Insetting Finances the Transformation to Regenerative Agriculture

IMG_2684

Forum for the Future launched its research into the future of regenerative agriculture this March. Funded by the Walmart Foundation and informed by Eileen Fisher, Patagonia, and other leaders, the research presents a roadmap for catalytic action, “Seven actions to transform to regenerative agriculture.” Principal among these actions is financing, namely, finding effective ways to fund the equipment and practice changes that, while often quite small, stand in the way for most farmers, ranchers, and growers. Funding that, as some argue, can be invested by companies that profit from farm and ranch production more than they do.

In a workshop this July, hosted by IPI and FFTF, workshop participants joined to examine the role of inserting as one mechanism to bring funding to farms and catalyse the transformation to regenerative agriculture.

Insetting – at its simplest, the act of investing to cause carbon gains within your supply base – can help scale the transformation to regenerative agriculture. It can help because monetising the carbon benefit can finance the initial transformation, while the lasting multitude of benefits for growers sustains that transformation.

To illustrate, consider insetting and regenerative agriculture in cattle ranching. This includes grazing more animals on smaller plots of grasses, moving the animals, and then allowing long periods of rest for the grasses on those plots before the cattle graze them again – this builds healthy soil and draws carbon down into those soils. To do this, ranchers need moveable fencing to keep the cattle on one plot for a time, and then move them on to another plot for a time, as well as moveable water troughs or piping. Financing the cost of that fencing and those water troughs can scale the number of ranches able to transition to regenerative grazing.

This happens, first and foremost, at the kitchen table where ranchers identify the regenerative practices they are interested in and willing to adopt or expand – how many hectares, split into how many plots, grazed and rested for how many days in a season, etc. Ranchers also identify the financing and technical support they expect to need to make this happen.

With this plan and budget for the new practices and a properly established baseline, one can model how much carbon will accrue in soils if the ranchers adopt those practices. This modeled amount of carbon accruals, duly discounted, can be pre-purchased by companies that source from ranches in the region. Those companies are investing their climate, ecosystem, or other program budgets to finance the transformation to regenerative agriculture. In this instance, one of the insetting companies is Xanterra, which sources beef for its restaurants and resorts in Yellowstone National Park.

In turn, ranchers contractually agree to implement those practices, and critically, to maintain those practices for a set number of decades. Grazing practices are reported annually, and carbon gains are measured every three years, again, over decades.

 

In this way, ranchers receive financing for adopting practices – they do not take on the risks associated with deploying their own capital, nor do they need to wait for soil health improvements and carbon accruals to recover costs. The supporting company or companies, such as Xanterra, count the carbon gains toward their carbon neutral goals. This insetting catalyses the transition with ranchers, farmers, and growers who cannot otherwise invest upfront. The lasting benefits for those ranchers, farmers, and growers are what sustain the transition. These benefits are in the form of reduced costs for inputs (such as forage), increased stocking rates, improved nutrient density of grasses and animals, more drought-tolerant grasses, and productivity gains. Insetting or carbon finance is not needed indefinitely.

Other current examples include Ben & Jerry’s long-standing investment in dairy farms. Dairy operations are often operating on the margins to begin with. To catalyse new, climate beneficial practices, Ben & Jerry’s invests to finance the adoption of on-farm manure management equipment. The equipment processes dairy cattle manure so as to avoid large amounts of methane – all of which is modeled, then monitored and verified. The practices are designed to generate on-going annual savings for dairy farmers which sustain those practices; Ben & Jerry’s counts the carbon gains toward its goal to address 40% of emissions by 2025, and 80% of emissions by 2050. 

Another example headed by a leading apparel company is financing the transition of the sheep farmers, or wool growers, that they source from to adopt regenerative practices. Many subsistence and mid-sized farms cannot finance the fencing and water troughing needed to increase grazing intensity of their sheep. By providing that financing upfront, the aim is to rapidly expand the number of hectares employing regenerative practices by the end of 2020 and, again critically, sustain those practices over decades.

Financing the transformation is a key lever identified by FFTF’s research. Valuing ecosystem services is another lever.

The value of these ecosystem services, this multitude of other benefits, can also sustain regenerative agriculture practices. And insetting can be designed to help bring about and track these benefits. Looking at our examples of cattle or sheep grazing, regenerative practices lead to the reintroduction of native grasses, which are more drought-tolerant and provide native habitat for insects, birds, and other wildlife. These native grasses, once grazed intensively and left to rest and regrow, are more nutrient-dense, which also increases the nutrient density of the animals, and in the case of cattle, enable “healthy diets.” Also, with animals grazed closely together in plots, waterways are protected, as those animals are no longer able to trample riparian zones in search of a drink – streams remain protected from the sediment run-off that occurs when riparian zones are trampled into muddied banks, preserving stream ecosystems and stream bed habitats. Interestingly, we are finding regenerative grazing can help animals re-learn how to group together, to bunch up, better protecting themselves from predators – a concern and a significant economic hit for many ranchers and farmers.

Based on our experiences putting climate action into practice, insetting is clearly an effective way to finance the initial transition, while the on-going benefits regenerative agriculture offers are what sustain that transformation.

Listen to this webinar on the same topic, featuring NativeEnergy’s Jennifer Cooper: