Impact Investing in Sustainable Agriculture for a New Economy
According to a recent article from Scientific American, agriculture is responsible for one third of global greenhouse gas emissions from human activity. Agribusiness farming operations are notorious for nitrogen and phosphorus runoff (particularly from poultry and hog farms). In the Chesapeake Bay region, for example, one study estimated the price tag for restoring the bay at $19 billion, of which $11 billion would go toward “nutrient reduction.”
There are more than 400 such dead zones throughout the world. Additionally, heavily subsidized corn and soy feed to livestock contribute to massive deforestation in the developing world. Tufts University researchers estimate that in the United States alone, between 1997 and 2005 the industrial animal sector saved more than $35 billion as a result of federal farm subsidies that lowered the price of the feed they purchased. These statistics demonstrate both the complexity of the supply chain from feed farm to table, and illustrate the importance of sustainability in the American food production industry.
A sustainable alternative to the beef factory-farming model follows in the footsteps of conservationist pioneer Allan Savory. The recent winner of the prestigious Buckminster Fuller Prize, Savory developed the Holistic Management grazing technique during his time as a researcher and farmer in Southern Africa in the 1980s. By getting grazing cattle to stay in larger, tight herds, Savory was able to restore grassland vitality and increase grass biodiversity. Deep chewing of plant roots, paired with the repeated soil chipping of hooves, caused dormant seeds to germinate and water to penetrate below the surface. According to Shannon Horst, CEO and co-founder of the Savory Institute, ranchers can consistently double, and even quadruple livestock capacity over time. (See an article in TIMEfor more on the Savory grazing technique).
Perhaps the most interesting aspect of Savory’s work has been its appeal to both profit-driven investors and international development agencies like USAID as a tool to combat desertification in rural farming communities. Since 2005, USAID’s Office of U.S. Foreign Disaster Assistance has provided more than $1.1 million to support Savory’s African Centre for Holistic Management’s program to restore degraded land, revive water sources, mitigate the effects of global climate change, and increase crop yields. Savory and Horst have worked with range managers on ranches and community group ranches, demonstrating how to manage holistically in communal and private range lands, in partnership with USAID.
Within the past couple of years, for-profit enterprises like Grasslands, LLC are successfully implementing the Savory Holistic Management methodology. Grasslands owns and manages 14,000 acres in South Dakota, and is funded by a network of private impact investors likeArmonia, LLC and Capital Institute founder John Fullerton. The profitability of the Grasslands structure comes from ranching fees per head of cattle, and is based directly on the Savory Institute business model. By investing in companies like Grasslands, Fullterton and other impact investors are laying the foundation for new finance-based theories, tools, and metrics to serve the needs of a sustainable economic system.
In addition to increased yields of beef per acre, the Grasslands model also creates an opportunity to commoditize sequestered carbon for carbon credit trading. Steven Apfelbaum, Founder/Chairman of Applied Ecological Services, Inc., explained to TIME, ”healthy grasslands represents the ecosystem with the highest potential for carbon sequestration of any on the planet.” Ranches like those owned by Grasslands cover an estimated 30 million acres in North and South America, Australia, New Zealand, and Africa—and nearly half of the earth’s land mass. Given the shear vastness of the earth’s grasslands, holistic management and reclamation projects hold huge implications for changing the planet.
While Grasslands only just completed its first year in operation, rancher Jim Howell reports that the two South Dakota ranches are expected to double in value and in productivity over a ten-year period and to yield annual dividends on the order of 4% to 5% in the early years, increasing to 10% to 11%. In a recent Capital Institute article, Fullerton expressed his confidence that the Grasslands model can provide a profitable, scalable model for biodiversity recovery: “We have a case study here of true wealth creation in Grasslands,” he says. “We are building biodiversity, soil fertility, sequestering carbon, and generating financial returns. And if my belief of what will happen to ecosystem services plays out, we will make a lot more money with these assets than with most financial assets.”
For more on Grasslands and the Capital Institute’s sustainable investment agenda
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