Portugal Farm

Is Agriculture the Missed Opportunity in Climate Investment?

With the COP 26 UN Climate Conference in Glasgow taking place in approximately six months and Biden’s ambitious climate goal, everything points to the direction that in 2021, we will witness a significant shift in the economic structure.

To build resilience and slash Greenhouse Gas emissions in half, the collaboration between the finance and agriculture sectors is evident and imperative. Investors have been ignoring this sector for years, but this is about to change.

However, over the years, the ESG sector -environmental, social, and governance-, has been receiving $2trillion as investments without distributing capital to agriculture. More specifically, in Q3 2020, $10 billion were offered as corporate support for green bond issuance, but agriculture was not part of that agreement. 

Innovation and GHG emissions reduction.

A report published by U.S Farmers and Ranchers in action highlights that if, across the U.S, climate-smart practices start to get implemented, this will ultimately lead to an almost 50% decrease in GHG emissions from the agricultural sector. These practices include span nutrient application, manure management, and cultivation and grazing.

What sets this to be a challenging project is the lack of investments in the sector, as we have already outlined above. Key strategists need to understand that the agriculture sector should not be underestimated. Eventually, it is essential to have the same investment level and management in renewable energy and the agriculture sector.

Renewable energy is a topic discussed in the round tables of board meetings. The leaders and investors of many organizations are structuring innovative fintech strategies around it to promote sustainability. This is only one indicator that renewable energy has become a top priority in the business world. We should also acknowledge the benefits that originate from renewable energy credits and tradable credits for the renewable energy sector.

The technological innovation barriers in agriculture

Technology, digitization, and innovation almost always lead the way to grow on a larger scale, minimize costs, reduce production time, and utilize green energy that reduces carbon emissions.

But why the digitization of agriculture hasn’t started yet?

There are several challenges that this industry is facing, and the most important ones could be addressed as the up-front costs to farmers to adopt climate-smart ag practices, as well as the price of carbon sequestration and new technologies that can measure soil health.  

The solution is simple; it is essential to make the new ag technologies affordable and attainable to all farmers. But how do we go from A to B? Again, investments are the indicated way forward.

Finance Mechanisms and Investments in Agriculture

To start having a constant cash flow, you could either be an institutional investor investing in the management of tangible assets or an individual using a crowd-funding platform. In the first case scenario, there is the ability to both adapt the mechanisms that are used to flow capital to more climate-smart agriculture and, in addition, attract more capital to the sector.

However, there is a lot of uncertainty in the sector. This originates not only from the strategies that are formed and have resulted in federal payments, subsidies, and incentives being very common and widespread but also because food and agriculture are often taking part in trade wars.

The conclusion after all these arguments is that the investment in these production models is seen as high risk. Still, the reality is that if people keep investing in the same assets, this will create a vicious cycle, and we will never see any change or get the desired climate goal results.

Gray Harris, senior vice president of Coastal Enterprises, Inc. and a member of the Transformative Investment in Climate-Smart Agriculture Working Group,  has stated that the economy is ready to leverage transformative investment for climate-smart agriculture.

Consumers now want fresh, organic food and less waste, and after COVID-19, we witnessed how the agricultural supply chain needs to shift and be more resilient for the future. Biden’s climate goal comes simply as a corollary of all the above.

It is time to invest in agriculture to benefit both the environment and the economy. Pela Terra allows you to make an investment secured by yield generating farmland, which also earns you European Citizenship, all while working for our future home.