Regeneration: The new Impact Investing imperative!
Mainstream climate change conversations are focusing on fossil fuels as the main culprit and thus concluding that the climate heroes are renewable energy, electric cars and other human technologies. This reduced perspective, serves no justice to the whole climate opportunity. Due to this blindspot, the bulk of the Impact investing movement is currently missing out on the most extraordinary investment opportunity of our lifetimes: Regeneration.
The Regeneration Opportunity
According to Wikipedia: In biology, regeneration is the process of renewal, restoration, and growth that makes organisms, and ecosystems resilient to natural fluctuations or events that cause disturbance or damage. According to Daniel Christian Wahl, “The word regenerative speaks to this need for regenerating the patterns of life, because basically what has happened since the Industrial Revolution, is that we have caused so much damage to the system and deforested, emitted, so much carbon that we need to do a lot more than simply not adding any more damage, which is one interpretation of sustainability. (…) Only when we intend to design as nature, not just learning from nature, but on our own agency as living beings in this process, can we start to work regeneratively.”
According to the latest poll from the Global Impact Investing Network only 1% of the deals are investing in sustainable land use and other investments that target Sustainable Development Goal #15: Life on Land (remember this is the natural habitat for humans — not Mars) .
Natural climate solutions and the Carbon Cycle
Yes carbon emissions from fossil fuels should be reduced immediately, we do have to transition to cleaner sources of energy but let’s not forget that our human life on earth depends on so much more than temperature. Applying a very needed living systems perspective: let’s remember humans are interdependent beings as all life on earth. Other forms of life such as plants and animals, bacteria and algae are producing so many of the ecosystem services we can’t breathe without. The cheapest and most universally accessible technology that exists to tackle the climate crisis is (drumroll and suspense): — — PHOTOSYNTHESIS — — (not lab-grown stuff), and it’s already happening everywhere right now! (no need to distribute it worldwide using fossil fuels, exponential obsessions about scale, or else). Nature can do the heavy lifting of the climate work while at the same time producing food, cleaning the air we breathe, biofiltering the water we drink and other ecosystem services that we usually take for granted and frequently want to substitute with human tech. But we must help out using and investing in more natural based solutions like green infrastructure, regenerative agriculture, holistic management for cattle ranching, and restoring ecosystems: forests, mangroves, coral reefs, grasslands. An example of green infrastructure funded by impact investors was the Environmental Impact Bond in Washington DC. Here is a quick video to illustrate natural climate solutions.
This is the deal: carbon is not the villain, it is a basic building block of life but we need to keep the carbon cycle in balance. In a simplified version: the carbon cycle consists of emissions that put out carbon in the atmosphere and carbon sinks which capture or sequester carbon back where it belongs. Emissions not only come from fossil fuels, they also come from industrial agriculture, mega-fires, desertification, industrial activity, land degradation, tillage, mining, ecosystem exploitation, and land use change. The carbon sinks such as plants, oceans and soils on the other hand are natural reservoirs of carbon-containing chemical compounds. There has never been a better time for carbon farming because we’ve never had so much carbon in the atmosphere to sequester: it is the opportunity of our generation! — the carbon cycle- beautifully explained in this video by Kiss The Ground: The Soil Story.
The Rodale Institute says that regenerative agriculture, if practiced on the planet’s 3.6 billion tillable acres, could sequester up to 40% of current CO2 emissions. They claim that agricultural carbon sequestration has the potential to mitigate global warming. When using biologically-based regenerative practices, this dramatic benefit can be accomplished with no decrease in yields or farmer profits. Organically managed soils can convert carbon dioxide from a greenhouse gas into a food-producing asset.
The Global Impact Investing Network survey around investment themes for Sustainable Development Goal of Life on Land mention that real assets such as agriculture and timber are growing more than any other asset class in impact investor interest. The market opportunity is clear, the investment upside is as good as it gets: we can not only expect to harvest long term profits but also cleaner air, cleaner water, healthier ecosystems and all other forms of real Blended Value. So what’s stopping us?
Challenges to Action
- Acknowledging the flaw in the human-centric approach to impact: Humans depend on nature for life; also humans ARE nature. Our health is reflective of the ecosystem’s health. There is no healthy society in a sick environment. No social investment or human right will thrive, or survive on a dead environment. Social and Environmental impacts are indivisible.
Take the Citarum River in Indonesia as an example: one of the most polluted in the world. (but it is also the same case in the Atoyac River or Santiago River in Mexico). The villages around that river are not going to improve with isolated human-centric approaches like medicine, tech, education, microfinance, donations or applying a gender lens. The main cause of their health suffering is the river’s pollution: their only water source. No matter how much we spend “impacting” their symptoms in isolation if we don’t address the systemic cause there’s honestly no real improvement for their lives.
Impact investing should be life-centric, we’ve spent too long thinking the climate crisis is an environmental issue, — It is not! the climate crisis is a social issue, an economic issue, an existential issue. Last february, as I was talking to a Latin American impact investor while he was explaining his impact investment target for jobs, I asked if there were any environmental screens about the kind of jobs he promoted and he said “well impact investments are not perfect: jobs come first, the environment is just a nice-to-have”. In that moment I realized we are like a fish asking “what water?”. We are taking life for granted. Nothing comes before life. And there is only one system for life on this planet: Biodiversity: the only thing that can make ecosystems come alive and thrive! Life should not be an optional investment or a charity case like biodiversity investments currently are.
2. Agriculture & forestry: The poison or the antidote? Thinking all agriculture investments or all forestry investments are inherently good for the planet is oversimplifying impact asset classes. Impact Investors should know better, because they dig deeper! There are plenty of extractive investments in those asset classes that are using monoculture, invasive non-native species, and harmful agro-chemicals. If we don’t double-down on due-diligence about management practices and long-term systemic outcomes we will never really know if we are degrading, sustaining or restoring the ecosystems through our investments.
We need to embrace and address complexity through a holistic Landscape approach: According to the Environmental Evidence Journal, “a Landscape Approach is broadly defined as a framework to integrate policy and practice for multiple land uses, within a given area, to ensure equitable and sustainable use of land while strengthening measures to mitigate and adapt to climate change. It also aims to balance competing demands on land through the implementation of adaptive and integrated management systems. These include not only the physical characteristic features of the landscape itself, but all of the internal and external socio-economic and socio-political drivers that affect land use, particularly related to conservation, forestry and agriculture. In short, landscape approaches seek to address the increasingly complex and widespread environmental, social and political challenges that transcend traditional management boundaries.”
This is why we need to learn new ways of financing that are more holistic and place-based, comprehensive of each watershed and less sector-based. Here is our very brief summary of how a Regenerated landscape would look like versus a degenerative one:
3. Dear Impact investors, welcome to Climate Finance
Impact investors are needed urgently in the climate finance space. Why? Impact investors are visionary pioneers that roll out the catalytic capital when it’s most needed to develop a new sector and with emphasis on the additionality factor. Aren’t they? If Blended Finance was waiting for it’s tipping point opportunity of a lifetime this is it: bridging the impact catalytic capital with the climate finance investments. Allow me to be more specific: There’s a clear bottleneck for the Regenerative investment opportunities: the deals out there especially in the “global-south” are mostly underdeveloped, quite small, not yet investment-ready and need financial structuring, market strengthening and impact monitoring . The multiple layers of grant financing urgently needed that will pave the way for these opportunities to become investment-ready is nowhere to be found. I honestly find much more frequently the generic investors ready to harvest the profits without previously having set a foundational building block of catalytic capital. Abundant generic investors want the investment menu to be ready to eat and hoping they can choose their favorite flavors. — Unbelievable yet so true.
4. The Future of Planet Finance Beyond Carbon: Biodiversity.
Monopolizing the climate conversation around carbon is hopefully a thing of the past. To future-proof any investment portfolio we will have to leave reductionist thinking behind and embrace complexity fully and intentionally. The future is a richer focus on not only curbing carbon emissions but also restoring ecosystem services and bringing about all the beauty and diversity of life. “Only life creates conditions conducive to life.” Dr. Janine Benyus.
Are you ready for Regeneration?
Through the unifying principles of regenerative systems, a new era for humanity emerges: Regenerative thinking reorients human beings as a restorative, beneficial and healing force for humanity and the planet as a whole. This is a re-identification of humanity as the planet’s “immune system” rather than its self- destructive cancer.
“Aligning with the widespread need for social, ecological and economic regeneration is in everyone’s enlightened self-interest. On a fragile and overpopulated planet: We are all in this together, facing the challenge to transform the human impact on Earth from being predominantly exploitative and destructive to being collaborative and regenerative.”- Daniel Christian Wahl.
My mission is to ensure that life is served by capital, not ruled by it.
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JOIN US! & Please support your local regenerators ; )
o If you are interested in regenerative investments contact us at Regenerative Communities Network.
If you want to learn more on this topic here are some recommendations:
o On Regeneration: Daniel Christian Wahl: Medium + twitter + books
o Regenerative Capitalism by John Fullerton and Finance for a Regenerative World
o On Regenerative Enterprise: Carol Sanford Institute + books
o The Purpose of Capital by Jed Emerson
o On Regenerative Leadership: Giles Hutchins & Laura Storm
o On Regenerative Agriculture: Ethan Roland Soloviev: Medium + How Good
o On Holistic Management : Allan Savory
