May 12, 2022

By Lynda Kiernan-Stone, Global AgInvesting Media

Three diverse partners: global insurance and asset management company AXA, worldwide CPG company Unilever, and global alternative asset management group Tikehau Capital have signed a memorandum of understanding (MOU) outlining their plans to create an impact fund dedicated to accelerating and scaling the transition to regenerative ag.

Initially, each partner is reported to have committed €100 million (US$103.78 million) to seed the fund, which has a target in place of €1 billion (US$1.04 billion).

Much like mining, since the 1800s it has been widely accepted that farming, by its very nature, is an extractive industry. But whereas mining is obviously so, the extractive nature of farming is much less evident – embodied in water pollution, soil degradation, erosion, and loss of fertility.

Outwardly evident or not, together, agriculture, land use, and deforestation are the primary driver of biodiversity loss, and the second-largest global source of greenhouse gas emissions.

Along with this, we have done a poor job in modernizing how we look at the profit and loss associated with farming. Higher crop yields and more animals, partnered with low cost of inputs, have traditionally meant higher profit. For centuries, the unaccounted losses tied to traditional extractive farming have been viewed as unavoidable, and inherent – but it need not be this way, according to the Union of Concerned Scientists, who stated that a shift from extractive to regenerative agriculture is not only possible, but profitable, when taking a more modern, learned, and complete approach to the costs and output of agricultural production.

Healthy soils able to sequester carbon, enhance biodiversity, preserve water, and boost the resiliency of crop yields, can also ensure a sustainable source of income for millions of people.

This fund, which will be managed by Tikehau Capital, plans to promote regenerative production by targeting three core pillars:

~ By protecting soil health as a means of fighting climate change, supporting biodiversity, and preserving water resources.

~ By contributing to the future supply of regenerative ingredients to meet both the needs of a growing global population and consumer demand for more sustainable products.

~ By unlocking innovative solutions that aim to accelerate the transition to regenerative agriculture.

As a pioneer in climate and environmental adaptation, AXA subsidiary, AXA Climate will play a key role in launching and deploying this fund by leveraging its expertise in climate, environmental, and agricultural risk management. It also will be integral in impact monitoring (particularly by satellite technology, according to a statement), supported by its granular knowledge of the agricultural sector. 

“Regenerative agriculture is a major ESG theme,” said Pascal Christory, chief investment officer, AXA Group, and Antoine Denoix, CEO, AXA Climate. “This fund therefore aligns perfectly with our strategy of decarbonizing the real economy through impact investments.”

“At AXA, we aim to have €26 billion (US$26.97 billion) invested in green assets by 2023, and to have €1.5 billion (US$1.56 billion) to invest in forests and natural capital projects, which will soon include sustainable agriculture projects. To convince investors, we need to reinvent the way we manage agricultural risk and measure impact locally, throughout the duration of the projects we fund. We hope that this initiative with Tikehau Capital and Unilever will be the first of many!”

Tikehau Capital brings critical experience and expertise in climate-related investments to the table. Its first fund dedicated to the decarbonization of the economy and the energy transition was launched in 2018. Today, the manager has nearly €2 billion in AUM honed in on climate action across its multiple asset classes.

“We believe that reducing agriculture’s impact on the environment is vital to combating climate change and ensuring there is a healthy and sustainable food supply chain for all,” said Pierre Abadie, group climate director, Tikehau Capital.

“This reduction in impact must be a collective effort that takes place on a large scale,” explained  Abadie. “Through the launch of this fund, our goal is to pool resources, skills, and expertise to support the technological innovations and the changes of practices that are required to improve both soil and human health. The fund will help us to implement our climate plan, through which we aim to have €5 billion (US$5.19 billion) of assets under management by 2025 dedicated to addressing the climate emergency.”

Rounding out the partnership is Unilever, which has been an industry leader in sustainable source practices engaging with hundreds of thousands of farmers for more than a decade. The company’s Regenerative Agriculture Principles are built upon years of developing progressive policies and practical work. Together with Unilever’s extensive global supply chain and local market experience, this background ideally positions Unilever to provide guidance for future projects.

“We know that one of the key ways to address climate change is through nature, and agriculture is a part of that solution,” said Eric Soubeiran, VP, Climate and Nature Fund, Unilever.  “This is why in 2020 Unilever committed to invest €1 billion (US$1.04 billion) in climate and nature projects, connecting value chain transformation with our business and brands, allowing Unilever to take targeted and meaningful action to address climate change and grow responsibly.”

Soubeiran continued, “Eventually, we would expect projects to include accelerating the transition of regenerative surfactants, scaling low carbon dairy and plant-based acceleration. We look forward to working with partners on this new regenerative agriculture finance mechanism.”

~ Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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