Investing in Regenerative Agriculture and Food
Investing in Regenerative Agriculture and Food podcast features 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. Hosted by Koen van Seijen.
Investing in Regenerative Agriculture and Food
106 Eric Smith on why regenerative agriculture is a neglected climate opportunity for the Grantham Foundation
A dive deep into regenerative agriculture and investments in agroforestry, virtual fencing, biochar, microbes, and remote sensing with Eric Smith, Head of the Neglected Climate Opportunities at the Grantham Foundation.
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Imagine for a minute you have complete freedom and a large portfolio at your disposal to focus on neglected climate change opportunities. What would you choose to focus on and what not? In today's interview, we dive deep into why Eric Smith, head of the Neglected Climate Change Opportunities at the Grantham Foundation, is investing in agroforestry, virtual fencing, biochar, microbes, and remote sensing, and what he's missing in the regeneration debate and what he would love to invest in. Welcome to another episode of In March last year, we launched our membership community to make it easy for fans to support our work. And so many of you have joined as a member. We've launched different types of benefits, exclusive content, Q&A webinars with former guests, Ask Me Anything sessions, plus so much more to come in the future. For more information on the different tiers, benefits and how to become a member, check gumroad.com slash investingbridge.com. an egg or find the link below. Thank you. Welcome to another interview today with Eric Smith, head of the Neglected Climate Opportunities at the Grantham Environmental Trust. Welcome, Eric.
SPEAKER_00:Thanks, Koen. It's an absolute pleasure and true honor to be here. You're doing incredible work building a community of practitioners and can't thank you enough for doing that.
SPEAKER_02:Thank you so much for taking the time and coming on here and share some of your experience, investments, questions, doubts, and everything else. But to start with a personal question, why did you end up working on soil regeneration, or in this case, neglected climate opportunities, but that ended up being soil? What was the road that led to your soil focus?
SPEAKER_00:Yeah, so let me give a bit of a background just for context. So I work for the Grantham Foundation for the Protection of the Environment and the Grantham Environment So, one's a private foundation, and the other's a public charity that works side by side to combat global environmental change. The foundation was founded by Jeremy and Hannelore Grantham back in 97, and later the trust in the mid-2000s, and then funded continually through the past two decades. But for those who don't know, Jeremy is co-founder and chairman of the Boston-based asset management firm GMO, the original GMO. How often do you have to explain something? something there. I mean,
SPEAKER_02:not often.
SPEAKER_00:I don't have to deal with that. But yes, I'm sure it has come up quite a bit. So Jeremy's what I like to refer to as an OG quant, one of the original value investors and someone with just an unbelievable financial acumen. And he's pretty well known for having called some of the previous financial bubbles, including the tech bubble of the early. I'm calling this one,
SPEAKER_02:actually. Yeah, that's coming somewhere the next month's years.
SPEAKER_00:The last
SPEAKER_02:dance. I will link the last the article, actually, to your last dance in the show notes
SPEAKER_00:below. Yeah, and his papers are great. You can look back through some of those papers over the years, and he's talked about everything from the phosphorus availability levels in the future and soil erosion to many of the aspects of financial markets.
SPEAKER_02:Toxicity.
SPEAKER_00:Toxicity is a big one too. But the majority of the organization's work has been and continues to be on the climate crisis. So the two organizations side by side, and collectively I'll just refer to them as the foundation, They fund strategic communication and journalism, academia and research, as well as environmental NGOs and what we'd call pre-commercialization climate solutions. So to get to your question, why soils and how did we get here and why are we doing it? I manage what we refer to as our Neglected Climate Opportunities Portfolio, and this is our mission-related investing strategy. It was created in 2017 to fund high-impact greenhouse gas mitigation and sequestration opportunities. The way this strategy developed was a bit of a modeling exercise, so the team looked at three metrics for various climate solutions. The abatement cost, as measured in dollars per ton of carbon dioxide, the total abatement potential, of that solution, and then the amount of capital that was flowing to that sector or solution. So low cost, big potential, and relevant to this conversation, truly neglected. At the end of that exercise, we ended up with four thematic areas, soil carbon and land use being one of them, oceans and seaweed, reducing methane from oil and gas operations, and the fourth, carbon removal or carbon capture utilization and storage. So two biological and then two abiotic approaches to mitigation and sequestration. Then with our network of advisors and grantees, we mapped out what needed to be done within each of those thematic areas, cataloging the various strategies for activating that theme to become a major abatement solution. So that's why we ended up on soil and where I have spent most of my time over the past few years as part of this work.
SPEAKER_02:And before coming to that, what was your background? Were you already active in, let's say, the land use space or ocean use space? Let's get it broader. But what was your route to the foundation?
SPEAKER_00:Yeah. So I had the fortunate experience of being a Peace Corps volunteer back in early 2010. It's a long story. But while I was waiting for my official invitation to come in from the Peace Corps, I decided to head down to Costa Rica to go work on my Spanish project. and found this place in northeastern Costa Rica on the border of Nicaragua called Laguna Del Aguarto. And at this remote, remote jungle lodge that was owned by these Germans, I ended up camping out there for six months, just giving tours and helping birders find their way through.
SPEAKER_02:How long were you supposed to stay originally?
SPEAKER_00:I stayed for, yeah, about four or five months before my Peace Corps service started. But on their property, there was this sign And it was Programa por Pago por Servicios Ambientales, so Payment for Environmental Services. And they had something like 200 hectares enrolled in Costa Rica's Payment for Ecosystem Services program, by which the landowner was receiving some benefit to ensure that the forest remained intact. And it was just at 22 years old, just this mind-blowing moment that someone would pay to keep nature intact. And that program has since been rolled out all over the world in various forms, has become the basis of ecosystem environmental markets. And that was the start of my journey on discovering that there's different tools in the tool bed for determining that there's a value of these ecosystem services and we have a right to protect our natural capital, so to speak.
SPEAKER_02:And it's very interesting, obviously, that you're now so active in both the carbon removal, the storage, both biological and non-biological, and all of that around. But it started 12, no, 11 years ago. That's interesting, with a sign somewhere in the jungle.
SPEAKER_00:Yeah. So from there, I ended up working in microfinance with women's banking groups. I ended up working on recycling programs, but worked for the organization called the National Fund for Financing Forestry. And that gave me a ton of experience and understanding kind of the flows. And one of the big projects I got to work on was with the World Bank with indigenous territories in Dole. And so Dole was essentially paying indigenous territories for the water services provided from their territory to their downstream plantations. And it was just such a cool idea and cool program. And then from there, I spent years in environmental auditing, less sexy, but really understood the basis for what became standards. And and labels and certifications. And I got to experience the pros and cons of those systems and what was working and what wasn't working. But from there, I ended up in grad school, did my MBA, my Master of Forestry. The basis for the Master of Forestry was exactly what we're talking about. It was I really wanted to have a conceptual understanding of how carbon was flowing through natural systems. I understood that the world was going to need to rely on natural climate solutions to help draw down all of the excess greenhouse gases that we've put into the atmosphere. And again, on that low cost paradigm, these solutions make complete sense. And so I wanted to be a part of that and wanted to help channel capital and resources to them. But then you get pulled in different directions and kind of had a stint with BlackRock and their climate solutions team, stint in venture capital, working with an impact VC called SJF Ventures, and then ultimately landed with the Grantham team to launch this program and really to catalyze a whole suite of neglected climate solutions. So really great journey.
SPEAKER_02:So within the, let's say the region ag space, as you are obviously focused on the neglected parts as much as possible, which is already part of the climate solutions. It's already a part that's been neglected a lot. What, I mean, it's been a few years, but what have you focused on mostly or what are really areas that are, let's say when you talk to other funders, investors, et cetera, you're often the only one looking at it or actually taking it seriously. What are the pieces that are extremely neglected Thank you.
SPEAKER_00:Yeah, I think that's what's so exciting about now having done this for a little bit more than three years is I would no longer consider soil carbon neglected.
SPEAKER_02:No, it's everywhere. It's
SPEAKER_00:everywhere. I mean, so three and a half years ago, nobody was talking about it. It was not. I remember. Maybe, you know, small communities of practitioners and true regen farmers. These were very small communities. But now the fact that the large agriculture incumbent industries are talking about this stuff, that's radical that that has happened in three years, which gives me a lot of optimism. But we've kind of taken a scattershot approach to various solutions within soil carbon and happy to talk through what those are. Yeah, absolutely. Yeah. So starting kind of just theory of change. So really, we're focused on doing what matters due to this existential crisis. And you have
SPEAKER_02:the flexibility with the funding. You don't have Correct me if I'm wrong, but like you don't have a three year return target and you don't have the enormous pressure some other investors might have to very quickly show results. You have the flexibility to focus on the neglected parts, if I'm correct.
SPEAKER_00:Nailed it. Totally. So we are definitely one of a unique set of players in the funding world, so to speak, or the investing world, because our mandate is different. Our time horizon is different. We are long term patient capital and we can work through the peaks and the valleys of... What is long term for you? Because I've heard that
SPEAKER_02:term used many different ways and forms and shapes.
SPEAKER_00:Well, let's put it this way. It's not the seven to 10 year venture horizon. So it's beyond that. That doesn't mean that we want to sit forever and wait for these companies to get their acts together, but we definitely have a different time horizon that we're working with, which is really important. But I think what's one of the more unique aspects about us is that we play across the capital spectrum. We're a relatively small team. How many people? The core team is six at this point with a few other supporting in different ways, but we play across the capital spectrum. So we all do and weigh in on both our grants and our investment strategy. And so we are mission aligned across the organization. Now, this allows us a lot of flexibility in terms of applying the appropriate capital structure to these opportunities to help move them along their development path. And so that ranges from true philanthropic grants to to organizations. And that's the bread and butter of what our executive director and Jeremy have been doing for a long time. But now we're moving more into this recoverable grant PRI pre-commercialization bucket. And then we can begin to apply our investment capital at that pre-CEED, CEED, Series A type stages and then help these companies move along, give them structure, give them introductions, introduce them to our network, our grantee network. We really see this as a holistic model for capital that allows us to be dynamic in our response to the needs of those organizations.
SPEAKER_02:And so what are some of those examples that are, because that's a very interesting flexibility you have that not many have, obviously, that some of those examples of maybe technology or companies or things you can talk about that are moving towards, let's say, they become interesting for more commercial funders or other investors that are a bit further down the funnel. What are some exciting ones that have moved a lot in the last three and a half years or three years?
SPEAKER_00:Yeah. Yeah, it's a great question. So I think probably one of my favorite is agroforestry. Agroforestry is much more common in tropical, subtropical subsystems where...
SPEAKER_02:That's where you found it,
SPEAKER_00:yeah. Basically, productivity is a lot higher, so you can manage and manipulate the systems much quicker, but... Is that a
SPEAKER_02:big reason, you think, in terms of agroforestry, why Brazil is leading or Costa Rica or why you see the Ernst Gutsch and others coming from places like there? Because the cycles are so much faster and you can manipulate. I've never met anybody, people have said it, but not in that way. And now suddenly it makes sense. But is that because you can just iterate much faster than, for instance, if you're in Germany or in Vermont or something like that?
SPEAKER_00:Totally. I think it's the dominant part of why, but there's other reasons just because I think those systems are also more used to working with the diversity of crops and species within subsistence farming systems. And so that, I don't want to call it ancient or indigenous knowledge, but really there's just a longer prep history of practice of subsisting with diverse ecosystems and diverse farming systems. And I think that knowledge has come together, coalesced into these really innovative modern agroforestry systems we see in tropical subsystems. But getting them adopted into temperate systems is a whole other challenge. And the challenge is overcoming the traditional farming paradigm to think, again, about horizons and changing our frame for how we view the system. And I think agroforestry really is a horizon challenge and really learning about how an asset doesn't become productive and how it generates cash flow or productivity over the life cycle. But to give you an example, we've taken two shots. And I think we're one of the biggest funders of agroforestry at this point.
SPEAKER_02:Which says more about the space than about your investments.
SPEAKER_00:Exactly. So the two organizations that we're working with, one is called the Savannah Institute, and they're based in the upper Midwest and are working to the genetics and the economics and the systems necessary to encourage farmers to begin to adopt these systems. And then we also invested in a company called Propagate Ventures.
SPEAKER_02:Which we had a few times on the podcast. I will link the interviews below with the crew.
SPEAKER_00:Wonderful. So we were Propagate's kind of first institutional capital. And I sit on their board and I work with those guys to really create the package of tools and financing and analytics to help farmers make that switch and have all the resources they need to adopt those systems. But it's a slog. And so we are taking both a development and grant funding type perspective with Savannah. We're taking an investment perspective with Propagate and trying to move these systems along side by side. So it's there's lots of examples that we can go. But yeah, I think that's a good one.
SPEAKER_02:And you've seen like in the last few years that the agroforestry space in general has made those steps to become much more investment ready or much more closer to investment because you've made an investment into Propagate and they might follow others and they might raise other money from others in the near future as they get much more commercial focused. Have you seen that speed in agroforestry in the last couple of years or was it something that already was there? Or is it like just with the soil carbon discussion, like is it suddenly popping up? Or what have you seen there as you've obviously done DD on many others and have looked at the tree space for quite a bit?
SPEAKER_00:Yeah, so I think what unlocks the space and makes it become more investable is two challenges. It It's making it more turnkey solution so that it's ready to be dropped in on the farm. And that's the kind of the plan, the analytics, the knowledge of what trees and systems are appropriate for your geography and your soil type. Because, again, it's a whole new set of knowledge that a farmer or a producer is not really accustomed to having. So making that turnkey, having dropped in kind of analytic packages that the farmer can upload a plot of land and say, oh, yeah, this is perfect for a chestnut and elderberry and this locust short rotation timber. And we can bundle that up with your wheat system and do that in a way that it'll transition the land over time. But the second aspect is capital. And there's no doubt that the upfront investment costs are completely prohibitive to farming systems, to farmers as they currently operate. So in order for us to overcome that barrier, we have to project by project de-risk and show that that the forecasted yield and returns are actually what we think they're going to be. And so it's going to take time. But as more money comes in, it's going to de-risk it. The knowledge base is going to grow. And eventually we're bullish on the fact that maybe agroforestry one day looks like the solar industry, where it's just drop in financing and projects are ready to go and farms are ready to adopt these systems. So I'm pretty excited about it.
SPEAKER_02:And do you see, since you've made that investment, because I think that's a bit of time ago, like interest from other institutional players, like because you said we are probably the first to the biggest, not because of us, but because of the space. Has that changed a lot in the last 12 months, six months? Is Agro First getting at least in temperate climates further along the funnel?
SPEAKER_00:Yes and no. I'd say there's small interested parties that are still staying engaged and interested, but nobody's beaten down our door yet to come knocking. I think what we're more focused on is really helping to bring some institutional foundation philanthropic wealth into some trial projects and show them what it means to just own the trees and not the land and to share that revenue from the trees with the farmer and really think about a capital light agroforestry model that doesn't require you to go out and buy$15,000 per acre farm
SPEAKER_02:land. In terms of cost per carbon, that's a very interesting one, obviously. Yeah. And next to agroforestry, if we look at that framework, we often try to use in the podcast, the ITN. So importance we've discussed, I don't think we need to cover it here. Tractability, like solvability, how fixable is it? But the neglectedness, obviously that's in your title already. Next, Argo First 3, are there other pieces that you are interested in or you're getting interested in? Maybe you haven't made any investments or grants yet, but it's something that's bubbling. Like, what do you see there that are other pieces that you can play a similar role as you have been playing in Argo First
SPEAKER_00:3? Yeah, that's great. So I think our fundamental belief is that society is going to coalesce around these practices and systems that ensure sustainability. There's real momentum from what I call a social license to kind of fix these systems.
SPEAKER_02:And a lot of critique. Let's take a small sidestep. Like there is article after article coming out on, especially on the soil carbon, like once every week, probably there's an article like, oh, soil carbon is going to fix us. It's going to help us all. If we just change X percentage of farms, then we're fine. And then 10 other articles come out like this is nonsense. Holistic grazing doesn't work. Look at these papers or cover crops don't work, et cetera, et cetera. What do you say when, let's say your peers or people that are not in the space sent you those articles? Because I get them a lot. And what do you reply to that? Yeah. Work in progress? Like what's the diffusion of that? Because it's quite interesting how sensitive it is to say that there are natural system solutions and that it is that we actually stand a chance, even if we don't all go vegan or really rewild high of the planet because that's what many of these are pushing for.
SPEAKER_00:Right. So for us, it has to be in all of the above strategy. There obviously is no silver bullet and over-reliance on any one solution is going to cause us a lot of headaches down the road. So we have to do everything. And that's our approach to these climate solutions. We're really taking a scattershot approach and trying to move as many solutions along their development pathway as possible. If one of those solutions turns out to not be as effective as research is currently stating or understating, that's okay because we're going to have other things moving ahead. So our investment thesis is really built around technologies and business models that enable producer profitability and doing that through newer improved systems. So in many cases for us, carbon or greenhouse gas mitigation is the byproduct of the business model.
SPEAKER_02:So you're saying if farmers are more profitable, they will, not automatically, but they improve their practices and thus restore store and biodiversity, water, carbon, etc. But you're focused on the profitability of the farmer, landowners, land managers, etc.
SPEAKER_00:Yes. And sometimes with agroforestry, the profitability solution is a horizon problem. Or with Vents, one of our portfolio companies, it's a...
SPEAKER_02:Thanks again for the intro. Yeah, we had Frank on the call. Yeah. An
SPEAKER_00:operations
SPEAKER_02:challenge. But there are... Also an horizon problem, actually, but it's a different horizon. You have to cut down the fences.
SPEAKER_00:I love it. I just love daydreaming about getting rid of all the fence lines and really managing for landscapes.
SPEAKER_02:I got somebody responding saying, imagine for wildlife, what that means. Imagine the amount of an amount of life getting trapped in fences. We're so used to it because agriculture land is fencing for us, but not so long ago, that wasn't the case. And like daydreaming about that. I was like that. I'm speaking of unlocking. I mean, the sky is literally the limit there. It's, it's quite interesting.
SPEAKER_00:Yeah. But I guess coming back to it, and I made this clear, our mandate is transformational. And we're continually debating this internally when we talk about transformational versus incremental. And with incremental, or said another way, small changes on big acres can have a very meaningful impact and scale. But what we want is big changes on big acres. So I think our portfolio represents that all of the above approach.
SPEAKER_02:Which is interesting because your background was more on the small changes on big acreage in terms of certification, et cetera. But you came around, yeah.
SPEAKER_00:Exactly, exactly, yeah. So the things that we're looking at in the end of the portfolio, there's a few crazy things, but in general, it's- Like? You want to go straight to some of the, well, I'd say there's two buckets, right? So back to this incremental, there's the incremental stuff around conservation, ag and no-till cover crops, crop diversity, livestock. integration, improve grazing and silvopastoral systems and reducing synthetic inputs and moving from conventional organic. But some of the other stuff around food waste and supply chain inefficiencies and agroforestry, I think is some of the more edgy stuff and some things I'm really excited about. I'll tell you about one, and I think it's a great story because It's funny when you realize that there are four times more people on this planet than there should be because of a world war. We have literally gone from 2 billion humans to close to 8 billion as a result of two men, Fritz Haber and Carl Bosch, who are responsible for the process by which we artificially fixate nitrogen from ambient air. It is now the basis of our chemical industrial agricultural system and why the current climatic conditions of the planet are at risk because there's too many people. But
SPEAKER_02:as we move forward with the... that's definitely living. Let's say the carbon budget is not equally shared among the 8 billion people.
SPEAKER_00:Exactly. That's very
SPEAKER_02:depressing. So
SPEAKER_00:what's the edgy part there? Well, the edgy part is how do we get rid of that? How do we get rid of the Haber-Bosch process, which is currently responsible for something like 4% of global greenhouse gas emissions? And so there's a company called Kula Bio. And as you're aware, there's certain plants that are able to fix nitrogen from the air. And we now know that there's microbes that can do this too. So unfortunately, their life cycle is fairly short. And the way that they interact with the plant for their energy needs is really determines the growth and productivity of that plant. So if they're becoming a huge suck on those plants resources, plant can't function or the microbe can't function and continue to fix that nitrogen. So Clue Bio is their commercializing technology that was spun out of Harvard that identified a process for charging the microbes or essentially packing them with their own energy stores that that they can continue to last longer in agricultural applications. So I believe their microbes are currently lasting something like two to three weeks in the field. And the development pathways show something like they'll be able to achieve four to five X over that, covering the critical stages of plant growth. But fundamentally, and most importantly, in field trials, the company has achieved a range of 50 to 100% synthetic nitrogen replacement. Which is huge. And this is game changing.
SPEAKER_02:And then asking the devil's advocate question, in healthy soils, are they needed as well? Or is this a transition tool?
SPEAKER_00:I think in healthy soils, they will be needed. So naturally, those microbes would not be present that fix nitrogen. So if you compare it to organic fertilizers, especially nitrogen and manures or other natural-based nitrate sources, you have to import those to the system unless you have livestock integration. And livestock integration is going to be very challenging. I think there will be subsets of models and kind of rent-to-cow systems where you will have someone drop off a herd and use vents to kind of run that herd through your cover crops. But I think this is a much more elegant solution, which is a simple microbe that sits next to the plant, fixes the nitrogen, and hopefully, fingers crossed, eliminates Haber-Bosch, which, again, has done unmeasurable damage to our soils, waterways, ecosystems. The amount of methane and nitrous oxide, it's just...
SPEAKER_02:Dead zones, methane, yeah. Because you say it's 4%. That doesn't sound like a lot, but it is. I mean, if you look at, of course, the soil, the carbon damage, the carbon coming out of the soil and what the industrial ag has done, it's much larger than the current 4%. Yeah. But then it's not measured and it doesn't show up in all those. But it would be an absolutely fundamental transformational bucket investment, I guess. Yes.
SPEAKER_00:I mean, it's just when I take a step back and I really think about how we got here, it's no one's fault. It's the collective result of our own human ingenuity to solve the problems at hand. And now we have a more macro level problem that we're attempting to address. What I think everyone misses in these conversations is the interconnectivity of these issues. This isn't a agriculture problem. This is a energy, agriculture, food, health crisis. They're all related connecting and feeding one each other i mean it's the ag system has been fundamentally propped up by cheap energy via subsidization both in terms of how we produce our food powers our tractors the chemical and fertilizers our hydrocarbons and the transportation system how food gets from a to b
SPEAKER_02:california to new york
SPEAKER_00:yeah yeah
SPEAKER_02:or spain to the netherlands
SPEAKER_00:but that might not be a huge issue if the transportation sector quickly or electrifies but fundamentally we have to phase out fossil fuels so the big question is what's the on food prices. But then that's the next place that our government also heavily subsidizes. And again, what originally started as a noble intention, cheap food to feed the world became a vicious feedback loop where one fed the other. Cheap food, more people, more people, more food needed. And so now our food system has gotten so cheap that we are awash in calories. And I read recently, yeah, empty calories. And we actually produce more calories than we need as a global human population.
SPEAKER_02:Like we could easily feed nine or 10 billion people. And
SPEAKER_00:so now as a result, what do we have? The largest health crisis ever seen. And of course, not talking about COVID. It's the chronic diseases such as obesity, diabetes, cardiovascular disease, cancer, that are all directly attributable to our diet. And that creates a medical cost and lost productivity. It just, it blows my mind that we've been listening listening to this healthcare debate for the last 12 years, and you have never heard any of these politicians talking about preventative medicine, and the impacts food choices and our access can have on our well-being.
SPEAKER_02:We just did an interview, I will link it below, with Catherine, and she works in the California, I'm going to, of course, push her name, I think it's a CERES project. So basically providing organic meals, so medically tailored meals to people coming out of the health system after an operation, low income, because that's the group that can benefit the most, because if they don't have the budget to eat well and they come out of a hospital the chances of them going back to the hospital of all of us if you don't eat well are incredibly high but if you get 12 weeks of good food delivered to your door suddenly the costs are neglectable compared to the cost of going back to the hospital because at the end of the month you do have a bit of money left and you're not eating actually but you are taking your medicine which obviously is a very very dangerous combination and they are showing incredible results and starting to have that discussion but it's Very difficult, let's say. Very inspirational because she did over a million meals. But if you look at the potential and having that discussion of just good, healthy food, it's not that, I mean, everybody takes the oath and let food be thy medicine, but it's very, very tricky. But there's some little signs around there for progress. But asking a question, what, so in this massive, completely interconnected issue field and challenge field and opportunity field, if you had a magic wand and you could change one thing overnight, what would that be? Only one. I always get people that then want to change one. They don't want to do the Aladdin trick, that they get more wishes. But in this case, you only have one. What would you do?
SPEAKER_00:It's funny. All the times I've heard that question, I love some of your other guess answers. But Before I answer, I would say, what is so exciting about this space is that we do have all the tools and knowledge and resources and capabilities to fix this.
SPEAKER_02:What is missing is implementation. That's what
SPEAKER_00:you're saying. Yeah, it's will. You would fix will. I would fix will. I would empower people's energy and will to actually go out and address this problem. And I would say, and more cynically, I would probably have to do that. I would remove vested interest in our government. I would somehow wave my wand to remove the ability of corporations to affect our political process. I mean, the reason we're here is legacy marketing from industrial food companies that have brainwashed us into believing the protein myth and breathing the calcium from milk myth and all of these other things that are just completely detrimental to our health and well-being and have been fed by the industrial paradigm. So that was a lot. But I would change willpower.
SPEAKER_02:And imagining there's like a whole stadium. Now, stadium is a bit tricky now, this COVID time. Let's say a theater with social distancing of other investors listening to you. We're on stage, we're doing this interview live. And somebody asks, okay, I've read the books. I visited farms. I can see it's all interconnected. I would like to operate holistically here. Where would you, without giving investment advice, but what would you tell them where to start? Where to go deeper? What would you point them to and say, okay, when you leave this theater, this would be the steps if I would be in your... your seat, I would take first.
SPEAKER_00:Yeah. So first, I'd advise anyone to take a step back and again, look at the interconnectivity and engage in some systems level thinking. What are the real pushes and pulls on the system that cause these outcomes to happen? So once you have this higher level thinking, you can begin to engage in more proactive thinking about solutions and think about where things can be dropped in or identified a little bit easier without the friction that something won't be able to compete. So what I mean by that, again, back to this subsidization question. So cheap fuel, cheap fertilizers, cheap labor, they enable this industrial paradigm to exist. And until we fix that, most of us or a lot of what we're looking for is premium pricing to somehow overcome those costs so that we can have business models and technologies to adapt more regenerative practices. So I would encourage these investors to really look for ways that do not rely on premium pricing to create value. And that goes back to what are the underlying business models that either increase revenue or decrease costs for the farmer to help them change their operating paradigm. So I'd say that's the first part is don't get stuck in that premium pricing model. Obviously, organic transition finance is a great place to invest produce and food that are going to continue to be a very high quality long-term investments. However, the way we rely on and create that premium pricing, again, these labels and certifications, I just think they're inherently flawed. Anytime you rely on a checklist of practices to achieve an outcome, you're asking for the least amount of compliance.
SPEAKER_02:You want to look for the outcome. Or how would you suggest to fix that? Because I've done some interviews, especially one in France, on outcome-based. Like, literally, you need to hit this and this target, otherwise you cannot be certified. Is that Would you base it on outcome if you would be, again, in the certification space, obviously, or not?
SPEAKER_00:Yes. So what we need are systems that continually raise the bar on the outcomes expected. And what types of outcomes you measure for, that's the question. Are you measuring for carbon? Are you measuring for quality or nutrient density? Are you measuring for increases in biological diversity and insect productivity on the farm? There's ways to show that we're achieving these things without standing next to a producer and saying, show me your chemical storage shack and I want to see that you're not having any synthetic chemicals inside here.
SPEAKER_02:Show me your invoices.
SPEAKER_00:Yeah, it's just about raising everyone up together and setting the bar higher and higher over time. And everybody understands that consumers are just absolutely inundated with labels and nobody needs another label that says it's just not going to have the effect. I'm supportive of these efforts. I just don't think it's going to fund fundamentally change the food system.
SPEAKER_02:It's not the transformative bucket for you. Yeah. And so in the transformative bucket, what are you missing? What are you like hoping that ends up on your, that knocks on your door, apart from more people that want to invest in agroforestry, but what is missing from the investor discussion currently that you're having with peers, with other people, with what would excite you if knocked on your door?
SPEAKER_00:We do this exercise all the time. We ask ourselves, what do we want? What are we looking for? And then all of a sudden it appears then you're just you're like
SPEAKER_02:like yeah it's about the intention
SPEAKER_00:so let me give you one there's a company so I've been a big fan of the biochar space for years and there's so many of us
SPEAKER_02:and somehow it didn't explode yet yeah that's why I know Peter quite well I'm Peter Oliver that's doing the biochar deep dive which I'm very happy about that somebody is taking deep dive interviews around that but yeah it's like why not yet like what's happening there what is not happening yet so
SPEAKER_00:what is your view on that? So it's funny, my first introduction to the Grantham Foundation was via a consulting project to go do diligence on a gasification technology that would produce biochar from animal manure. And that was really compelling because it was solving manure management issues and creating a really high profile soil amendment that was not just woody carbon based, but also had elements of the recovered nutrients from that manure. So I got really excited about it. We'd I actually had some initial conversations in North Carolina while I was in grad school trying to set up a system whereby we would address some of the swine and poultry manure challenges in North Carolina. Great renewable energy credit system. The way gasification system work is kind of in between combustion and paralysis. There's a little bit more oxygen presence to get much more syngas produced, which can produce a nice renewable energy stream. And then you can sell heat. But I hear a but coming. It's just anytime you're heating manure in that way, there's going to be unintended side consequences. And you have to question the quality of that char. And I think that's been one of the roadblocks for the biochar industry has just been the range of production technologies, the range of outcomes in the char and transportation and the long term value in the soil. It's hard because it's almost it can be a one time application. It can it can be a 20 time application. But research research is coming along, let's say. So anyways, I've looked at about 15 different biochar companies over the years, really trying to say, what are we solving for? What do we want? And what we were always after was infield paralysis, something that can take corn stover, leftover green residuals or a part of them and actually char them directly in the field and leave them where they are.
SPEAKER_02:Instead of leaving them there decomposed by itself, like this is a much faster and actually you go up a few levels in terms of effectiveness. And
SPEAKER_00:permanent is, again, what we're after.
SPEAKER_02:Permanent storage is very relevant here.
SPEAKER_00:Right. And we can unpack the carbon credit conversation in a second here. That's got to be a whole other hour. Stay
SPEAKER_02:tuned for part two.
SPEAKER_00:Climate robotics we identified. And Jason was a longtime biochar engineer and had been around the space and co-founder. They are developing basically an infield mobile robotic paralysis unit. That's going to process the harvest residue and biochar it and leave it in the field. And in terms of a business model, it doesn't rely on carbon credits.
SPEAKER_02:So it doesn't rely on the premium issue in terms of food, in this case, in terms of credits. But so what does it rely on?
SPEAKER_00:Yeah. So with the excess fertilizer and synthetic chemicals that we've been dumping all over our lands, our soil has become much more acidic. And so now we have to add literally tons and tons of base or alkaline material to our soils, primarily in the form of lime, to help restore the pH balance of the soil. So adding biochar is one of the ways to confront that acidity. And basically, the char will be acting as a lime replacement directly in a field. So we have a business model whereby it's going to be cheaper and more efficient to do this system than truck in tons of lime, three tons per lime of lime per acre into your system. And then you have permanent carbon sequestration via that charge. So something that's one of my, you know, was dreaming of looking for and then finally found it. And it was like,
SPEAKER_02:oh, yeah, this is great. So this one you found. But what is out there? You don't know, maybe. But what are you still hoping for that door behind you that somebody knocks on?
SPEAKER_00:Well, here's a big one that we just put it
SPEAKER_02:out there. So maybe, you know, in the next month, magically somebody knocks on the door. Not saying that it came through this podcast, but in general, just putting the intention in the universe helps.
SPEAKER_00:I guess taking a step back. So how do we manipulate bacteria and fungi to grow rapidly into the soil?
SPEAKER_02:I just saw the movie, by the way, Fantastic Fungi, which is beautifully done. It's absolutely stunning. I'll put the link below. Go and watch it if you haven't. Just to learn, see. It's ridiculous. But anyway, to supercharge them to grow faster. Yeah.
SPEAKER_00:And so So can you add a seed coating or some other type of amendment that would essentially begin in a fairly symbiotic relationship with the plant and then consume a lot of the inactive inorganic compounds in the soil to grow quickly and manipulate into the soil and also be durable? So it's not a type of fungi or bacteria that is going to be easily consumed within a very short time. time period. So the challenge, and this is what it's kind of contrary to the principles of biodiversity in the soil. I was going to say, again, do you need that? Same question. Do you need that in a healthy soil? That's what we struggle with is if you coat all these seeds and they all shoot this one type of, you know, there's a company called Soil Carbon Company based in Australia that is working with a melanin endophytic fungi. What happens when you add all of that material to the soil? And at what point At what point does the diversity of microbes eventually learn to eat that material and then it respires? So what could be the durability or the permanence of that solution? Because that's going to be the fastest way to just pump carbon into the ground.
SPEAKER_02:But then you don't want it to come back as a boomerang when soil responds very quickly, potentially, and suddenly releases whatever we haven't figured. That's a risky move. Very interesting, but very risky. We just don't know.
SPEAKER_00:We just don't know. And the really scary part and the thing that keeps me up at night is the pace at which change is accelerating. And we have a pretty good fundamental understanding of how temperature and humidity and moisture are going to shift and climatic growing zones are going to change. But the speed of that change is A, happening faster than we anticipated and B, creating a situation where plants may not be able to thrive in those situations. And so I'm really concerned about how that temperature swing and moisture swing is going to activate increased respiration within the soil and really that negative feedback really starts looking pretty grim pretty quick.
SPEAKER_02:And that's a great bridge to another part of the regen ag sector that I'm very interested in. I don't see a lot of activity. We've talked about it before as well. How do you bring this to a landscape scale? Like what happens if you really bring regenerative practices approaches to not just one farm, not just two, not just five, but actually to a landscape scale. And we've seen some examples where you actually start influencing the local climate and start damping those swings, start bringing back rain in some cases, bringing back rivers, et cetera. Like there are very edgy things that are happening in terms of if you restore the water cycle, we had Walter Yen on the podcast, which might be out now, might not, depends a bit, but otherwise I put it in the, depends on the order, I'll put it in the show notes. Like there's some exciting, edgy things happening there. What are you seeing there? Because for sure you're looking at it.
SPEAKER_00:Yeah. I mean, that's one of the things that I think we've fundamentally neglected as a society is the impact of trees and the carbon cycle and the evapotranspiration effect of how massive amounts of trees can affect microclimates. That's why I'm really excited about agroforestry because you can fundamentally preserve microclimates or prevent that rapid change on a macro level when you're managing at a landscape level. I wish we were doing more here. I would say a lot of the remotes were in two kind of remote sensing biogeochemical model companies, and they have taken two very different approaches. And one of them originally started as exactly trying to answer this question. So working with seed companies and producers to understand how quickly the climate conditions were going to change and how to adapt to those conditions by evolving their seed and their varietals. That company has since become SIBO Technologies, which is trying to be a Zillow for agriculture and provides a regen platform where you can understand the regen potential of every acre. And alternatively, Dagan, which uses the DNDC model some of your other guests have spoken about, they take a really landscape modeling approach to greenhouse gas flux from ag systems. And so the goal and some of the work that we're doing with the Nature Conservancy is modeling on a corn belt level, on a state level, on a county level, what those greenhouse gas fluxes are from the system, and then providing, and then via TNC Avenues for managing and manipulating those fluxes in meaningful ways. Because most of America, at any state or local county level, most of their greenhouse gas footprint is only going to be the agriculture system. And so as they begin to manage and look for ways to reduce that footprint, they need that information. So we're systematically providing that landscape level greenhouse gas data to hopefully the globe. But right now it's pretty U.S. heavy.
SPEAKER_02:But I think it's safe to say that you would love to see more.
SPEAKER_00:Yeah. Yeah. Well, I think we need to fund more against systems level thinker who are thinking. And I think TNC is actually rolling something out on what they're calling food sheds or food level systems to begin to think about intercooperative activity.
SPEAKER_02:We have to.
SPEAKER_00:Yeah. Back in my ecosystem service days, this wasn't a farm concept. It was a jurisdiction And you would think about basically the flux from that system and managing a whole jurisdiction as opposed to a project. And we just need a more macro systems level look and you need people who are thinking at that level. It's got to be a combination of academic and governmental entities that are coming together to really drive those conversations forward.
SPEAKER_02:And hopefully a few farmers.
SPEAKER_00:Yeah. Have you found anything interesting on that kind of landscape level of manipulation or thought?
SPEAKER_02:Not, I mean, I think you can even put fence in that as well. Like it's some of the underlying technology that we kind of need to manage at a landscape level. I've definitely seen work, let's say much more on the organizational level in the landscape itself or on common land in Spain, but also in South Africa, et cetera. They really together with WWF or the sustainable landscape find lab with Paul Chatterton, and there are a few people that are looking at a landscape level and taking a landscape approach, but mostly, let's say, starting on the ground, literally, with the farmers, with local NGOs, etc. The technology switch to what actually, what should we plant, where and why, and what does that potentially have, what kind of impact could that have, or how many trees do you need to plant, where and why, which is a question John Kempf actually asked Walter Jena and I also asked. Obviously, the answer is it depends, but just the fact that we can ask that question, like how How many trees do you need to plant? Where to influence the cloud system above it? Or just the fact that it switches from rain brings trees. Now it's actually trees bring rain and that kind of discussion or vegetation, which I think is, and I think I've seen way too little. I just finished an interview with Judith D. Swartz on the Reindeer Chronicles, her latest book, where she basically took a landscape approach on a number of landscapes and showed that, but it's not a big book, like, because there are not so many of these approaches, but if think as soon as we see the potential, because this is enormous, this goes way beyond one farm, one farmer, one farmer family, one collective going through a transition. This is actually, this is climate tempering. If we want to, this is bringing back water cycles. This is biodiversity through the roof. If you want to like this, bring that light back live in many places where it's basically desertified. If you look at Spain, et cetera. So I'm very excited. I haven't seen a lot of the very high level system thinking and then very practical okay what do we need to do in the landscape like tell us where to plant and what to plant and tell us what to change in terms of practices because then you can actually go and do it and then i think the social the implementing part becomes then the financing part because then it becomes a horizon problem again like you mentioned with agroforestry if you know what to do where and why you can start looking for finance and i think it's out there it's much more we need the tools the handles we need the basically we need the next steps in that process you cannot just say let's bring back a ecosystem? What are the steps in that involved? And why does it matter to start there and not there? Because we have limited resources.
SPEAKER_00:Yeah. I mean, I really hope that you have at least a few people from the USDA who are listening to these podcasts because they have all the... There are a few. They have the tools. The conservation title is part of the farm bill. I'm actually, for the first time, pretty bullish on some of the USDA approaches, the carbon bank, and Senator Booker is talking about ramping up conservation funding. But But that's where this knowledge has to sit, is at the federal level. And they have to move these resources in a more concerted way to influence these changes. And it can't just be, don't till those acres this year. It's like, how are we going to systematically rewild parts of our landscape? This is a 20-year discussion. And who's doing that? No one is thinking on that level. And that is concerning, but it's nice knowing that we have the tools and ability to do that if people were to get their act together.
SPEAKER_02:Yeah, because if you're at the examples like judith mentioned in her book i mean against all odds this is happening in some places at very small scale in some cases or very like you have to very look very carefully but imagine if you actually would resource them well imagine what they would be able to do and what people on the ground would be able to do if you had the tools that are there but they're just not in their hands because they're completely disconnected from a lot of cases technology but also the finance world and if i mean that that really excites me but it's also it's a huge gap between the two at the moment.
SPEAKER_01:Yeah.
SPEAKER_02:And so too, I want to be conscious of your time as well to finish with a final question. What do you believe to be true about regenerative agriculture that others don't? This is definitely inspired slash stolen slash taken from John Kemp. We're often asked about, let's say, extractive agriculture in general. I like to ask it about regenerative. What do you believe to be true? Where are you contrarian compared to others?
SPEAKER_00:I'd say on the more negative side, I'm concerned that it's a fad And I really just don't want it to become the next sustainable lingo word. And when you see companies like Cargill talking about doing regenerative on 10 million acres, that's where things get concerning. And it goes back to your conversations about practices versus outcomes versus true holistic models. I mean, what is it? And I've seen this play out with sustainability. I've seen this play out with impact. There's just real concern there. And so I'd ask, and what I think to be true is just what are the intrinsic truths about what we want from the food system and that's what's going to last and I think what people want is health and wellness and I think that's going to be a truth and that will be something that pulls the regen ag community forward is talking about quality food and health outcomes so and that's the way we're going to support a kind of decentralized decommoditized farming system which is the dream so
SPEAKER_02:I I think we need to keep that for another one where we go deep in food as medicine, nutrient density and all of that. But I think it's an excellent answer. Where are we in the hype cycle and how far are we going to come down in that hype cycle, which is the scary part. Then we're going to go up again. I'm not too concerned about it, but the whole deflating of the hype is going to be painful to watch, but let's hang in there. I want to thank you so much for your time, Eric, and it was a real pleasure to dive deep into many of these and I hope it's not the last one.
SPEAKER_00:Absolutely. This is definitely a long-term relationship and again, thank you for having me on and for bringing this community together. And I'm always open and willing to connect with people in this space. Just find a way to reach out and we'll get connected.
SPEAKER_02:Perfect. Thank you so much. If you would like to learn more on how to put money to work in regenerative food and agriculture, find our video course on investinginregenerativeagriculture.com slash course. This course will teach you to understand the opportunities, to get to know the main players, to learn about the main trends and how to evaluate a new investment opportunity like what kind of questions to ask find out more on investing in regenerativeagriculture.com slash course If you found the Investing in Regenerative Agriculture and Food podcast valuable, there are a few simple ways you can use to support it. Number one, rate and review the podcast on your podcast app. That's the best way for other listeners to find the podcast and it only takes a few seconds. Number two, share this podcast on social media or email it to your friends and colleagues. Number three, if this podcast has been of value to you and if you have the means, please join my membership community to help grow this platform and allow me to take it further. You can find all the details on Come Thank you so much and see you at the next podcast.
