A conversation with Sonja Stuchtey, co-founder of The Landbanking Group, about innovative financial strategies, accountancy standards and rules, reliable sourcing, better quality and lower prices, investing in the value chain and more.
Let’s say you are an orange juice or chocolate bar producer: your margins are under pressure because the costs of buying raw ingredients have exploded the last few years. What do you do? In any other business you would likely invest in your supply to secure reliable sourcing, better quality and potentially lower prices. Why haven’t we done that in regen (with some exceptions of fully vertically integrated brands)? Now it seems possible for companies to invest in their value chain so to allow orange farmers to make regen changes in the practises to future proof them. How? Crucially it comes back to treat it as a long term investment and not as a short term cost which will hurt you margins and, thus, annoy your shareholders. Treating investments (which btw we need billions) in regen as an investment and not a cost sounds so trivial and simple, but it takes a whole lot of technology to measure, report and a lot of talks with the big four accountancy firms to get this done.
LISTEN TO THE CONVERSATION ON:
WHY BUILDING A BRIDGE BETWEEN NATURAL CAPITAL AND FINANCIAL MARKETS IS KEY
Nature Equity Assets allow companies to book investments into nature on their balance sheet, recognising nature as critical infrastructure that deserves investment. Nature equity aims to disentangle land rights from natural capital for investment.
”If we really want to unleash big amounts of institutional money, we need to go even beyond the dimensions of big projects, and we need to cater for solutions that reflect their needs to have risk-diverse portfolios of investments, and this has not been possible the way nature investment functioned before we started. So, the ambition has been, from the start, how can we build this bridge between supply and demand? How can we repackage what nature delivers into products that capital markets understand? And this has been basically the birth of the Landbanking Group and of the Nature Equity concept, which is trying to repackage very different, very local, very specific outcomes into understandable contracts for investment.” – Sonja Stuchtey
”I found that there is a disconnect of lingo, of concepts, of timelines, of sizes. So actually, there is a supply and there is a demand, but they can’t meet because it’s not being translated properly. We need an infrastructure. And that’s basically what we are building or have established with the Landbanking Group. We need an infrastructure that understands the delivery of ecosystem outcomes. […] So these ecosystem outcomes from various different ecosystems. They are all very, very important for the protection of the last remaining healthy ecosystems we have, and they are important also to restore the ecosystems agriculture is embedded in.” – Sonja Stuchtey
WHY LAND STEWARDS USUALLY KNOW BEST WHAT TO DO WITH THEIR LAND
The Land Stewardship Group aims to provide entrepreneurial freedom to land stewards while measuring and paying for ecologically positive outcomes.
”The ambition is to respect that the land steward is usually the best custodian of the piece of land and knows best how to treat the land properly in a regenerative way. This is not always the case, because some have lost the attachment that they used to have. […] The first example is that most land stewards know exactly what they need to do to have their land prosper and thrive. So, we don’t prescribe what they need to do. […] So we don’t prescribe the management practices they apply; we measure the outcomes. And that’s our absolute core and our DNA that we try, and in some contexts, it’s not yet feasible. We hope technology evolves quickly.” –
– Sonja Stuchtey, The Landbanking Group
”How to achieve the ecologically positive outcome? Who are we to decide if permaculture is the better answer? Who are we to decide which kind of grazing structure you follow in your specific ecosystem? ” – Sonja Stuchtey
HOW LARGE CORPORATIONS IN CERTAIN CROPS HAVE A BURNING NEED NOW
According to Sonja, they are currently seeing some urgency in value chain investments.
”There are a couple of crops, and we are all aware of them, that have already grown to become a scarcity, or at least highly volatile. The cocoa price has tripled in the last 12 months. Oranges have tripled in the last two years. The same is true for olives and melons. We know, everybody who is involved in this market, that a lot of agri food supply chains are under stress. And most companies are very aware that the one and only chance they have to continuously ensure their supply chain, is to invest in a more regenerative practice. And while paying now for a higher price for a crop that actually is not yet regeneratively farmed, we offer them an opportunity to disentangle the timelines.” – Sonja Stuchtey
WHY TREATING INVESTING IN NATURE SHOULD BE CONSIDERED AN INVESTMENT, NOT A COST
Sustainability investments can be depreciated over time, but they must be considered in business decisions.
́”We are investing in all kinds of facilities that are essential to business. And if you have nature as part of your value chain, it’s absolutely essential. And we need to invest in the amendment, the improvement, the expansion, and the maintenance, as we do for everything else.” – Sonja Stuchtey
”It is an investment in their business continuity. That’s why I said it’s so important that it comes out of the CSR report into the financial report, because it is a big decision to take. And it is a decision to justify to the owners and to the shareholders. And that’s also why it’s so important to not impose this additional cash outflow into the cost structure of the commodity because it would completely twist the business case.” – Sonja Stuchtey
”I’d invest in the high-integrity forest in the DRC, Gaboon, Brazil, Suriname, where I don’t get any rubber from, I actually have nothing in my value chain. But I know it is an important infrastructure for me as a company going forward, because if the forest of Gaboon falls or the DRC falls, the Nile River will stop flowing, we will have hundreds of millions of refugees, and an entire continent where the north of the continent will dry off. So, another huge desert is being developed. That’s something everyone will suffer from; I cannot attribute this to myself as a company. Still, it’s a hugely, hugely important investment into the future. […] If I have a tax advantage, it has financial implications. And it can be added, at least, to my risk portfolio, and it will be part of my financial reporting. And it can even be an asset because it is a long-term investment, which is of monetary value to me.”
– Sonja Stuchtey, The Landbanking Group
OTHER POINTS DISCUSSED
Koen and Sonja also talked about:
- Why The Landbanking Group doesn’t describe the practises, but measures the outcomes
- The importance of giving farmers autonomy
LINKS:
LINKED INTERVIEWS:
- Emma Fuller – Making soulless capital who doesn’t care about regenerative agriculture invest in it
- Douglas Eger – How to IPO natural asset companies and raise billions
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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.