Regenerative agriculture: Back to life

The warnings are stark. The planet may run out of soil to grow food within 50 years. In 2023, between 713 million and 757 million people faced hunger. The number has been growing since 2015, according to the UN.

More than half of the world’s agricultural land has been degraded, the World Economic Forum reports, and this is leading to US$400bn (€384bn) in production losses and increasing food insecurity. For the world to be able to continue to feed its growing population, according to a wide body of research and expert opinion, it needs to turn to regenerative agriculture.

Back to the future, so to speak.

Some define regenerative agriculture as a transition from the use of chemistry through biology to the use of natural solutions to fertilise and enrich the soil, adopting technologies to improve genetics to produce better crops and livestock that grow in harmony with nature. 

The very essence of regenerative agriculture is the restoration and preservation of soil health, which has been systematically destroyed over the centuries, hastened by the advance of intensive farming and the advent of heavy machinery, fertilisers and pesticides. 

Oliver Williams, global head of agricultural investments at Manulife Investment Management, sums up: “Soil health, biodiversity and sustainable productivity are the key inputs to the future of farming. Agriculture production resources – land and water – are limited, and the quality, value and productivity of these resources will deteriorate if management practices do not take their health into consideration.

“We are farmers and custodians of these resources. Our foremost goal is to maintain and improve the condition of the soil, water and the larger environment in general. Regenerative agriculture framework is the most important tool we have to achieve these goals.”

Tai Lin, managing partner at Proterra Investment Partners Asia, says: “Over the past two decades, people focused on the energy sector when considering sustainable investment. They looked at transport and infrastructure. It is only in the last decade that the food system has become the third – very important – pillar of the entire sustainable investment discussion. Rightly so, as transport, infrastructure and food production contribute – in equal portions – to 90% of the world’s greenhouse gas emissions.”

Capital is now flowing into the sector, although still too slowly, for research and development into new farming methods, like vertical farming, with a growing number of start-ups working on innovations and technologies to replace traditional farm practices. 

Unfettered by traditional practices, institutional farmers are pushing the boundaries in search of new concepts and technologies to increase the pace of change towards sustainable and restorative agriculture.

Today, farmers have technologies for precision farming which use chemicals where needed and to monitor changes to the land. Innovation gives farmers access to information and data to manage their farms.

Now, as part of their ESG obligations, some large natural capital investors are working with smallholders to improve farming methods and livelihoods.

Since 1997, Sustainable Harvest International, an American not-for-profit organisation, has been working with small farmers in Central America to stop using slash-and-burn techniques and to adopt sustainable cropping.

The entity, founded by a former Peace Corp volunteer, Florence Reed, says that if the world’s 500m smaller farmers adopted regenerative agriculture, they could draw down 6bn tonnes of carbon from the atmosphere – nearly 20% of global annual emissions, the equivalent of shutting down every coal-fired power station in the world. 

Tai says: “The drive to sustainable investment is being led mostly out of Europe, but it is on the ground in Asia that some of this thought leadership is needed. Asia accounts for the largest portion of global greenhouse gas emissions and is the fastest growing.

“The reason that Asia has the highest emissions is because of its sheer size. When you have two-thirds of the world population wanting to eat as the western world does, there is invariably more production and carbon emissions.”

Proterra manages food funds and assets totalling about US$1.3bn in Asia. “Allocating dollars to food and agriculture in a professional way has an impact in itself,” says Tai. “So investing in food and agriculture in Asia, for instance, could be the best incremental ESG gain if you handle it correctly.” 

A number of the world’s largest institutional farmers – Nuveen Natural Capital, Macquarie Asset Management’s agricultural platform, Manulife IM, Australia’s Warikirri Asset Management and many more – have embraced sustainable farming. New players, like New Agriculture and Gresham House, have approached agriculture with the same mindset.

But there is a short-term cost during the transition to sustainable farming. 

Williams says: “In any correction of such an important fundamental to the environment, there may be an expense incurred on the investment in reverting to regenerative practices. This is encompassed within the overall capital cost of improvement of the asset and ultimately achieving the required sustainability and investment outcomes.” 

Manulife IM has assets in the US, Canada, Australia and Chile, and grows a wide range of crops from cotton, soybeans, tree nuts and horticulture on more than 400,000 acres of land – valued at US$4.2bn at the end of September 2024. 

The manager is progressively implementing regenerative farming into its land-based assets. “Many of the common regenerative practices are already incorporated into our farming system,” says Williams. “These include no-till or minimal till, establishment of cover  crop, crop rotation, mulching in farm, composting of bi-products to enhance poor soils, integrated pest management to reduce chemical usage, and so on.

“For the past two years we have surveyed our farm managers on the use and extent of regenerative practices utilised on our farmland. All our farms – both tenant and directly-operated – across all geographies use at least one regenerative practice, and in 2023, 75% of our properties used four or more. We also pilot new practices, such as the application of biochar on our apple orchards, that help us learn more about regenerative practices before applying them at scale.”

Williams says the impacts on cost and output, or yields, of these practices are generally positive in both the short and long term. “Output may be reduced, stay the same, or in some cases actually increase, depending on the geography and practice applied. However, overall profit and soil health should both improve with the introduction of regenerative practices, helping ensure that we can continue sustainably managing agriculture assets into the future.” 

Other large agricultural land managers, backed by capital and access to continuous research and development, are also making meaningful inroads in cutting carbon emissions with state-of-the-art techniques (see manager case studies from page 49).

The search for natural solutions in regenerative farming also starts from the production of seedlings. London-based Cibus Capital owns Withcott Seedling in Queensland, Australia. The business can produce 300m vegetable seedlings a year.

Withcott’s main source of carbon emissions comes from the medium used in its potting mix. Historically, plants are propagated in peat moss, which is extremely carbon-intensive, says Damon Petrie, Cibus Capital’s consultant investment director fpr Australasia. Because peat moss is mined, he says, it does not regenerate quickly, so it is a depleting resource and a negative for biodiversity. 

To reduce its emissions, Withcott is working to replace peat moss with natural materials like coconut husks, rice husks or milled woodchip. “We are on a multi-year journey to transition to a more sustainable medium which will lead to a meaningful fall in our emissions. We hope to fully replace peat moss in our potting medium in the next two to three years,” Petrie says. Withcott began trialling new potting mixes 15 months ago at commercial scale.

The seedling business also uses an inorganic material known as vermiculite for its water-holding quality. Petrie says Cibus has a two-step approach to the removal of peat and vermiculite from its potting mix. “Step one is to reduce its use by 50%; step two is to go completely organic.” 

Technologies are also shifting agriculture to the glass house or vertical rack, replacing the need for large acreage to produce the same amount of food. Vertical farming and greenhouse farming are now producing vegetables in many countries, including Singapore and Europe.

Gresham House produces 20 tonnes of leafy greens a week from its 25,000sqm vertical farm in Norfolk. Peter Bachmann, managing director of social infrastructure, says: “We believe it is the largest fully automated vertical farm in the world. We are building more vertical farms to replicate our vertical farming elsewhere in the UK and overseas.

“We see big growth potential for this business. Ultimately, we believe we can grow soy, rice, wheat and peas. And if we can grow these crops in vertical farms, there aren’t many things left we can’t grow. 

“We try to take a system-wide approach to tackling big food problems,” he says, listing the benefits of vertical farming. “First, it uses 250-500 times less land than traditional farming, and up to 1,900 times less carbon and 95% less water, chemicals and pesticides. And because the food is produced locally there are no air miles. It will also have less food wastage as it has a longer shelf-life.”

Lin says: “It is very easy to think about primary production or farming, but one should look at the entire value chain. Of course, you can do regenerative agriculture upstream, but equally you must think about midstream, where the effluence or emissions from the processing or the yield losses occur in food production downstream, where packaging and consumer habits are becoming unsustainable.”