Farmland Impact Investing to Mitigate Climate Change
The planet is increasingly feeling the impacts of climate change. As wildfires, droughts, and unprecedented storms become more common, businesses and landowners are suffering as their properties struggle to survive. Consequently, many investors are focusing on backing environmentally sustainable ventures that slow the progress of climate change.
In 2019, investors contributed $20.6 billion in total to the environmental, social, and governance (ESG) sector of the market – most commonly focusing on climate change solutions. Not only is impact investing beneficial for our planet, but these types of investments are also beneficial to investors’ portfolios as the farmland industry continues to modernize with sustainability in mind.
Impact investing is on the rise as financial backers use their capital to fund a sustainable future, particularly in the agriculture industry.
Investors can be the driving force behind climate change solutions.
Investing for Environmental Progress
As industries from tech to agriculture grapple with climate change, private investors look to the environmental, social, and governance segment of the market. There is a growing sentiment that the best way to maximize returns may be to minimize the effects of global warming. Instead of using a typical negative screening method – avoiding companies that are climate destructive, like oil or tobacco – impact investors are selecting options that have a net positive environmental impact. When it comes to agriculture, investors have established trends in funding advancements in precision agriculture and regenerative farming systems.
In 2019, AgTech businesses raised $2.8 billion in venture capital. Furthermore, the agricultural biotech market reported over $20 billion in sales, and experts predict an 11% increase to $52 billion a year by 2026. Investors are focusing their capital on companies that are making progress towards a healthier climate and more efficient farmland management simultaneously, to relieve pressure on the planet and create a business fit to compete in a changing economy. Implementation of new technologies on FarmTogether properties will make our offerings well-equipped to reap prosperous harvests and returns throughout our work with a farm.
Gearing Up For Farmland Investing
Though organic farming may be an environmentally and economically sustainable choice long-term, the transitional start-up costs can be steep. The conversion from traditional farming to an organic model involves major changes like clearing the soil of all traces of fertilizer, establishing a crop rotation and rest periods, and finding suppliers of non-modified seeds.
Prohibitive initial costs are perhaps the biggest deterrent for farmers interested in following an organic model. That’s why through the FarmTogether process, investors can provide the initial capital for a property to make the switch to organic farming, and stay involved as a fractional owner as the farm becomes profitable.
Though the startup costs may seem initially daunting, research shows organic farming is, over time, a far more productive and profitable use of land. From 1997 to 2015, organic crop sales in the U.S. increased from $3.6 billion to $43 billion, and that number has only been growing. And the global market for sustainable products is predicted to increase from $793.3 billion in 2015 to $872.7 billion by 2020. In 2018, U.S. consumers spent nearly $2 billion on imported organic food, and the U.S. relies on imports for 75% of all organic soybean and corn sales. Research shows that there is value to investing time and money into creating an organic or regenerative farming system.
While the environment is changing, savvy investors, entrepreneurs, and farmers are building the infrastructure to mitigate and even reverse the felt impacts. Impact investors are a driving force behind a changing agro-economy that equally prioritizes environmental and financial sustainability. The FarmTogether investment model emphasizes embracing new advancements and making long-term, positive changes to farmland while earning returns for our clients.
Farmland is a worthy investment in part because of its low volatility. During times of market distress, agriculture typically remains a stable sector of the market, with the National Council of Real Estate Investment Fiduciaries (NCREIF) Farmland Index reporting no negative years over the past two decades. Climate change, however, will present new obstacles to the agro-economy that could drastically change trends. One way to minimize risk when investing is to avoid options that are actively contributing to the progression of global warming, like industrial farming. But to maximize impact, private investors looking for reliable long-term options should consider buying equity in a business that has a net positive environmental impact, like sustainable, innovative farming.
Investing in innovative and sustainable farming practices is made easy through FarmTogether. Check out our current live offering, Galaxy Organic Apple Orchard. The orchard consists of 201 acres planted to mature apple trees. The plan is to redevelop 100% of the property into an organic apple orchard over the next 2 years.
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Disclaimer: FarmTogether is not a registered broker-dealer, investment adviser or investment manager. FarmTogether does not provide tax, legal or investment advice. This material has been prepared for informational and educational purposes only. You should consult your own tax, legal and investment advisors before engaging in any transaction.