Fernando Russo – From selling Playboy’s to growing coffee, cacao, credit and lots of cows

A deep dive conversation with Fernando Russo about the reasons why he is going deep into coffee and cacao without being a coffee drinker and how he turned from being a Playboy’s salesman and a travel entrepreneur to an impact investor in the regenerative agriculture and food. We also talk about fashion and heights, the Amazon, deforestation, reforestation, the role of cattle—the good, the bad, and the ugly—and, of course, the potential and why he is in the water camp, not the carbon camp.

LISTEN TO THE CONVERSATION ON:

What is driving one of the most active impacts investors in the regenerative space? What Fernando tells fellow impact investors when they ask him about this regen thing?
Getting credit and other finance into the hands of farmers and land stewards who want and can change is way more important. Let’s get to work.

WHY COFFEE IS SUCH AN INTERESTING CROP

Coffee and cacao are low-hanging fruits for regenerative agriculture investments.

”The first time I was really in touch with learning agroforestry techniques was on a cacao farm, so cacao and coffee go together for me on this road. For me, it’s easier to tell the agroforestry story with these two crops, and I see a massive business opportunity in these two crops, and the business opportunities around disrupting the big traders that today own the market, crushing the farmers, and selling this crop. It’s an amazing crop; cacao is a sacred crop from the Mayas, and it was something that was related to health, to opening your heart, and now they turn this into this shitty, sugary product. And the same with coffee; they over roast, and then we have this; it’s full of nutrients if you do it in the right way and if you roast it in the right way. And I think now we are already there in these two crops where you have a market, disrupting the big traders, the big companies, and allowing the farmers to access directly the specialty roasters and even the specialty chocolate makers in Europe and the US. So, there’s something to be done in this field. And it’s easier to operate on that than the other challenges we have on soy. If you want to do that on sugar cane, if you want to do that on wheat, that is more difficult and needs to be done, but it’s more difficult.” Fernando Russo

WHY WATER MORE IMPORTANT THAN CARBON

Fernando emphasises the importance of water in regenerative agriculture, arguing that it’s a more effective way to mitigate climate change than carbon farming.

”Then another one that’s very strong for me is the carbon versus water narrative. So, I’m on the water field, and most investors are on the carbon field, so everybody’s obsessed with carbon […] I’ll be looking with more interest at the water story. So, I think the power of regenerative agriculture is that we are able to create more water. And when I use the water arguments to talk to conventional growers, they all understand. If I tried to talk to a farmer about carbon, biodiversity, I don’t get anywhere. But if I tell him, if we do this system, you’re going to have access to more water, it’s going to help with your irrigation… And water is also from ecosystem services, one that, at least in the tropics, comes back faster. And it’s badly needed. For everything we talked about, climate mitigation is the basis of life. So instead of doing carbon farming, let’s try to do water farming. I think it’s a much more relevant and impactful way of looking at regenerative agriculture.” Fernando Russo

WHAT INVESTORS SHOULD KNOW AND UNDERSTAND WHEN IT COMES TO REGENERATIVE AGRICULTURE

Invest in companies that help farmers make more money, not in the ones that sell products to them.


”A very important piece is to stop investing in business models that are based on selling something to the farm, we have to reverse that. There are so many agritech companies that are selling things to farmers. Okay, sometimes they can be successful because they really hit something, but the models have to be based on allow the farmers to make more money.” Fernando Russo

– Anna Wong, Volunteer

”The other thing I’ll tell investors, take a careful look at this credit story, we need to allow the money to get to agroecology. […] And there’s a strong argument that I think should be made around climate mitigation capital. Now, we just had this massive, disastrous flood in Brazil, in the south of Brazil. A massive city called Portalegre was completely flooded for 10 days and destroyed. […] Imagine if we take the agroecology producers who are usually around the cities and they are supplying the vegetables and things to the city, and we help them transit to agree to regenerative agriculture. Many times, they are already doing regenerative agriculture. So, we allow them to grow their businesses around the city. So, we have a strong food supply for the cities. But we create healthy soils around the city; we create a sponge to hold the water when it is excessive, when we have extreme floods, rain, and extreme weather events like that. And when we have droughts, it also retains water and reduces the temperatures in the cities; there’s just so many benefits. So how is this capital that’s going to go now to try to mitigate the climate emergency that we are already in? Some of that should be going to regenerative agriculture as well.” Fernando Russo

WHY CREDIT AND OTHER MECHANISMS TO GET MONEY INTO THE HANDS OF FARMERS WHO WANT TO CHANGE ARE SO CRUCIAL

Fernando discusses the impact of investing in agriculture, focusing on smallholder farmers and blended finance.

”We might impact philosophy first. I will do a debt finance vehicle to really get to smallholder and medium-sized farmers in the global South to do agroecology. We are in the root to do that with some asset managers from Brazil from Gaia and Pharma; the two of them are getting together and creating a very interesting vehicle that we want to bring to European investors. But, of course, with a billion we have, we can do something much more robust, which has to be a blended finance type of vehicle. So, working with governments that have this capacity. I think that’s the most important piece when it comes to impact. And if I was worried, if I needed to deliver returns, then I will do that strategy with coffee and cacao with permanent crops as a key driver ” Fernando Russo

”It’s great when you have a big vehicle that can tie things together. So, you can really tie the off-takers; you can really bring the off-takers because the off-takers want to have access to regenerative, sustainable supply. All the big corporations are desperate for that. But they don’t know how to start. And then, how are you going to just bundle a bunch of smallholder farmers? How are you going to do that? So, there’s room for that when you have a lot of capital on the table. The large corporations don’t want to pay for the transition, but they are willing to give off-taking agreements.” Fernando Russo

OTHER POINTS DISCUSSED

Koen and Fernando also talked about:

  • Transparency and disclosure in supply chains, particularly in the fashion and food industries
  • Investors must balance idealism with realism
  • The potential of regenerative agriculture to address climate change

LINKS:

LINKED INTERVIEWS:

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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.

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