time we spoke three years ago? Why did she decide to start a $20 million fund focused on rural Mexico and the regenerative transition?
Inspired by thinkers like John Fullerton and Carol Sanford, Laura champions soil health and living systems thinking, reframing biodiversity as a critical asset rather than a charity case and critiques profit-driven economic models that overlook natural and social resources, advocating for a shift towards valuing ecosystems’ inherent richness. Highlighting Latin America’s role in climate resilience, we discuss indigenous wisdom, regional nuances, and innovative finance strategies blending social justice with ecology. As plans emerge for a second fund in Mexico and Colombia, Laura calls for bold investment in nature-based solutions to rejuvenate food systems and biodiversity.
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Such a delight to have Laura back on the show. We don't spend enough time, as always on this podcast covering the global nature of regeneration, and we end up spending a lot of time airtime talking about the global north. So what has been happening in Mexico and the rest of the Spanish speaking countries in Latam? They hold the key for many of our biodiversity challenges and opportunities, and many of the tropical or subtropical commodities are farmed there. What has she learned since the last time we spoke three years ago and why did she decide to start a $20 million investment fund focused on rural Mexico and the regenerative transition?
Speaker 1: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.
Speaker 1:Find out more on gumroadcom investing in regen ag. That is, gumroadcom investing in regen ag, or find the link below Welcome to another episode Today with the Chief Purpose Officer and Co-Founder of SVX Mexico and Managing Partner at Regenera Ventures, which invests in the transition for regenerative agriculture and regenerative land use in rural Mexico. Welcome back, Laura.
Speaker 2:Thank you, cohen, thank you for having me.
Speaker 1:So we chatted in. I checked it, obviously, laura. Thank you, cohen, thank you for having me. So we chatted in, I checked it, obviously in the summer of 2021, which, or the end of the summer of 2021, which feels like a lifetime ago. We're currently recording in the summer sorry, in the northern hemisphere and also the, let's say, autumn slash, winter in the northern hemisphere. It's november 2024 which feels in region, region, ag and food and food systems a lifetime ago. So I'm very happy to check in with you and and we have a lot to cover. But first of all, just for people that didn't listen to the other one, which, of course, I will link below, a short introduction into into your work and what led you to focus specifically on rural Mexico and specifically on regeneration.
Speaker 2:Thank you so much, cohen. So I used to be a banker. This was 10 years ago. I was in both asset management and wealth management in Mexico, and, as you can imagine, it was a very toxic culture, a very masculine culture, you know, one of those old school, very industry driven cultures that always ask more of you and that drive you to burnout.
Speaker 2:And so, over 10 years ago, I had a life changing moment, moment and decided that if I die tomorrow, I don't want to just have made the rich richer. So I really wanted to restructure my life, especially professionally, and really find out my purpose, and I had no idea that impact investing existed. And then I went into that rabbit hole back in 2014. But when I first started in impact investing, everything and anything could be, you know, impact, and so I really needed a northern star. I really needed direction. So, back in 2016, I met John Fullerton from the Capital Institute, and so he's, I would say, one of the fathers of the regenerative economy thinking, and I also met the year after that with Carol Sanford and many other leaders.
Speaker 1:You've met some good people in that year. Yeah, that's been a good 12 months in that case.
Speaker 2:How do you want to?
Speaker 1:go deep in, like going from zero to 100 in in two seconds. That's probably your, your deep dive, yeah, wow exactly.
Speaker 2:So I think, um, that drove me to put my hands in the soil for the first time, that drove me into understanding soil and living systems, thinking and all of that.
Speaker 2:So I think that became my northern star.
Speaker 2:And so, from impact investing that was very broad and SVX, that is an impact investing advisory firm, really driving towards regeneration as our direction, I would say and so how we have applied that in our thinking, in the way that we advise and in the way we question not only investment paradigms but also finance and economic paradigms.
Speaker 2:And so from that, we also had the amazing opportunity of working with the Biodiversity Finance Initiative in UNDP, and they were really trying to discover what was investable from biodiversity, and like changing the paradigm of biodiversity no longer being perceived as a charity case because in in Mexico and Latin America it was very much the case I think it still is, you know, that biodiversity seen or regarded as a charity case and like changing that mindset into seeing biodiversity not only as an investable asset but actually seeing it as everyone's only life insurance, and so seeing that the insurers of our life are really, you know, the custodians of biodiversity. And so basically, all of that realization was gradual. It took several years, but it definitely gave our company and myself clear direction, and so now our mission is that we want to ensure that capital serves life instead of governing it, and that has been the mission in the past several years. It's almost been a decade now of work, and so that evolution has been with a lot of learning, but also with a lot of unlearning.
Speaker 1:That's a really good point. I mean, I love the phrase capital serving life, and I remember actually you mentioning your driver also back then. I don't want to make the rich necessarily richer, which I think is sort of the biggest driver of the financial system until now, or a big chunk of it at least, and it's definitely not serving life. And so what was? Let's unpick the unlearning piece a bit. What's the biggest unlearning lesson? Not to ask the biggest lesson you learned, but the biggest one you had to unlearn from your work in banking and you're applying now your financial skills to facilitating more life applying now your financial skills to facilitating more life.
Speaker 2:Yeah, so I think I was educated in the fact that you know we always want a generic form of more, like always wanting more right when you reach certain amount of income, you always want double that or triple that or whatever. And so I think I was educated to always want more and I've been unlearning and re-educating myself to to know the meaning of enough and to like get my head around enoughness, you know, get my head around balance and get my head around like what is desirable from enough and from balance, rather than a generic form of more that keeps us eternally unsatisfied. And so I think that has been a huge learning process. But the other learning process has been from exponential growth as being this desirable goal or desirable destination into actually thinking that in nature and this is from Kate Raworth in nature, you know, growth is lovely when you see a baby growing up to be an adolescent and an adult, but that happens in the first two decades of your life, and after the first two decades of your life you mature, you don't grow. You know, to four meters tall when you're 40. Like this year I turned 40. You know, to four meters tall when you're 40. Like this year, I turned 40.
Speaker 2:And so I think I've been very much reflecting on how does maturity look like for the economy, for finance, instead of growth? And also the other reflection is that we, as humanity, has become the means for the eternal reproduction of money, and so one of the bigger questions of, let's say, someone like Jed Emerson, that is a very, I would say, game-changing author of impact investing that is, what is the purpose of capital has really been a question that I've been learning and unlearning with throughout many years now, about if humanity has become the means towards the reproduction of money or if really capital can be the liberation of humans, humanity's potential and life, flourishing, and so I think, um let's just think that for a minute, because it's we're seven and a half minutes in and we're going straight to the deep end, which I love, like yeah straight to the deep end of the pool, and, but it's a very deep one.
Speaker 1:Have we just become, yeah, have, have we just become, slaves of the money? Um, to put it in different terms, and, and how? And it's something we wrestle with with the podcast as well Like, is money a tool? And probably it is, and we've been using it really, really well to not facilitate life, so could we also use it? But it comes with such tension and such narratives around exponential growth and such narratives around more and enough. There's never enough, et cetera, et cetera. Like, can we like? Is it almost too powerful to dance with and will we fall into those traps? What do you see there? What do you feel there? Because we have this lure of money and greed that is extremely strong, and maybe it's just. Are we in the adolescent phase, like Charles Isentier likes to say, and are we maturing? Should we mature now and go through another phase and then we can manage that greed or we can manage those, those tensions? What do you see there?
Speaker 2:so I think we need to acknowledge that we can finance our way into extinction. We need to acknowledge that the inherent compound interest that goes into money creation is kind of the poison pill of life, Because we are creating a debt and we are building all of our systems based on that debt. And so I think we have created an excess of financial capital at the cost and at the liquidation of the social and the natural capital. And so the problem with that is that you cannot do a click, and like you know, like you know that axiom that energy is never built or destroyed, but rather it is transformed I think we have transformed so much of the social and natural capital into financial capital, but you cannot click your way back to a hectare of rainforest. It's not a click away. And so I think we do need to turn that excess financial capital back into natural capital and social capital.
Speaker 2:But we have many mental constraints, like the fact that saving the world has to be within a business model, the fact that we have to monetize this crisis. You know, in our last decade, of being able to do so Like there's a ton of mental constraints that I use a metaphor of the fact that an Excel spreadsheet has a cell and the cell becomes a jail of our minds. You know, it becomes a prison of our minds, and it has really imprisoned our minds so much that we are desiring that double digit return more than we are valuing clean air, drinkable rivers and nourishing soils, you know. So for me, those are the wild returns. The wild returns are that the clean air, the drinkable rivers and the community, and so we've lost all that because we're imprisoned in an Excel spreadsheet.
Speaker 1:Which is pretty sad if you think about it.
Speaker 2:Yeah.
Speaker 1:I mean probably never what the designer of Excel or the programmer at Microsoft or whoever came up with it envisioned. But it's yeah, we're a prisoner in an Excel cell.
Speaker 2:The good thing is that it's a mental construct. You know, that's the good thing. It's part of our imagination. Like, compound interest is not physics, it's part of our imagination and we can imagine otherwise, right.
Speaker 1:And so how have you this is all the unlearning, and how have you seen, like the learning pieces with all the investors and entrepreneurs you've worked with over the last almost decade? How has it been landing? How have you been? Because I remember I think the title we chose last time was how to make investors and financiers fall in love with biodiversity of LATAM, fall in love with biodiversity of latin and um, how, how has it been going? What are what have been um surprises, insights on on that journey of getting people to unlearn that they're uh, let's see, looking over the edge of the, the excel cell to maybe the neighboring one, or actually beyond the sheet, just to be super.
Speaker 2:yeah so like like I remember actually back then when when at the end of the podcast you asked me like who I could refer you to to speak, and I remember that I referred you to Reginald Haslett Marroquin, and I'm really glad that you guys now, you know, have connected in in many ways. Um so I think one of the wise words of Reggie he's always saying that we need to look at things differently, because we find new things or new opportunities or new approaches once we look at them differently. And so I have really seen that natural capital and a lot of nature-based solutions are not only underinvested and undervalued but really the best multi-purpose investment for everyone. And so some of the findings have been you know that sometimes, when we're looking for things that are called regenerative agriculture in, for example, southeastern Mexico, where you have a ton of smallholder, farmer agriculture and a lot of indigenous wisdom, it is not called regenerative agriculture, it's called agroecology or so many other names. But really it carries the wisdom of going from a domination dynamic or domination paradigm of nature to an interdependent dynamic or paradigm, right, and so I mean it comes from a lot of other vertices of wisdom, much more than that. But really I have found that we don't need to come and impose a new intervention or a new way. Rather, see and recognize a lot of this wisdom, how it is already playing out in many of these landscapes, because the resistance to the industrial agriculture model had always been there, and so, for example, just last year, we visited smallholder agriculture and producers from southern Oaxaca, and this is not only vulnerable to climate vulnerability but also to earthquakes, and so you know they need to rebuild and rebuild and rebuild, and so, like looking at how climate resilience has become economic resilience in practice and not theoretically.
Speaker 2:You know like these are coffee farmers that were usually driven towards a coffee farming mentality precisely because of the margins that you can find in coffee and the place where they were that was very apt for that, and how that has been so vulnerable to the single price of a commodity that they have been adapting, and they have been growing cocoa that is actually native from their ecosystems. They have been diversifying into a really special honey that is a keystone species from their ecosystems. They have been diversifying into a really special honey that is a keystone species of their ecosystems. They have been diversifying into poultry, vanilla and so many wild species that they have found around their ecosystems, and so I think one of the huge surprises for me is that we are not coming here to impose any new ways or new models, but rather you're learning to see and finding them and partnering with them, and so learning that we're not here in a paternalistic intervention kind of way, but rather in a partnering with the regenerators that are already present.
Speaker 1:And you have been expanding to another country, to Colombia, recently or not so recent, but at least you're not only focused. I mean, you've done always a lot of work in the rest of the continent as well, but most of it was focused on Mexico. And how is regeneration? Of course, different, it might be called slightly different, but what are lessons there from looking at it in another country, another context, another history, quite far of course, like, let's say, another landscape and another soil types as well? What are your lessons there, or what are your insights from basically putting SVX into another country?
Speaker 2:Yeah, so we've been working all throughout Latin America. But I would say it like, if you see the geography of where Mexico is, it is literally, it could be, a portal between the global North and the global South, and we are like a bridge, you know, between South America and North America, and so we, we ourselves, become like translators, or we ourselves become bridges of these two realities, become bridges of these two realities. And so I would say, in the global north, we have a huge contest of like trust is based on intellectual trust and relationships, and, like, in the global south, it's a lot about affective trust. And so Mexico has, I think, like a hybrid of those two. And in Colombia, you know, there are so many nuances of being a tropical country that are similar to Mexico but also contrasting. So, like, for example, over there, you know, I just mentioned two weeks ago in Bogota, like oh yeah, march, so it's going to be spring, and they're like no, no, there's no spring. Here I'm like why, what? What do you mean? There's no spring? And I totally forgot, you know that they were caught between el niño and la niña, phenomenons of drought and floods, or drought season and rain season, and so they don't have that context of, like very marked seasons for them because they're so close to the equator right. So it's just like those tiny nuances that are so explicit and so present and so important to acknowledge the differences between.
Speaker 2:Even though Mexico has a tropical part, it is really different for how Colombia works, and so I think we share a lot of context and a lot of like the friendly dynamic between two countries.
Speaker 2:We really like each other and there's a lot of Colombians working in Mexico and there's a lot of Mexicans working in Colombia.
Speaker 2:But I think acknowledging those essential differences of what makes Colombia Colombia and Mexico Mexico, is really also important.
Speaker 2:And so another thing that I feel different from the Mexico and Colombia context is that we're both Latin American countries and Latin America has a lot of patriarch dynamics, but especially in Mexico there's a name of a dynamic called macho, the macho country, like a toxic masculine dynamic of domination of women, and you know that has that has played out and, and I would say in Colombia we really find a kind of women empowerment that we don't necessarily find in Mexico.
Speaker 2:And I say this precisely because within regeneration, I think there's a layer of reconciliation and I think there has been a separation of the feminine and the masculine forces or energies and like valuing the masculine energies more, and I think the diversity of both are really important and give the strength and the resilience into everything you know that goes into the work of regeneration. But I think it really stands out that in Colombia the women leadership is more, I would say, acknowledged and available and present than it is in Mexico. So I think we have a welcoming experience in Colombia that has been a little bit tougher in Mexican context.
Speaker 1:Yeah, I think there's a lot of trauma and a lot of I mean regeneration goes obviously trauma and a lot of I mean regeneration goes obviously. But still many people maybe missed that. That memo uh, way beyond soil, soil health and and regeneration of uh, of x inches or whatever we we take as measurement, um, but it's such a good trojan horse to to discuss and not saying fix, but to work on a lot of other things as well, because a lot of these things touch land ownership, access to finance, inequality in general, access to a lot of other things and, of course, access to food and health and all of that which really play out in a lot of these issues and it all underlies like how we designed our food and land system and agriculture system. So you're saying, in a sense, it's slightly easier in Colombia. Is that what I'm hearing? Or slightly more?
Speaker 2:I mean you say welcoming, but slightly easier landing in that sense, more welcoming in terms of gender, but it's also challenging in the fact that we do need to embed yourself in the context, to be able to not comment something that is not attuned with what they are expecting. So I would say it's just a very friendly atmosphere. We found it very welcoming so far and we just really enjoy ourselves while we work with Colombians and is that one of the reasons?
Speaker 1:I mean it's a perfect bridge to to host or to focus there on a small event. I don't think it's going to be small. A small thing you're going to put together in in march next year, in 2025, to to go to colombia, to focus like let's, let's talk a bit about laris, um, and, and why there, and why now or why in six months, and why it's so important to to bring the community together of all over latin, obviously, and beyond yes, so I want to acknowledge the fact that we're recording this some weeks after the biodiversity cup took place in in cali colombia.
Speaker 2:So I think, like 2024, march the year that I hope, natural capital becomes like more of a, and next year, the big cup will be in the amazon, in brazil so you're on a nice.
Speaker 1:You're on a nice, uh, a nice street streak there exactly but.
Speaker 2:But so I would say like natural capital is putting itself on the map and it's becoming mainstream, and like, finally, the big asset managers and the big banks, and like all the financial world is finally not just looking at it, but like finding the ways like to to apply it, you know, or like to to invest in it, or so they're like. I think we're still very much in the nascent phase of how to make um nature investable and biodiversity, and da da, da da. And I want to say that the amazon has been, of course, a very interesting keystone place to talk about in all these climate narratives and and and biodiversity narratives. But I do think, since brazil has, you know, the biggest chunk in terms of land volume, usually Brazil takes a lot of the attention, time and focus.
Speaker 1:And so the.
Speaker 2:Spanish speaking Latin America is usually left second. So I would say there's a bit of attention there. There's a bit of attention In fact that whenever you just type in in you know, regeneration, Latin America, Brazil usually takes the protagonist role and that is great and I do acknowledge their role and their size and everything. But we do want to make Lattice a way to bring about the focus to the Spanish speaking Latin America, because there will be already several events going on in the Brazilian side of things right. So, for example, in Latin America, I would say a big role into the narrative of regeneration has been played for by Sistema B, which is the big corporation movement in Latin America, and so the Sistema B has already been talking and putting front and center like regeneration as one of their main directions.
Speaker 2:I would say and they do have a Sistema B event coming up in the second half of 2025 in Brazil, right? And so there's also the COP and there's, you know. So there's already a ton of things that will be happening in Brazil, and so we don't want to duplicate that, rather, add value and so focus making sure that LARIS, which is actually the initials of Latin American Regenerative Investment Summit, which is the pioneer summit, the very first summit that's ever been done to really build the investment case for the regenerative transition of Latin America, build the investment case for the regenerative transition of Latin America, especially with an emphasis and focus on Spanish-speaking Latin America, not just Portuguese-speaking Latin America. So we will have Brazil present, of course, in Brazilian cases, but we want to make sure that we are highlighting and emphasizing the rest of Latin America, because we already know that a lot will be done in Brazil and, like you know, by other types of events. And so, right now, the Cup of Valladolid just happened in Cali. Some of our team members that were there, you know, were really amazed at the fact that it was like the People's Cup, the fact that the community was very much engaged, involved, participating and like front and center everywhere. So I think that really shows that Colombia and Latin America is recognizing the value of our biodiversity assets.
Speaker 2:And so I think 10 years ago we were like copy pasting models from the private capital industry, you know, following the unicorn mentality and all of that, and we just wanted unicorns in Latin America or whatever. And I think we are now going into an evolution, a phase of like a lot of the, even like the tech, private capital accelerators are now morphing into impact climate. You know, accelerators are now morphing into impact climate accelerators and that really shows the evolution of how the region is even perceiving itself, I would say so really valuing what is in our essence, instead of following other models from external sources. And so the importance that we want to make this event in Bogota is precisely because, basically, we have a ton of years of data, especially from the US investment case, that have been super helpful, you know, and there's been like just I don't know if you saw the recent publication from the American Farmland Trust, but it's amazing like the return of our investment per farm and like they have like per commodity, per state, and they average over 167% of return of our investment. You know all those data points that have been going on for almost I would say more than two decades in the US.
Speaker 2:We don't have that for Latin America, so we really need to build our investment case. We really need to build our data points. We really need to build our data points. We really need to build our examples, and so this event is coming together at the end of a two-year collaboration that we've been mapping the regenerative agri-food entrepreneurs and companies and organizations all throughout Latin America, from Mexico to Argentina. This community has been called regenerativoorg. I can type it in the chat if you'd like. So regenerativoorg.
Speaker 1:We'll put all the info obviously on the show notes as well.
Speaker 2:Yeah, so regenerativoorg has been you know, that consortium of partners that we've been mapping.
Speaker 2:Regenerativoorg has been, you know, that consortium of partners that we've been mapping like who is doing regenerative agribusinesses in Latin America and that has been for over two years, been more of an, I would say, academic exercise, because there's been a lot of Latin American universities involved in this mapping of the cases and like what qualifies as regenerative, what doesn't, and like the diverse reality of you know, indigenous led Ecuadorian businesses like Wignac and like really corporate based businesses, you know in large scale industries like in Brazil, and so that kind of mapping, that kind of characterization, definitions, all of that has been going on for a couple of years now and we want to move into, ok, but what is the investable case?
Speaker 2:You know what is the profitability of this transition, like those data points I think are missing.
Speaker 2:And so we want to bring together the community in a central place, because Bogota is kind of like at the belly button perspective of from Mexico to Argentina, and so like making sure that the investors are listening to the regenerators and the regenerators are listening to the investors at the same time. So we want to bridge this community but really make sure that this event is a first one of many to bring about the investment case of the Latin American regenerative investment transition. And so it's been over, I think, almost 15 years of the Latin American Impact Investing Forum, which is the FLEE that is hosted by New Ventures usually I mean always in Mexico, and so been, you know, the northernmost point for all Latin America to travel and gather there. And so we wanted to make sure that this was a little bit more central and that this was for the gathering of the regenerative tribe. And you know that, to make sure that we get together, we exchange learnings but also build the investment case more systemically.
Speaker 1:And do you see the investor community let's say local as well as global, the global north starting to give? You say the big banks and the big financial institutions start to at least engage? Let's not say they're starting to invest, because that would be too scary. But do you see an interest in LATAM, especially the Spanish-speaking countries? Of course this is the first event you're doing, or the first one of hopefully many, so let's see how many people make the trip and come. What do you feel in terms of interest for the business case of regeneration on the continent?
Speaker 2:So I think the interest is there and I do want to say, like there's an anecdotal example that I think is key to talk about.
Speaker 2:So, for example, there was this hike of the price of cocoa in the past several months, or maybe almost a year or more. Yeah, part of that is because more than 60% of the cocoa sourcing of the world, like globally, is coming from Africa, even though cocoa is native from Latin America. So, when you have these climate vulnerabilities that are playing out everywhere, I mean even the cocoa in Latin America is suffering, but it's suffering less than the one sourced in Africa. So I would say there's a huge role of Latin America. Going back to its essence, to its native agrobiodiversity and really growing it here will make a difference in terms, I would think, of climate resilience, and that has really, you know, like there's so many supply chains that have cocoa as part of their key you know keystone species, and I think it's one of the main species that is adored all throughout the world. It's like a religion. You know chocolate and it's at risk.
Speaker 1:Probably chocolate, coffee and tea. Those are the big ones, Exactly.
Speaker 2:So I would say, you know, one of those anecdotal examples of how the hike of that commodity really puts everything into perspective and really makes you think and go back to where is it native from and where can it thrive for longer and like to be like the global sourcing strategy and also the other, I would say, key element is the actual decarbonization of supply chains of a lot of American corporations and Canadian corporations that are sourcing globally and that are now looking to source more from Latin America because it makes sense in terms of, like, less GHG emissions and less travel miles.
Speaker 2:So there's a lot of US and Canadian food systems transformation that needs to involve their you know, mexican and Latin American partners, and so I think that is what is actually happening. So, for example, last year in Mexico, the largest deal of regenerative agriculture happened and it was, like you know, super surprising to everyone. Imagine it is $25 million. It's a deal that it's with the Whole Foods as the offtaker in a very large scale farm in northern Mexico, in a very large scale farm in Northern Mexico, and so basically they were used to being all the suppliers of like four commodities and now have diversified into I don't know how many more, but basically has been an intergenerational transition of the family ownership as well as the, I would say, debt, investment from responsibility, the Swiss asset manager, and so those kinds of examples are, you know, I would say, pointing towards the fact that this is an investment case and it's not just you know, the Pachamama philosophy that I'm always talking about and that people think I'm, you know, barefoot and I don't know like this makes sense.
Speaker 1:It's both, it has to be both. It, it's both, it has to be both, it's both.
Speaker 2:It has to be both. It has to be both. But I think you know some of those isolated data points have pointed towards the fact that you know there's so much going on the US transformation food systems and they are very dependent on their Latin American partners, and so if they want to, you know, if they want their US food system to be transformed, they have to work with the Latin America food transformation as well. There's also a lot of European buyers in Latin America and a lot of the European I would say a lot of the regenerative food companies that we've mapped are exporting towards Europe as well, and since the European regulations are only getting higher standards and more rigorous, I think that is where this regenerative transition really has a business strategy that makes a lot of sense in this timing.
Speaker 1:And so that's a perfect bridge actually to what we absolutely also have to talk about, which is your fund. Last time we talked I mean last time we talked on the podcast there was definitely no fund, and now there is one. And so what was the reason to build that fund? To go to the fund business, which is especially fundraising for a fund, a first-time fund is, as I imagine, a lot of fun. No, not really. It's quite brutal and a very, very long journey, as anybody that's doing that now or has been doing that, probably listening to this can attest, and anybody that hasn't can only imagine. I think the first close for a first-time fund manager is somewhere between 18 months and two years, and that was before these hard times of 22 23, and so what's the reasoning to do that? I can see them imagine like there's more money needed in rural mexico in terms of regeneration. So why did you decide to? To take up and take the glove and, let's say, start to fight.
Speaker 2:So we actually said during 2019 that we were mapping out what was investable about biodiversity in Mexico. We're actually finding a lot of the pipeline that is currently part of the pipeline for the fund. So at the very beginning, we didn't set out to build a fund. We rather say let's develop and cultivate the regenerative investments. And so we literally said there's a development phase or a development layer that needs to happen before the funding phase, and so from that experience, we've been collaborating with a ton of different partners. So in 2020, we started a partnership called Sustainable Landscape Ventures that was funded by USAID, and so that partnership was implemented by Conservation International in Mexico and so basically covered three key landscapes which is Oaxaca, chiapas and the Mayan Peninsula in Mexico. And so these three key landscapes which is Oaxaca, chiapas and the Mayan Peninsula in Mexico and so these three key landscapes, I would say, have a lot of interests for USAID, especially migration, but also because it's, you know, the most biodiverse places in Mexico, and so it's like, besides, the Amazon is the other part of the really big chunk of rainforest that is available in Latin America still, and it's suffering a lot from deforestation.
Speaker 2:So I think, having Conservation International as that key partner that had landscape managers in each of these main landscapes, and so they acted both as a sourcing partner, origination partner partner, origination partner, but also they were kind of filtering out what businesses, what organizations, what cooperatives were really aligned to local biodiversity and to social justice. And so really, when they brought us organizations, they brought in you know, a lot of the conservation international expertise of like what plays out with the local biodiversity, international expertise of like what plays out with the local biodiversity, and so for us, we had the role of building a new investor community that was really interested and acknowledging and not only acknowledging but really valuing and cultivating regenerative investments. And so basically, we we started building out a, an investor community for nature-based solutions, and so we organized three investor learning journeys within that project. So we are reversing technical assistance. We are not bringing a technical assistance to the rural communities, but rather the rural communities are giving the technical assistance to investors, because now investors come to listen and learn.
Speaker 2:And so with that we really kind of brought about the dynamic of why the fund was needed. And so, basically, the fund was needed precisely to bridge the ticket sizes between the need on the ground and the availability of capital in the asset managing space and to bridge, of course, the mutual learning that needs to happen in this very nascent space for Mexico. And so, within that sustainable landscape ventures, we've been able to catalyze funding for over 30 organizations right now, rural organizations ranging from honey producers to really diverse agroforestster systems and so many others, and so those organizations were funded by direct investments from the investors in our community.
Speaker 2:And we have learned a lot forming that community, cultivating that community and now proposing the fund to them. And so USAID was our first I would say our first partner for building the fund. They really helped out with a grant support for us to structure the fund, conservation International as a support partner also for, like, the sourcing and the relationships on the ground, the landscape level, sourcing and the relationships on the ground, the landscape level. And then now we found DFC as our anchor investor early this year and then I hope we can be able to announce our second anchor investor soon, because it's not public yet but it has been approved, so we're nearing our first close very soon.
Speaker 1:When this goes out, you'll be at your first close and you can find the press releases and stuff.
Speaker 1:Hope so, hope so. And so what are the like? Not the technicalities, but the considerations you had while designing this fund, because, of course, you want to somehow balance the tension between being as radical as maybe, let's say, the ground needs, and want to somehow balance the tension between being as radical as maybe, let's say the ground needs and the soil needs and the ecosystems need and the people on the floor who are doing this real work need, and you don't want to be too radical for the financial markets, because then you're just not going to raise, or it's very difficult to raise, significant Like what have been those considerations and maybe compromises as well.
Speaker 2:So I would say one of the huge differences of our investment thesis versus what we can usually find in the US in terms of the regenerative funds, I would say a lot of the regenerative funds in the US are either debt for the transition right, the other is land ownership strategies, so like really it's land acquisition and management.
Speaker 1:Which I think is most of them in terms of dollar amounts. If you look at the amount invested, it's going to be land, real estate.
Speaker 2:Yeah, and not just the US, right, that's placed out globally. And the third is, like the tech investments, right. So we're not debt, we're not land acquisition and we're not tech. So we're like, really, I would say, a controversial strategy, or not controversial, but rather a contrarian strategy, precisely because Mexico is a contrarian country, you know.
Speaker 2:So rural land ownership in Mexico was revolutionized in the Mexican Revolution, and so the Mexican Revolution actually the anniversary is tomorrow and so more than 100 years ago, the Mexican Revolution redistributed land ownership throughout Mexico and so, from, like the very big land owners that were, you know, very, very wealthy and usually came from the colonial history or the church, and like it really broke apart land ownership in Mexico and like, really redistributed land. And so, from that land ownership in Mexico today, rural land ownership is really spread out, really distributed into a lot of smallholder farmers, and land acquisition is not, as I would say, practical or readily available. So there is private land. Of course there's a ton of private land, and I'm not saying there isn't. Of course there's a ton of private land, and I'm not saying there isn't, but many of the most biodiverse spaces are, of course, within the land that is, still in a common land framework of rural and indigenous ownership, and so that really plays out in the fact that we are not a land acquisition strategy fund.
Speaker 1:And so we really work, simply because you can't and you don't want to.
Speaker 2:We don't want to, and so we really partner with the usufruct of the land like the actual produce of the land instead of the land asset as an asset itself, right.
Speaker 2:And so we believe that is part of the social justice lens of our fund, precisely because it's that part of the contrarian work I think has a lot of meaning towards what is driving degenerative practices.
Speaker 2:You know there's a ton of over-centralized ownership and control that is playing out not just in the rural US but everywhere in the world and that goes against social justice. So there's a definition of rural, I mean of regenerative agriculture that we love, that comes from Eugenio Gras, which is Latin American he already passed away but in his definition it's not only talking about the ecological and the soil, health and the blah, blah, blah, but rather the labor and the connection to land. So that is very similar to, like Wendell Berry kind of philosophy, right. So I think we come from a philosophy that is very much pollinized by Vandana Shiva, by Wendell Berry, by Eugenio Graz in Latin America, by Maria Sevina and many other indigenous leaders in Latin America. But we think that if we are only talking about ecology without social justice, that's just gardening Like we really need to think about the redistributive quality of regenerative investments. It's not just the what you invest in, it's the how.
Speaker 1:Let's repeat that one more time, Like if we only talk about I was laughing because it's such a good line If we only talk about, what did you say exactly?
Speaker 2:So this actually comes from the inspiration. So this actually comes from the inspiration. So there's one of the environmental activists in Latin America that was shot to death in the 90s. His name is Chico Mendes. I think he was Brazilian, and so Chico Mendes said that ecology without class struggle is just gardening.
Speaker 2:So I always paraphrase his phrase, because this is his quote, but I paraphrase it like ecology without social justice is just gardening, like we really need to bring in the social justice piece. This really needs to, like it plays out also in Wendell's very quote of the fact that we need to be tied to the land and the land binding us and our labor towards it for the long term and the long term quality. You know, the ownership of the land really is part of the attractiveness of staying in the land and of, you know, putting your love to the land. You know so, really, for us, it is very important that rural communities stay in the ownership, as much as possible, of not only their land assets but actually their companies. So, for example, we're not only bringing about an investment model that invests in regeneration, we're actually innovating with the self-liquidating equity or redeemable equity piece that I mentioned in the last episode in depth.
Speaker 2:That is precisely instead of putting farmers into debt, rather going with them to their growth strategy or transition strategy, with our skin in the game and our risk as well, for the long term, so like for over seven years, right? So usually in Mexico there's a ton of debt available. It's really really expensive debt In Mexico. We're never below double digit interest rates and you can even see triple digit interest rates in Mexico play out In microfinance. There's like over 100%, over 200% in microfinance rates in Mexico. So that's legal, so really expensive that it's widely available. All towards Mexico, and so we're not focusing on that, but rather the equity piece so that we can be invested with like the skin in the game with them for their transition to happen.
Speaker 1:And so how do you structure like? How does a fund like that land with investors? Of course you've been cultivating this group for a while so it doesn't come out of nowhere. And how do you make sure you're still able to? Of course you're going to your first close now, but still able to raise enough to also have a difference, because if you raise, I think the fund target is 20 million US dollars, which is significant. That's not 2 million left and right, that's a significant amount. How do you dance with that tension and how has it been landing so far? Because it's not been easy a couple of years in terms of fundraising in general.
Speaker 2:Absolutely. I think fund economics is definitely a huge challenge. Fund economics is definitely a huge challenge. Fortunately, within Mexican context, funds that are 20 million are okay in fund economics compared to what 20 million can do in the global north. We're actually aiming from 20 to 30. So we might go into the oversubscribed almost 30. I hope so. I'm not saying it's happening really soon, but I'm hoping and I'm aiming towards that, and it's precisely because we wanted a size that was significant enough to be able to play out as a learning strategy for the global north, to learn of Latin American investment cases. But it has been super challenging. So I would say the timing is we're in this very adverse fundraising timing, absolutely. But also the institutional big investors are really playing a role in the intersection of climate and gender and that has definitely played a part for us and that has really helped us out because we are two female managing partners, me and Stevie, and so I think that has really played out a significant role in terms of the institutional funding. So we got the institutional funders first instead of getting the private money, and so we've been fortunate enough that many of our actual investors are women leaders themselves within their own institutions.
Speaker 2:But, as you know, there's several programs happening at the same time. Like 2X is a gender equality or gender lens investing perspective for fund managers. Usaid supported us as well. Because of that, we've also won two awards, so one from the International Climate Finance Accelerator in Luxembourg. They are amazing and in their cohort we won during 2023. In their cohort we were the only Latin American fund Imagine, and they have, you know, they have global applications. They had over a hundred fund managers applying that year and we were the only ones from Latin America. So you can imagine like how little this happens.
Speaker 2:And we've also won the recognition from the Climate Policy Initiative, cpi, the Climate Finance Innovation Lab, and so it's really different those two programs, but they are super helpful both of them. The ICFA is more like the accelerator for funds and fund managers from emerging markets into climate, and the CPI is like you can innovate in terms of like it's not only for funds but it can also be, you know, for like really alternative bonds and alternative bonds and things that are really wide-ranging in terms of the type of instrument that you can be able to curate with them, and they offer really complementary support both of them. But I think in both programs. I think part of our essential qualities that have brought about being supported by them has been the, the role of. We are playing a role in climate adaptation that many have not played before. A lot of the climate finance has only been focused in mitigation in latin america, and so climate adaptation is a is like a newer thing. And gender, and so the, the women leadership, I think, really plays a role in the funding.
Speaker 1:Yeah. So how soon? Of course, depending on funding coming in. But what are you targeting? And I could have checked the deck. But what are you targeting in terms of deployment? How soon is this fund, will this money be out of the door? Let's say, how easy is it? I mean you've been building pipeline, but how easy will it be to put 25, 30 million to work?
Speaker 2:So we have been building this pipeline for over four or five years and this pipeline has definitely grown and matured and it has, for example, organizations that we've helped catalyze. A very small ticket size imagine $100,000 two years ago from another investor is now able to absorb maybe $500,000 or $100,000 more. So I think we have not only mapping them out but really ecosystem building and being long term relationship building with many of the companies that are now our targets. Many of the companies that are now our targets, and so several of them, I would say several that are women-led, have not been looking for outside funding, precisely because they have the fear of the mission drift and they have the fear of, you know, product capital coming into this exponential vortex right that we started with.
Speaker 1:Yeah, it was going to be my next question how do you avoid, how do you make sure you don't fall into that vortex?
Speaker 2:So I think that is why they find us as, like, a desirable partner for them, because we're not coming from that Silicon Valley mindset or perspective that I mean.
Speaker 2:I don't have anything against Silicon Valley, but, you know, like that kind of exponential growth expectation.
Speaker 2:We're coming from a, you know, yes, profitable expectation but, like you know, we are finding a multiple that is very reasonable for the real estate model equity and that we will be tailoring and working with each company to see what works for them, instead of, like, applying a single kind of, you know, a single type of financing for everyone, because we do see that it's very different for the regenerators that are working at the retail level than the ones that are just only working on soil and the ones that are building the infrastructure for, you know, nature, systems to be paid for.
Speaker 2:So I think it's four layers that we are addressing and since in Mexico we don't have that many competitors or many other regenerative funds, we really need to be very open and very tailored in each transaction. That we do, because we will only be able to work with 10 to 15 companies at most, and so we have been able to get to know the ecosystem far enough that we know where we will probably be allocating those 10 to 15 investments kind of already, but we're still finding. Every year we're finding and expanding our pipeline significantly.
Speaker 1:And do you see this as okay, as often the fund management strategies are, we do a first fund, then we do a second, slightly bigger, et cetera, et cetera. Do you see that space in Mexico as well to do, I don't know, in a couple of years, maybe a 50 million or 40 million fund, and or maybe it's a double strategy? Does it make sense to do similar, maybe different sizes, et cetera, in the rest of, let's say, Spanish speaking Latin America? What do you see there as follow up steps if this turns out to be successful?
Speaker 2:as follow-up steps if this turns out to be successful. So we're actually aiming for a second fund to be in Mexico Colombia predominantly and hoping to do a little bit around Mexico and Colombia, maybe Central America, precisely because we see the growth of the regenerative transition accelerating everywhere. And so we do see that, and since we already have a team in Colombia and we've been working with Colombia right now, svx Colombia is in a partnership with Global Affairs Canada, so we have a budget from Global Affairs Canada that we're doing the grant strategy for since a couple of years ago, and so we've been able to grant organizations directly, accelerators and funds. So we're getting to know and pollinating the ecosystem in Colombia throughout many layers, and so the growth that we're perceiving from Colombia is like really good timing for us to be starting to build those relationships and that knowledge, to be able to do this in a second fund. So I'm not sure how much time will be between the first fund in Mexico used as the, let's say, investment case and then expanding into Colombia. There will be maybe some years between that, but we're definitely already planting the seeds of what will be Regenera Asset Management, and so we already incorporated as Regenera Asset Management to be able to have Regenera Ventures Fund 1 and be able to have a second fund that spans a bigger geography.
Speaker 2:The reason for this is that I think there's a lot of regional LATAM fund managers that are usually having, you know, the cost benefit of that diversification is really expensive because you need to travel so much, you know, and there's so many different time zones and so many accounting and fiscal considerations to going into all these Latin American currencies.
Speaker 2:That is not minor, you know. It plays a significant role. So we have talked to some fund managers I'm not going to name names, but that have acknowledged and accepted that kind of failure from their investment thesis that they wanted to span all Latin America and they have found that it's really expensive to do that and the cost benefit usually is not playing out in their favor. So the fact that we're concentrating in specific countries is usually precisely to make very good use of the fund economics that are very tight and like making a very effective allocation as much as possible within the same fiscal and currency risks in each country, and so that specialization, I would say geographically, really makes sense and also follows the fact that regeneration happens in a place level unit, and so we really need to focus on place, rather than having these really wide regions and targeting millions and millions of hectares everywhere. I think we really need to get to know place and that's the reason that we're also allocating in one country at a time.
Speaker 1:Yeah, it makes a lot of sense and I'm conscious of your time and and want to want to also wrap up at some point, but I'm curious, um, will that follow? Or do you see that similar um or what else is missing, like are, are there enough? You say, mexico, there's, there's enough depth, but actually it's mostly, uh, completely unaccessible for any transition finance for farmers because of prices or because of interest rates. Like, do you see what are other big blocks, building blocks, let's say, of the financial puzzle, that are missing currently in the Latin market to really kickstart a regenerative transition? Is it depth, I would say, is it other equity, is it like, or just general consciousness, which also helps, probably?
Speaker 2:We need braver investors. We need braver investors that are comfortable being contrarian and not just followers, because you know, when a big asset manager like Responsibility puts 25 million, then they look up, you know, then they see, oh yeah, that sounds nice. They need to be brave enough to make the investment case and follow their hearts, you know. So I think it really helps that the global north is doing this transition. It really helps that the US has all these data points and that Europe is, you know, going into this transition as well, because a lot of the Latin American investor market is really following that. And so I think we are needing more brave investors, more brave fund managers. That you know we want to have competition. We want to have and not just competition, but competitive partners or actual potential collaborators, because we want to build this as a systemic investment case. It's a fund as a learning opportunity, as a bridge to make this happen. But really it's bigger than this, right, it's bigger than 20 million. It's an actual impact imperative, and so we really need to make food systems work.
Speaker 2:We really need to make biodiversity thrive again and people come alive, as Laura Storm says.
Speaker 2:So really, we want this to grow, we want this space to grow, and we found that there was, like we didn't find a lot of fund managers that wanted to be nature-based.
Speaker 2:You know many just want to go with the flow of the tech-based, and so you have so much of the climate finance that is now tech-based and really nature that can be multi-purpose solution always have two cents, you know. So I think that it's a lot about who's taking natural capital seriously and rural communities seriously, and I do want to mention some very long-term pioneers in the space, which is Eco Enterprises Fund that has been going on for over two decades and that they have led the way, they have paved the way and they have, have you know, had this nature focus for for a while, and I think we've been learning from their footsteps and they have, you know, an admirable path and leadership, and, and so we, we think it's the timing to have much more no, absolutely, and and I want to thank you, of course course, so much for the work you have been doing and coming on here in a very busy time.
Speaker 1:I mean, first Close is probably I'm not saying as busy as it gets, but it's definitely a major, major milestone. So let's cross our fingers our fingers crossed for when this is out, that has happened or is about to happen, and thank you so much for coming on here and share so openly of lessons learned.
Speaker 2:I forgot to mention one thing.
Speaker 1:Go ahead. We don't have a format so we can just keep going. I mean, I'm conscious of your time because I want to make sure you can go to your next meeting, but go ahead.
Speaker 2:No, no. So I just wanted to mention that we also have one of the development finance institutions offer us first laws, which is precisely to be able to catalyze private investments when we will be able to, you know, name the investor and everything in a couple of months, maybe, or maybe in a month, and everything in a couple of months, maybe, or maybe in a month. This will be happening very soon and it will be called SOIL, like the acronym will be SOIL, so it will be one of the very first losses.
Speaker 2:What a surprise, yeah it will be one of the very first losses in impact capital in Latin America, because that happens very seldom, like it never happens you know in latin america first loss is really hard to find so it's part of those. You know examples that will congrats with the finance and regeneration. So we're we're very excited about that.
Speaker 1:Sorry that I haven't mentioned and just for people to no, no, no, sorry for for people that they hear first loss, but they actually don't know what it means In two sentences. Why is that important?
Speaker 2:It's super important because it enhances our risk return profile as a fund, being conscious and super acknowledging that we will be acknowledging a very risky market, a very climate vulnerable market, and there will be some things that will play out in our favor and some things that won't. And so these first laws will be able to return a principal and preferred return to private investors. So this means that in the case of a loss, this part of the investment will help in the payback and if there isn't that loss, then that helps in adding to the return. So you know, it's really important and necessary.
Speaker 2:Exactly, it's a cushion and it helps out. It might even be expanded by another foundation later on, who knows? But it's really important that private capital jumps into this, and it isn't necessarily in terms of Mexican geography, and so that is why we are. We're getting that, and it's also because we acknowledge the climate vulnerability that we're going into is really really scary, scary, like Mexico is one of those countries that is really drought stricken in terms of, like, the water, the water risk in Mexico, or the hydrological risk in Mexico, is really really high. It's one of the highest in Latin America and even with all of those risks that will be playing out, even with all of those risks, it's still riskier not to invest in it. So, really super important to invest in the regenerative transition.
Speaker 1:And it's a perfect way to wrap up. Thank you so much, laura, for being here again and taking us with you on a journey not only in Mexico, but actually further south further central, let's say and sharing why it's so important to look at the Spanish side and not only the Portuguese. Of course, give Brazil the attention it deserves, but the continent is a lot bigger, the continent plus, actually, the central part, of course and it's such an immense, important hotspot in terms of human side, environmental biodiversity. Like you, it's as you said, it's always riskier not to invest, which is probably an interesting sentence for many investors. So thank you so much for being here again and sharing your journey and keeping us up to date on what's happening on your end of the world.
Speaker 2:Thank you so much, cohen, and thank you to the community that is listening to this.
Speaker 1: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 investinginregenerativeagriculturecom. Forward slash posts. If you liked 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.
