Dirt Capital Seeds Financing for Ecological Farms
Kat Friedrich, Conservation Finance Network
Dirt Capital Partners provides one example of what a mission-driven investment fund can look like in food systems work. Dirt Capital has strategically addressed one of the largest barriers to new and beginning farmers in our country: cost of land. As CFFP brainstorms if, when, and how to structure a fund for food systems work in the Pacific Northwest, looking outward to innovative funds such as Dirt Capital provides us with great material for ruminating.
Dirt Capital Partners has organized eleven mission-oriented investors to purchase farmland in New England, New York, and New Jersey. The land will be leased to “good farmers” – or, farmers with both business acuity and ecologically sustainable practices. The fund is structured as an LLC with a business model similar to a small real estate private equity fund, providing structured sales to the farmer within 5 to 10 years in the form of rent.
Sustainable Farm Partners, LLP and Crop Diversification: Real change through innovative investment in Iowa
Sustainable Farm Partners, LLP
Sustainable Farm Partnerships in Iowa provides another example of a mission-driven investment fund from which CFFP can learn. Working at the intersection of environment, economy, and society, this private equity partnership acquires high quality conventional farmland and converts it to sustainable, organic farms. While creating systems change in a state known for its conventional, GM commodity crops, their program is also designed to deliver stable income to investment partners. As seen in the next article, efforts like those of Sustainable Farm Partners contribute to a movement towards diversified, resilient, and sustainable agriculture on a local level.
Iowa Farmers Planting Fruits, Vegetables over Corn, Soybeans
Christopher Doering, The Des Moines Register
When we talk about healthy food affordability, one root cause that continues to surface around high fruit and vegetables prices is national subsidies for corn and soy. These subsidies are a double-edged sword for both consumer and producer, as farmers who mono-crop corn and soy live at the whim of shifting market commodity prices. For CFFP, investment in farm crop diversification is an investment in both consumer health, and the resilience and viability of farm businesses.
Farmers in Iowa are shifting away from the staple commodities of their state of corn, soy, and hog operations towards more diversified farming businesses. Mixed vegetable operations generate higher and more stable revenues, thrive on smaller land plots, and do not require large or expensive equipment. On the other hand, they are more labor intensive, require knowledge of diverse farming practices, and are more difficult to distribute and market for the farmer. Young and beginning farmers in Iowa are willing to take on this challenge and reap the potential benefits.
To Make a Difference, Family Philanthropy Must Take More Risks
Katherine Lorenz, The National Center for Family Philanthropy
CFFP seeks to create both systems change and support enterprise success. As our Market Research suggests, food systems change is the more involved and risky of the two endeavors. And, as this article suggests, philanthropy alone has small resources to address large and complex issues, making food systems change all the more daunting. However, while CFFP may not single handedly create food systems change, the risks we take will set a precedent for others to get involved. Our innovations and learnings can provide a way for governments, other nonprofits, and individuals to join in tackling the complex issue of food systems improvement.
“Philanthropy is trying to address the world’s most entrenched social issues. If it were easy to solve these problems, they would be solved already.” Clearly, the problems remain unsolved. The author suggests a pivot in philanthropic strategy is required: complex problems require innovative solutions, and innovative solutions require risk. The words “philanthropy” and “risk” are seldom paired together. At the same time, family philanthropies are uniquely positioned to test out solutions that can be adapted, scaled, and implemented by larger bodies with more resources.
4 Things Every Investor Should Know About Vertical Farming: Lessons Learned from AVF Summit | Summary
“4 Things Every Investor Should Know About Vertical Farming: Lessons Learned From AVF Summit”
Chris Powers, AgFunder News
Hydroponic micro-greens emerged from our Ecotrust research as a way to get leafy greens into urban areas, and also emerged from the Bowman Analysis as a winning category for investment. So—what do we do next as investors? In this article, writer and entrepreneur Chris Powers outlines four key takeaways from the Association for Vertical Farming’s summit in Amsterdam last month to educate investors on the state of affairs in vertical farming and tips for involvement.
A state of the industry landscape scan indicates that most vertical farming operations provide micro-greens and lettuces to select restaurants and CSA’s. While the technology exists for sophisticated vertical farming, we need entrepreneurs with a mastery of techniques and breadth of knowledge to build the industry. The biggest hang-up for these entrepreneurs are a slew of startup costs that, if unaccounted for, can easily thwart an otherwise solid business plan. The author closes with ways that investors and entrepreneurs alike can go above and beyond to make vertical farming as sustainable as possible, for instance by growing in point-of-sale locations and eliminating food miles.
Cascadia Foodshed Financing Project works at nexus of food, financing, and philanthropy. This space is where Impact Investing resides, a term that is as well defined as the term ‘sustainability.’
Our research has revealed further definition of the impact investing space to separate Venture Philanthropy from Impact Investing. Venture Philanthropy is a nebulous term used to describe alternative funding approaches that produce both social impact and financial return on investment. As noted by the Organization for Economic Cooperation and Development, there is no one strategy for Venture Philanthropy but rather a set of common characteristics that help to define work in the field. Some groups may highlight the use of blended finance including investment and grant making in tandem. Others may emphasize the additional use of skill sharing and other forms of nonfinancial support. Still others might emphasize the importance of systems change over the success of individual deals.
As CFFP seeks to build the regional food system of the Pacific Northwest through impact investing and venture philanthropy, we strive to stay abreast of the work of others. Our recently released Market Research explores new paths for the role of venture philanthropy within our own focus of food and place.
Here, we’ve gathered a starter pack of resources that provide a lay of the land surrounding venture philanthropy – both the intellectual development of the field and its manifestations on the ground:
“Paying Farmers to Go Organic, Even Before the Crops Come In”
Stephanie Strom, New York Times
CFFP and Ecotrust’s market research focused on ways investors can interface with the food value chain in order to build a more sustainable regional food system. While the research is completed, a continued awareness of other efforts in our food system will give CFFP an even sharper focus of where to most effectively intervene. Industrial food companies may facilitate the conversion to organic in many states, but infrastructural challenges of aggregation, processing, and distribution still remain for mid-size farmers in our region. This provides further evidence that infrastructural support may be a great niche for investment.
In order to be certified organic in the United States, farmers must undergo an expensive process to convert their land. During the required three-year transition period to organic, farmers forgo synthetic fertilizers, pesticides, and GMO seeds that may reduce production costs while receiving no organic premiums for their products. In order to keep up with consumer demand for organic and non-GMO products, food hegemons including Kellogg and General Mills have been helping farmers convert to organic. They provide financial support during the rough transition period and provide a guaranteed market for crops once they are finished.
"Venture Philanthropists and Impact Investors"
As CFFP seeks to work with local entrepreneurs in the food system, issues like impact assurance, financial returns, and appropriate placement of capital have been recurring themes in our discussions. In this timely report, Toniic confronts these and other hesitancies head on and suggests realistic solutions to facilitate relationship between venture philanthropists and impact investors seeking change in their communities.
There are a growing number of entrepreneurs who are meeting needs in their communities through business, providing sustainable & regenerative transformation for a variety of socioeconomic and environmental issues. However, there is a significant “collaboration gap” between these entrepreneurs looking to scale and investors "due to a variety of economic return hurdles, risk tolerance, preferred investment structures, liquidity requirements and desired impact outcomes”. Toniic has partnered with The Shell Foundation to research relationships between venture philanthropists and impact investment, two sectors engaged in developing social enterprises but with different motivations. This report outlines a variety of actionable solutions to increase collaboration between philanthropists (impact first) and investors (finance first) in global entrepreneurship including blended funding, structural enhancement, impact accelerators, technical assistance, information & knowledge sharing, and innovation.
“New Tools Bring Lenders to the Table for Local, Regional Food Enterprises”
Lillian Salerno, USDA
The training program is a more technical, in-the-weeds complement to Ecotrust’s Intrepid piece which, in tandem, could provide a good introduction to food systems impact investment. Such resources from agencies long involved in the food and agriculture fields have the ability to help shape the space for impact investors.
Article Summary: While the USDA has long been investing in local food entrepreneurs and business to build rural development, increasing demand for local food has led venture capitalists in the same direction. In order to educate and guide investor efforts, USDA has created an online training program focused on (1) the Background on the Food Industry, (2) Assessing Regional Food Enterprises, and (3) Financing Regional Food Enterprises.
“Costco gets creative to meet shoppers’ huge appetite for organics”
Janet I. Tu, Seattle Times
This provides an example of how traditional market forces can be harnessed in innovative ways to support alternative production methods that improve social equity and environmental sustainability. As a group of investors looking to meet similar goals, CFFP can partner with and equip other local retailers and distributors to create similar programs.
Article Summary: “While organic food sales reached nearly 5 percent of total food sales last year, organic farmland makes up only about 1 percent of U.S. farm acreage.” Demand far exceeds production, and retailers are now playing an important role in bridging that gap. Companies including Costco, Whole Foods, and PCC are employing a number of creative mechanisms that help farmers acquire land, scale up, or transition to organic farming. Techniques include land and equipment loans as well as creation of farmland trusts.
"Economists keep saying we should put a price on nature. Now they’ve finally done it."
Chelsea Harvey, Washington Post
Natural Capital presents a useful tool as CFFP looks to measure environmental returns on investment. This measurement accounts for nuances and fluctuations that allow analysts to evaluate sustainability for the long term.
A group of faculty at Yale School of Forestry and Environmental Studies has been working closely with economists to create a formula that describes the value of nature related assets, known as Natural Capital. Previously, economists had described the value of nature through “ecosystem services”, which better represents the flow of natural assets like income. On the other hand, natural capital represents the whole of natural assets like wealth. In this way natural capital is a more accurate representation of those assets, looking at the whole value of assets after the (sometimes unpredictable) effects of industrial endeavors and “green” interventions alike.
As part of its own research, CFFP regularly illuminates educative research, media, and resources related to our work. This page contains public versions of our synopses.