Take-aways from World Agri-Tech 2023

I spent last week in California at World Agri-Tech, connecting with agri-food collaborators and colleagues from around the world. It was an action-packed conference: in just 2.5 days I had over 30 1:1 meetings, moderated a panel, hosted a workshop and a roundtable, and attended small group events. Here are some highlights from the panel and workshop.

Impact Finance: Attracting Climate Investors into Ag Innovation

Our panel looked at what’s needed to drive more climate-focused capital into agrifood innovation, and where investors are seeing opportunities and challenges.

Panel members included Sam Kass, Partner, Acre Venture Partners; Clea Kolster, Partner & Head of Science, Lowercarbon Capital; Susan MacCormac, Partner, Morrison Foerster; Lila Preston, Head Growth Equity, Generation Investment Management; and Caitlin Walsh, Managing Director, Growth Equity, CPP Investments.

 A few take-aways that stood out: 

  • ESG is not impact. Susan Mac Cormac, Partner at Morrison Forester, stressed the importance of not conflating ESG with impact, which is critical to avoid greenwashing and unlock more capital for much-needed climate solutions. If you’re still coming up to speed on the differences between ESG and impact investing, we recommend you check out this article as a starting point. 
  • Ag is hard. We often hear that food and ag investing is harder than other sectors, and for good reasons: deep tech, complex go-to-market pathways, natural systems, and more. Lila Preston, Head of Growth Equity at Generation Investment Management, and Caitlin Walsh, Managing Director Growth Equity at CPP Investments, both said they see fewer viable growth-stage investment opportunities in ag relative to other sectors they look at. A key challenge they see is returns potential–given most exits have been acquisitions, and most acquirers are trading at industrial (vs. software) sector multiples. This can make it difficult to get a line of sight on venture-scale exits, especially at the growth stages. But the panel was far from bearish on ag. Given climate tailwinds and the potential for emerging technologies to expand margins and unlock new business models that can pave the way to higher multiples, investor appetite to tackle tough problems remains high.
  • Exit pathways conundrum. On the topic of exits, the panel also debated whether a portfolio company exiting to an incumbent “bad guy”, whether that be an oil & gas company or other stereotypical climate villain, would be at odds with the outcomes impact investors are seeking. This discussion pointed again to the all too familiar, and limiting, black and white narratives in the ag sector. On the one hand, if a “climate villain” wants to acquire a company as part of its strategy to transition to a new, more sustainable, business model, this seems like exactly the type of large-scale, catalytic outcomes that impact investors want to enable. On the other hand, we absolutely need to guard against greenwashing. At the risk of making perfect the enemy of progress, we also have to acknowledge that fixed views on who's "good" and who's "bad" may in fact be slowing us down.

Shock scenario: the end of soil carbon offsets as a tradeable asset

When it comes to efforts to reduce emissions intensity within, and outside of, agricultural value chains, there has been an immense amount of focus on the potential for soil carbon sequestration and offset markets. But of course, there are no silver bullets, and we are increasingly seeing soil carbon offsets come under scrutiny.

I teamed up with Renee Vassilos at The Nature Conservancy to organize a shock scenario workshop focused on the (hypothetical) end of soil carbon as a tradeable offset. The point of the workshop, which brought together 25 stakeholders across the industry,  was to expand our collective thinking and preparedness, not to predict the future. We hope to tease out more insights from the session in a longer post, but two quick takeaways are worth sharing: 

  • An inexorable shift towards climate benefits. Across all 6 groups that participated in the workshop, the prevailing view was that with or without offsets, we would still find a way to shift towards agricultural practices that have climate benefits. Some groups thought the shifts would be underpinned by sticks, like government-mandated practices, while others focused on carrots, like premiums. But the overwhelming consensus was that climate-focused agriculture is a trend that will stick, not just a fad tied to offsets. For those who might hope that the emissions focus will shift away from ag in an offset-free future, this doesn’t bode well. 
  • We can’t forget about financial tools. Surprisingly, not many of the workshop participants focused on financial tools as a pathway to drive behavior change across the food and ag system. We think that mechanisms such as sustainability-linked loans, like Geora is enabling, and embedded insurance will be key levers to drive change, whether or not offsets go out of favor. It was great to have Sound Agriculture in the room, as their yield loss guarantee is a real-world example of the types of tools that we think can help create new pathways for change.

Scrutinizing to progress, not to stifle. 

These conversations at World Agri-Tech were a reminder that whether it comes to ESG vs impact investing or soil carbon offsets, we are seeing increased scrutiny over how companies and investors are meaningfully driving towards climate action. As we recently explored through a case study on JBS, setting bold targets and ambitions isn’t enough. Attention is now turning to how outcomes can and will be achieved. 

We certainly need this accountability. And we must be mindful that the challenges we pose to one another are in the spirit of moving us collectively forward, rather than throwing stones. We don’t have time to risk stifling progress. 

Huge thanks to the amazing Komal Patel for helping me get this post out within a week! 

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