Tom and I received an invitation to attend the Climate Action Innovation Zone at COP28 in Dubai. This zone, recently established as the official third zone alongside the Blue Zone (designated for officials and diplomats) and the Green Zone (open to the public), has recently gained prominence.
Spanning five days, the Innovation Zone showcased flagship forums on a variety of topics, including Sustainable Innovation, Sustainable Finance, Hydrogen, and Agri-Food. Among the key highlights were two notable stages: the Island of Hope and Climate Action. The Island of Hope stage emphasised the challenges faced by island nations, which are disproportionately affected by climate change, while the Climate Action stage facilitated more intimate discussions with climate experts.
Supply chain opportunity
One session that stood out for its practicality, was on Supply Chain Opportunities. It delved into enhancing risk management within supply chains through strategic engagement with suppliers. In the ever-changing global supply chain landscape, effectively managing risks is vital for companies across all industries. This session offered valuable insights, drawing on experiences from company representatives across diverse sectors, including management consultancy, pharmaceuticals, global agribusiness and food, software, and transportation.
The session went into detail about prioritising high-impact emission categories and focusing on reaggregating disaggregated supply chains when decarbonising supply chains. A representative from Brambles, a company operating in the global agribusiness and food industry advocated for setting regenerative supply chain targets that consume existing waste and build natural resources. This approach underscores the importance of circular economies beyond recycling.
Take the example of a company that we met at COP28, The Supplant Company. Waste in agriculture is not just the well reported 40% that we throw away at the supermarket and in our homes, less well known is the 15% wasted before it leaves the farm, and more importantly the crop residues that may be usefully tilled back into the soil but are often burnt. The Supplant Company has found the right chemistry to take certain crop residues and provide economic incentives to avoid burning by turning them into useful sugar replacements that can be integrated into cake. There are already plenty of sugar replacements that can go into liquids – like your Pepsi Max.
Regenerative agriculture
Regenerative agriculture is an approach to farming that aims to conserve and restore farmland and its ecosystem. It is centred around universal agronomical principles that help protect and restore natural resources - primarily soil, as well as water and biodiversity. If done well, it can improve soil health and soil fertility, at the same time capturing carbon in soils and plant biomass. However, there is no predetermined definition of ‘regenerative agriculture’. This can create confusion in trying to assess net zero transition plans for many companies.
Good baseline data, or any baseline data at all, is crucial to be able to measure the impact of regenerative practices. We understand this general point about baseline data from our experience as scientists and as equity analysts. Estimation from satellite remote sensing has been the only at scale possibility for soil measurement and historical practice has centred on individual agronomists measuring single farms or fields. We first learnt how absent ground truth is in agriculture from conversations with the Forest People’s Programme. Ground-truthing (validating estimated data) can offer major potential to improve risk assessments and audit, preventing harmful supply chain impacts on human rights. This can have a magnifying effect when coupled with a strong due diligence process which if done well, can address environmental and social risks in opaque supply chains.
In March 2023, Planet Tracker published a report offering useful guidance for the financial sector. The report highlights the critical need for a sustainable global food system, emphasising that without transformation, financial institutions will struggle to achieve their Net Zero ambitions and restore nature by 2030. It outlines four key themes for financial institutions to align their capital and investment strategies accordingly. These themes are:
- Establishing responsible supply chains,
- Enhancing food system efficiency,
- Reducing pollution, and
- Developing sustainable product offerings.
For institutions wanting to take action, the report outlines six priority actions, notably emphasising the goal of transitioning agriculture to regenerative practices by 2030. This focus highlights the critical need for proactive, environmentally conscious investment decisions in this area, a movement potentially inspired by COP26 in Glasgow. There, leaders from 45 countries, representing 70% of the global GDP, committed to making climate-resilient, sustainable agriculture the most attractive and widely adopted choice for farmers globally by 2030. This consensus highlights a significant shift towards sustainable practices in agriculture, reflecting a growing global commitment to environmental stewardship and climate resilience.
A company leading by example is Nestlé, a holding in our Evenlode Global Income and Equity strategies. They have committed to regenerative agriculture to future-proof their supply chains. Their plan has a strong emphasis on soil conservation, achieved through maintaining permanent and diversified soil cover and minimising soil disturbance. There is a shift towards organic fertilisers over synthetic and enhancing natural habitats within farmland, particularly through agroforestry. And a continuous effort to reduce the use of synthetic herbicides and pesticides, alongside measures to protect watersheds and regenerate water cycles in water-stressed areas.
Regenerative solutions in the supply chain in our Evenlode Foundation1 investment portfolio
Agricarbon entered our pipeline of opportunities in our Impact fund in 2021. They offer at-scale ground-truth measurements of soil carbon, and the potential to measure other parameters like soil microbiome in future. Agricarbon now sell an end-to-end service that rigorously quantifies the customers’ soil carbon. We saw the value in their development of an at scale solution that combined unique vehicles using robotics, human talent, and statistically robust sampling strategies, with a lab-based sample measurement automation. Importantly, that automated process was developed in a trusting relationship with soil scientists, who understand what is necessary to create a rigorous baseline.
Identifying material and specific cases for regenerative practices is a key part of bringing it into our agricultural system. For instance, if you rewet 3% of European peatland, data suggests you mitigate 25% of European agricultural emissions, but how do you motivate and pay for such rewetting, when the land is marginal, or already in use for crop growing? Enter the whole value chain business model of Ponda (formerly known as Saltyco). Ponda’s working hypothesis was that rushes grown as part of rewetting could be processed into a high value insulation material that could be sold into the fashion industry that needs to replace polyester and goose down. As such they create and develop an entire value chain around a product that can be paid for from deep pockets to benefit farmers and achieve a material and specific goal in regenerative farming. We invested in Ponda in 2022. This investment was an important step but was not our initial venture into the field of regenerative agriculture.
Our first regenerative agriculture investment was a company aiming to gain trust in and help develop the Indian cotton industry. Materra sell scalable solutions to grow and source climate-resilient, transparent and equitable cotton. They continue to be our star performer growing in value 7x since our investment in 2020, and recently announcing that Mango have produced a collection using Materra branded cotton. They have expanded from a few lines of cotton in a greenhouse in the Leigh Valley when the innovation team met them, to vast healthy crops at multiple sites in India, and they recently hosted their fifth birthday party in London. Their impact will be to raise the quality of Indian cotton, to improve the well-being of Indian cotton farmers, and regenerate agricultural land.
To conclude, regenerative agriculture and effective supply chain risk management are crucial for the health of the global economy. Large multinationals and startups are increasingly adopting regenerative practices to future-proof their operations, as seen with companies like Nestlé focusing on soil conservation and reducing synthetic inputs. Simultaneously, innovative startups like Ponda and Agricarbon are at the forefront, developing scalable solutions that directly address the needs of regenerative farming through technologies such as ground-truth measurements and creating value chains that support environmental and economic sustainability. These efforts are critical for enhancing the resilience and sustainability of supply chains globally. Investment in these practices is essential, as demonstrated by success stories like Materra, which will significantly improve the quality of Indian cotton while enhancing farmer well-being and regenerating agricultural land. This integrated approach to regenerative agriculture and supply chain management not only mitigates environmental risks but also offers a pathway for economic growth and sustainability in the face of global climate challenges.
Sawan Wadhwa, Head of Stewardship and Tom Weller, Head of Innovation
2023
Please note, these views represent the opinions of the Evenlode Team as of 2023 and do not constitute investment advice. Where opinions are expressed, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. This document is not intended as a recommendation to invest in any particular asset class, security or strategy. The information provided is for illustrative purposes only and should not be relied upon as a recommendation to buy or sell securities. Every effort is taken to ensure the accuracy of the data in this document, but no warranties are given.
1The aim of the Evenlode Foundation is to develop long-term relationships with organisations who are driving innovation and systems change and aim to have a positive impact on society. The Foundation’s philanthropic and investment activities are fully funded by Evenlode Investment Management Limited and do not utilise any client funds. The Evenlode Foundation’s investment portfolios are unavailable to external investors.