A conversation with Tim Coates, co-founder of Oxbury Bank, the UK’s only specialist agricultural bank, about flood risk mitigation, water quality, water cycle restoration, selling flood mitigation to institutional investors and much more.

LISTEN TO THE CONVERSATION ON:

• Google Podcasts
• Apple Podcasts
• Spotify

This episode is part of the Water Cycles series, supported by The Nest, where we interview the dreamers and doers who are using the latest technology to figure out where to intervene first. They are making or trying to make the investment and return calculations. so what is missing, what is holding us back? Maybe we lack the imagination to back them and try regeneration at scale.

Tim Coast, a third-generation farmer founded an agriculture focussed bank. He argues that the best place to start (at least in the UK) water cycle restoration might be selling flood mitigation to institutional investors and other institutional players suffering from bad watershed management like the drinking water companies trying to make sure we have clean drinking water, insurance companies who pay when businesses and houses flood, the reinsurance companies that pick up the final bill, the towns which get regular flooding, the railways, etc. It doesn’t make sense to sell the cooling effect of healthy water cycles and ecosystems to people who are not on board yet. According to Tim, you will lose too much time on education and convincing and… we don’t have time!

THE ABSENCE OF SOUND TRIGGERED REGENERATION

It was the absence of sound what caught Tim back to an agricultural context. It was a sense of place that really landed and a feeling that he had to be there to get what he really wanted out of life.

”I always come back to that feeling of this amazing ability to be a steward of a certain part of our wonderful planet. And that, for me, is the kind of continuous thing, that idea of stewardship, that idea of multigenerational, the idea of passing something on so.” – Tim Coates

”It was the sound actually, that caught me because it was too quiet. I’d been spending a bit more sort of time there by myself. And I realized that it was just much quieter than my memories of it as a child. And everything sort of started flowing from that and thinking about and that’s kind of when my curiosity got the better of me and thought, you know, it should be there, should be more life, more activity going on. And I think that was sort of the moment where I was aware that there was going to be a lot of change. And that led to some pretty big decisions pretty quickly.” – Tim Coates

WHY WATER AND SPECIFICALLY FLOODING IS THE ENTRY POINT FOR INSTITUTIONAL INVESTORS TO INVEST IN RESTORING WATER CYCLES

There’s an increasing number of people starting to pay attention to water. You might want to start the conversation asking why might flooding have occurred, which is an obvious immediate concern. Why is it more likely to occur? What resilience could be built out the immediate location and, in the location around it? What is our role in improving that resilience to that particular risk? Then you pretty quickly can get into the conversation.

”I think you have to play a little bit of a slightly canny… I can’t think of a best metaphor, but you know, sort of through the backdoor route to this. So, slightly read your audience and think about the first bit of conversation they might want to have. So, for some colleagues internally who are quite focused on risk, generally, let’s start with the obvious water conversation, which is flood risk, right? And then, because we’re concerned about flood risk, as people who have exposure to land, that’s an obvious immediate concern. And there’s reasonable data that we can point to and talk about the impacts. So, start with something that is both data rich, and reasonably straightforward to explain and is already in someone’s interest. And then start to talk about the wider context of why flooding is not just bad in and of itself in terms of the impact it might have on the asset that you’re concerned about.” – Tim Coates

”But actually, it’s about how do we hold that water in the soil longer. And then before you know, you are talking about the entire catchment scale and then suddenly going, ‘hey, this is quite a big number to affect this change, and we’re going to get really big impacts. But it requires really big investment. And as you and I know, sometimes actually going and asking an institution for a large number is easier than asking for a small number.” – Tim Coates

SELL FLOOD MITIGATION, NOT SOIL CARBON FIRST, TO INSTITUTIONAL PLAYERS TO FINANCE WATER CYCLE RESTORATION

We’re talking about mitigation of the fact that we’re already in a bad situation. That kind of mitigation versus adaptation tension that you sometimes see in this space.

”We know where we’ll get better returns, because we’re less likely to see physical climate risk, disrupt nature-based solutions. Or are we trying to say, actually, we really need to make an impact where those are most likely to be acutely felt tomorrow, but they could be riskier, because they may not succeed how we want them to, so it becomes really difficult decision on that front.”

”There’s something called the TCFD, which is the Task Force for Climate Related Financial Disclosures, which is very much focused on carbon accounting. […] This is a global initiative, TCFD, which has now enforced in the UK and many other generally holistic companies to disclose their emissions. But the next initiative that’s right behind it, that is due to sort of basically be enforced by probably the end of next year, is around nature. So, it’s looking at what are your impacts on your activity as a corporate on nature, your dependencies on nature, describing and quantifying those, and then talking about the risks and opportunities to obviously manage that going into the future. The UK where there’s this big government targets to get 30% of nature restored by 2030.” – Tim Coates

”There’s a really interesting financial mechanism that could work here, which is some form of top slice debt approach, which is what you say is that there’s something you want to see accomplished in terms of a natural capital outcome, this goes back to my point about it’s all one ecosystems approach, and you can target the thing you care about the most. Which is, let’s say what I’m most interested in is something that’s going to be doing something that is contributing to global cooling through enhancing the small water cycle. I will deploy a certain amount of equity into that, let’s say a billion, but what I know I’m going to get is a range of ecosystem services, co benefits that I’m less interested in, they’re all important, but I’m less interested in those outcomes. By less interested, I mean, I’m not going to try and capture their value. So they are therefore marketable.” – Tim Coates

OTHER POINTS DISCUSSED

Koen and Tim also talked about:

• How to build a farm cluster
• The need for a better service-led banking operation for farming
• Building resilience at the farm and bank level

LINKS:

• Oxbury Bank
• Article in Farmers Weekly about Tim’s farm
• Freakonomics Radio Podcast episode on ESG and case against divestment
• Biodiversity Net Gain (UK Statutory Market for Biodiversity)
• Taskforce for Climate Related Financial Disclosures (TCFD)
• Taskforce for Nature Related Financial Disclosures (TNFD)
• John Kempf podcast with Dr. Mary Lucero on accidentally patenting life itself and the importance of communicating science

LINKED INTERVIEWS:

• Water cycles series
• Neal Spackman – Why it is so difficult to get truly regenerative water and ecosystem restoring projects funded
• Alpha Lo – What if water is more important than carbon
• Millán Millán – Farm water at its proper scale
• Marcel de Berg – Water is a more important cooling factor than the heat of carbon
• Ties van der Hoeven – The regreening project we can’t afford not to do, restoring the water and weather systems in the Med, starting with fish
• Zach Weiss – On a mission to train hundreds of thousands of people in key water restoration techniques
• Anastassia Makarieva – Healthy forests invest their capital to create their own rain

——————————————

Feedback, comments, suggestions? Reach me via Twitter @KoenvanSeijen, in the comments below or through Get in Touch on this website.

Join the Investing in Regenerative Agriculture and Food newsletter on www.eepurl.com/cxU33P

The above references an opinion and is for information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.