Lifestyle & Culture

From ‘Greed is good’ to ‘Green is good’: How impact investing can help fight climate change

It was heart-warming to see tens of thousands of people march in Frankfurt on Friday for FridaysForFuture, a global protest against political inaction on climate change.

There are also other ways, also, to making a difference.

How we allocate financial resources serves as an incentive for business to pursue production towards reducing greenhouse emissions.

We allocate financial capital in many ways – how we invest, the savings investment vehicles we choose, the pension schemes we contribute to or the equities we buy.

A global inflection point

For example, investing in regenerative agriculture is a great example of an impact investment. There is real and measurable impact to the environment, biodiversity and soil health. A company such as Wide Open Agriculture has a clear business plan to create a strong and sustainable business which creates employment, reduces depopulation rates in rural areas and rewards all stakeholders over time. (Full disclosure: I represent Wide Open Agriculture.)

This year – 2019 – is an inflection point in agriculture and the role it plays in climate change.

A recent World Economic Forum report notes that agriculture is a major contributor to challenges facing the environment including land degradation, aquifer depletion, nitrogen runoff and greenhouse gas emissions.

In July 2019 scientists recorded the highest concentration of atmospheric carbon dioxide in human history: 415 parts per million (ppm). This represents an increase of 135 ppm since the start of the industrial revolution – and is equal to one trillion tons – a teraton – of carbon
dioxide increase over the past 200 years.

We are destroying forests at an alarming rate – mostly for industrial style agriculture or intensive livestock grazing. They still cover about 30 percent of the world’s land area, but we have felled 46 percent of all trees since humans started cutting down forests.

About 17 percent of the Amazonian rainforest has been destroyed during the past 50 years.

Regenerative Agriculture

Whilst industrial agriculture has been a major contributor to the problem, regenerative and sustainable agriculture offer a way to remove carbon dioxide from the atmosphere. A plant removes carbon from the air and sends it back into the soil as roots (carbon sequestration). These roots then release sugars to feed soil microbes. The microbes work their own magic to convert carbon into organic carbon matter which enriches the soil and assists further plant growth and more carbon sequestration.

Regenerative agriculture involves a set of farming practices that have at the core improved soil health, improved the eco-system and outputs of healthy, delicious food. Some of these farming practices include cover-crops, no-till farming, crop rotation, reducing chemicals and fertilisers and planned use of livestock. These practices work to drive carbon into the soil
and keep it there.

If we invest in companies that engage in regenerative agriculture, we are deploying funds toward making an “impact.” This impact investing strengthens their ability to grow, create sustainable businesses and engage in more carbon-depleting practices.

I would argue it also sends a powerful message to heavy polluters as reduced share demand tends to decrease a company’s value, which in the long run leads to investor agitation for change.

I am working with Wide Open Agriculture Limited (ASX: WOA), presenting the Australian regenerative agriculture company to impact investors, family offices and fund managers in Europe.

WOA is the world’s only publicly listed company committed to delivering not just financial returns, but also positive and measurable natural, social returns. It is backed by the large Dutch Foundation, Commonland, which holds 17 percent of the equity.

The business model is exciting for impact investors in that not only is land improved through regenerative farming, but the company also has its own food brand – Dirty Clean Food. Dirty Clean Food launched with an online distribution platform and sales are expected to reach $1 million Australian per annum just from the grass-fed regeneratively grown beef and lamb.

The company recently commenced negotiations with Asian distributors in Singapore, Hong Kong, Indonesia and China which could result in contracts that substantially lift sales revenue.

Of course there are other companies you can support directly and indirectly, so do your own research.

It is time to turn the 1980’s Wall Street mantra around from “greed is good” to “Green is good.”

About the author:

Matthew Reynolds is an accountant, management consultant and Virtual CFO living in Frankfurt.

Matthew is available to work with expat companies and businesses requiring assistance in Frankfurt or global companies seeking to expand operations to Australia.

His website is www.austlinx.net and he can be contacted at: info@capstonegroup.net.au

Read more from Frankfurt by Matthew Reynolds here.

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