Agriculture feeds us and clothes us. We can’t survive without it. Farmers can be excellent stewards of the environment.
But farming can also be destructive. At its worst agriculture creates monoculture deserts, poisons waterways and insect life, creates cruel livestock systems, degrades soil and breaks the carbon cycle.
Regenerative agriculture offers us a way forward that combines the best of conventional farming, with traditional methods and new technology.
This article looks at regenerative agriculture as part of the solution to the complex issues surrounding food systems, sustainability, and environmental impact. More importantly, it provides practical guidance for investors on how to approach and engage with this crucial aspect of sustainable investing.
What is regenerative agriculture?
After the Second World War, the advent of chemical fertilisers and pesticides meant populations were largely spared from the ravages of hunger familiar to earlier generations. But while yields boomed, soil and ecosystem health were depleted. Today, agriculture remains a significant contributor to global emissions and a hard-to-abate sector.
While the term “regenerative agriculture” has gained popularity in recent years, its ideas are not new. Communities around the world have long practised farming that works in harmony with nature, preserving soil health and biodiversity.
Regenerative agriculture is an approach to farming that goes beyond sustainability, aiming to actively improve the health of the ecosystem. It’s about producing food and textiles in a way that enhances rather than detracts from the environment.
Nature loves diversity, not monoculture. Everything done in regenerative agriculture is about building resilience and minimising inputs – nature’s own recipe for sustainability.
It focuses on rebuilding soil health, increasing biodiversity, improving water cycles, minimising non-cyclical emissions and enhancing food nutrition. Fundamentally, it focuses on building resilience within the farming system, for both nature and production.
Regenerative agriculture encompasses a range of practices designed to work with nature rather than against it.
These include minimising tillage, using cover crops to protect and bring nutrients back into soil, using diversity to improve resilience, crop and grazing rotation, mixing trees with other forms of agriculture, integrating livestock to mimic natural grazing benefits and reducing or eliminating synthetic inputs such as chemical fertilisers.
It encourages all farmers to make the changes that work for their farm and is not rigidly prescriptive.
Nature loves diversity, not monoculture. Everything done in regenerative agriculture is about building resilience and minimising inputs – nature’s own recipe for sustainability.
The meat question
As the global population grows and demand for food and textiles rises, agriculture remains a vital but challenging sector to reform.
While meat consumption is often at the centre of controversy, the reality is that significantly reducing it in the time frame necessary to address climate change may not be feasible. Global food prices are closely linked to quality of life, making it crucial to adopt the right approach to agricultural changes.
To date, responsible investment initiatives have primarily focused on encouraging food companies to reduce meat production and consumption. Organisations like FAIRR have made notable progress in promoting alternative protein sources.
Undoubtedly, the current scale of meat consumption and the industrial methods used for livestock production pose significant challenges. However, when managed properly, livestock farming can offer environmental and health benefits. Despite differing ethical viewpoints, meat remains an important source of nutrition for many people.
Regenerative agricultural principles can be applied to all forms of farming, including livestock. When incorporated into regenerative systems, animals can play a key role in mitigating some of the environmental downsides of meat production, bringing substantial benefits to ecosystems.
Ruminant animals, particularly cattle, are often criticised for their greenhouse gas emissions and resource intensity. However, unlike the burning of fossil fuels, the emissions from ruminants have been part of the natural carbon cycle for millennia.
The issue arises not from the existence of these emissions but from the sheer scale of modern cattle farming, which has far outstripped natural cycles.
Additional problems emerge when practices become unsustainable, with reliance on imported feed, the use of open slurry lagoons that emit excess methane, letting animal drugs contaminate soil and waterways, or clearing forests for grazing land.
In contrast, well-managed systems can see these animals contributing positively: promoting grass growth, improving soil health and root depth, fertilising the land and enhancing biodiversity by supporting insects, birds and other wildlife.
The issue is not necessarily meat consumption itself but rather the unsustainable scale and intensity of current farming methods. A more holistic approach involves treating meat as a privilege, showing respect for livestock and adopting more mindful farming and consumption practices.
In addition, investors must look beyond meat alone and consider the broader global food system, including the environmental impacts of plant-based commodity crops.
Why this all matters for investors
As material ESG issues are increasingly crucial to investment decisions, more investors are considering the agricultural sector’s impact on climate, biodiversity and society. Regenerative agriculture is relevant to investors in agricultural value chains, including the food and beverage, clothing and pharmaceutical sectors.
By promoting diverse ecosystems, regenerative practices also support wildlife and help to reverse nature and biodiversity loss, helping to address a key systemic issue.
The WWF’s latest Living Planet Report shows an average global decline of wildlife populations by 73 percent since 1970, and that we are nearing several dangerous tipping points. Transforming our global food system is essential if we want to avoid catastrophic nature loss and the associated impacts to the global economy.
Achieving a sustainable food system through regenerative agriculture requires supportive policies and broader systemic changes.
Beyond global systemic benefits, regenerative agriculture can also have positive localised impacts. Improved soil health means better water retention and reduced runoff, mitigating the physical risks of both droughts and flooding.
Crucially, regenerative practices rebuild resilience into farming systems, helping to ensure long-term food security. These practices can also uplift local economies and enhance farmer livelihoods – a win for social impact.
As regulations evolve, frameworks like the Taskforce on Nature-related Financial Disclosures are nudging investors to consider nature across portfolios – a trend that is only going to strengthen.
Consumers and regulators are turning up the pressure for sustainability, and companies that don’t adapt risk being left behind. Those that embrace regenerative practices may find themselves ahead of the curve.
Regenerative agriculture also makes financial sense. Initially, yields may dip during the transition period, but over time, reduced input costs and increased resilience tend to improve profitability. Regenerative farms should weather climate and market shocks better, acting as a hedge in an increasingly unpredictable world.
The policy factor
Achieving a sustainable food system through regenerative agriculture requires supportive policies and broader systemic changes.
Effective policies should adapt to local farming practices and prevent misuse or gaming of the system. The goal is a framework that allows for a rich “patchwork” of regenerative approaches, allowing a farmer to apply what practices work best to their specific context.
In the case of the UK, new agricultural policies post-Brexit, including the 25 Year Environment Plan and the Agriculture Act 2020, can help to guide this shift if implemented effectively.
The Environmental Land Management scheme, although not explicitly framed as supporting regenerative agriculture, aligns with many regenerative principles by incentivising the provision of public goods like clean air, water and wildlife conservation.
Government incentives must be carefully crafted to reward genuine environmental improvements without creating perverse incentives. For example, taking productive land out of the food system may increase reliance on imports produced to lower standards and a greater carbon footprint.
If nature or biodiversity credits are to be used, designing a credible system is critical. It must consider the complexities of nature and ensure genuine delivery. For example, re-seeding a field with a wildflower mix is not much use if the seeds don’t take.
Crucially, the emphasis should always be on reducing negative impacts, with credits used as a last resort.
The UK’s unique land ownership structure, dominated by large estates and institutions and with high barriers to entry, presents both challenges and opportunities.
The land ownership and pricing structure creates challenges for new entrants. Many farmers are tenants, often with short-term arrangements. This makes it difficult for them to invest in long-term regenerative practices. Reform must promote longer tenancies that incentivise farmers to adopt practices that nurture, improving the land for the long haul.
On the other hand, the existence of large estates and institutionally held portfolios presents opportunities. Major landholders have the power to implement regenerative practices at scale and contribute to ecosystem restoration.
Investors can play a crucial role in shaping policy by engaging with policymakers to promote incentives for regenerative practices. They should advocate for reforms that encourage longer farm tenancies, enabling long-term regenerative investments.
Supporting the development of credible systems for nature or biodiversity credits, while emphasising the reduction of negative impacts over offsetting, is another area where investor voices can make a difference.
How investors should approach regenerative agriculture
The term “regenerative agriculture” has now become firmly cemented in the corporate lexicon, appearing prominently in the policies of global food companies like Unilever, Danone and Tyson.
While the use of the term has gained traction, investors must dig deeper into these commitments and understand how they manifest in real-world practices rather than simply accepting the branding at face value.
At a high level, investors should begin by critically assessing the specific practices tied to regenerative agriculture initiatives.
This means not only questioning the meaning behind terms like “regenerative”, “organic” or “nature-friendly”, but also probing whether companies are adopting tangible practices that enhance soil health, biodiversity and water management.
Simply skimming reports adorned with glossy pictures or buzzwords won’t suffice; investors should be engaging to ask the critical questions. What measurable actions are being taken to improve soil health and biodiversity? What outcomes are being monitored, and what are the timelines for these transitions? How is the company managing potential short-term trade-offs, such as reduced yields?
When engaging with companies, investors should look for specific, measurable initiatives.
Evaluating how a company interacts with its agricultural supply chain is equally important. Investors need to assess how much visibility a company has into its sourcing, especially in diverse agricultural regions. Local complexities often require different approaches, so transparency and honesty from companies about these challenges are key.
Metrics are an essential yet evolving part of evaluating regenerative practices. From soil health to biodiversity and carbon sequestration, there are various emerging methods for measuring impact.
Investors must take a nuanced view – data like the number of trees planted may appear straightforward but must be placed within a broader context to understand their impact on ecosystems. What type of trees? What ecosystems were affected? How are these trees maintained over time?
Certification schemes and standards can also aid in evaluation, though investors must remain cautious not to lean too heavily on them. Programmes such as the Soil Carbon Initiative, Regenerative Organic Certified, Regenified and others are still evolving, and no single certification is yet considered the gold standard.
Such schemes should serve as a guide but not fully dictate investor decisions, as different ecosystems and farming contexts require tailored regenerative approaches. Independent research from organisations like the Sustainable Food Trust can provide valuable context and insight.
When engaging with companies, investors should look for specific, measurable initiatives. It’s crucial to encourage the kinds of concrete, quantifiable steps in regenerative practices that align with longer-term sustainability goals.
Finally, investors must be prepared for the “J-curve” often seen in regenerative agriculture transitions. Initial periods may require significant capital injections and patience, as short-term yields can dip before the long-term sustainability and resilience of these systems are realised.
Here, investors can play a pivotal role in providing the financial backing and long-term view needed for these transitions.
Practical steps for investors
To drive meaningful impact in agriculture and food systems, investors should adopt several practical actions.
Due diligence
Ask targeted questions that go beyond surface-level claims or certifications. Dive deep into how companies are measuring soil health, biodiversity and water management. Keep in mind that comparisons may not be like-for-like, and context matters.
Look beyond surface-level claims and certifications. Ask specific questions about soil health, biodiversity actions and water management. Understand that comparisons of metrics and certifications may not be like-for-like.
Nestlé has been making strides in implementing regenerative agriculture practices. In 2023, the company reported that 15.2 percent of its key ingredients were sourced from farmers adopting regenerative agricultural practices, with a target to reach 50 percent by 2030. This provides a concrete metric for investors to monitor and engage with.
Engagement
Engage with companies to push for clearer disclosure on transition strategies and timelines toward regenerative agriculture. This includes encouraging transparency on yield management, supply chain visibility, and the genuine application of regenerative practices.
Ensure that businesses are not only adopting regenerative language but are making substantive and measurable changes.
Financial considerations
Evaluate the financial implications of adopting regenerative agriculture. Companies might face initial costs and temporary yield losses but could balance these out with improved long-term resilience and reduced inputs. This might include initial costs and short-term yield reductions balanced against long-term resilience and reduced input costs. Engage with companies on how to manage and finance this transition.
Policy advocacy
Support policies that promote long-term land stewardship and push for adaptable, locally appropriate incentives that support farmers in regenerative transitions. In the UK context, this might involve advocating for reforms that encourage longer farm tenancies, enabling long-term regenerative investments.
Supporting the development of credible systems for nature or biodiversity credits, while emphasising the reduction of negative impacts over offsetting, is another area where investor voices can make a difference.
Additionally, investors should advocate for certification schemes that drive genuine, lasting change without being overly prescriptive.
Innovative financing
Explore or create novel financing mechanisms to support regenerative initiatives. Sustainability-linked loans and green bonds tied to regenerative agriculture KPIs or blended financing models can reduce the perceived risks of transitioning.
Investors can draw inspiration from COFCO International’s $1.6 billion sustainability-linked loan tied to soy supply traceability or green bonds such as BPCE’s €750 million issuance tied to sustainable agriculture.
Recent efforts like the $1 billion impact fund proposed by AXA, Unilever and Tikehau Capital illustrate innovative ways to finance regenerative farming on a large scale.
Proxy voting and shareholder activism
Use proxy voting to influence corporate behaviour towards greater transparency and adoption of regenerative practices.
For example, the 2024 shareholder proposal at General Mills, driven by advocacy group As You Sow, called for greater transparency on regenerative agriculture and pesticide reduction. The proposal garnered 29 percent support, demonstrating investor influence and growing activism in this area.
Large estates and institutional land portfolios
For those invested in large estates and institutional land portfolios, consider how these entities can implement regenerative practices at scale. These major landholders hold substantial influence and the capacity to significantly contribute to ecosystem restoration.
By adopting regenerative agricultural methods, large estates can set a powerful example for the wider industry, demonstrating how land management at scale can align with ecological restoration and long-term resilience.
By engaging purposefully and strategically across these areas, investors can not only encourage meaningful change within the agricultural supply chain but also help mitigate the environmental and financial risks associated with traditional farming systems.
The road ahead
Regenerative agriculture presents an opportunity for investors to contribute to environmental sustainability while potentially unlocking financial gains.
Agriculture and nature don’t have to be at odds. By fostering systems that allow farmers to produce food while enhancing natural capital, we can build a more resilient future that aligns with increasing investor focus on natural capital, illustrated by frameworks such as the TNFD.
As we grapple with unprecedented environmental crises, regenerative agriculture offers a compelling path forward that aligns the interests of farmers, consumers, ecosystems and investors.
Nevertheless, this transition requires more than investments of capital. It necessitates supportive policy frameworks, innovative financial models and a commitment to long-term thinking.
But for investors, the potential rewards are substantial, not only in terms of financial returns but also in risk management and positive environmental impact.
By engaging proactively in both domestic and global markets, investors can help reshape the future of agriculture. Their involvement can facilitate more effective climate change mitigation, biodiversity conservation and food security.
The opportunity now is to move beyond headline-grabbing buzzwords and catalyse meaningful changes in food systems and land management practices.
The transition to regenerative agriculture must become an attractive and viable business decision for farmers if the necessary scaling is to occur, enabling the sector to meet the projected 60 percent increase in food demand by 2050, while simultaneously preserving biodiversity and curbing emissions.
As we face the dual challenges of feeding a growing population and addressing climate change, regenerative agriculture provides a valuable solution, capable of addressing both demands.
For investors ready to engage with this complex but high-potential area, the rewards – both environmental and financial – could be significant. Now is the time for action, and the investment community plays an essential role in advancing this transformative, much-needed change.
Laura Chapman is an investment professional with over 20 years’ experience. From private markets investment she moved into responsible investment across asset classes. She has also developed a regenerative farming enterprise with her husband Jonathan and is passionate about sustainable food and farming.
Lucy Hussona is an analyst at Canbury Insights and former stewardship policy associate at the Financial Reporting Council.
