The big corporations, governments and NGOs will continue to be active in agriculture, but there are still opportunities for impact investors.
Scaling up existing models
Impact investing already has a track record of success in agriculture. Over years of experience organizations like Root Capital have developed models that have proved their effectiveness in providing impact finance to key rural smallholder communities. Now these methods are ready to be brought to scale, applied to new parts of the world and extended to new crops and new markets. GEXSI, Toniic and Total Impact Advisors are some of the intermediaries currently listing smallholder finance deals on the Maximpact platform now.
This could be an important avenue of growth for impact investing and for world agriculture with a ready-made demand for capital, a group of experienced financiers and proven models for making the finance work. And, because these seasoned financiers are good at sharing their knowledge, possibilities for replication and franchising make more impact possible.
Pioneering longer-term finance
These providers are also taking their investing into new territory and this could be another area to watch for investors. So far, most of the tried-and-true models have provided short-term finance for specific agricultural activities. Yet there’s a need for longer-term finance for a greater range of activities.
Some experienced lenders, including Triodos, are beginning to establish longer-term funds for just these cases. The buzz is that we may see other organizations joining forces and coordinating their efforts to create a bigger impact in the sector. This is a riskier approach,yet it has the potential to catalyze food production in many parts of the world and have an impact beyond any seen so far. Watch this space.
Moving from “alternative” to mainstream
The taste for sustainably produced,responsibly sourced and organic and Fair Trade certified food is growing in all parts of the world, as is the interest in locally produced food. Banks in many places are still reluctant to lend to small and mid-sized producers on terms they can afford.
This creates another area of potential profit for impact investors. Some already have a track record of providing finance to small and medium-sized, local producers of high-quality food. In the US, Iroquois Valley Farms is one example of a company tapping into this part of the market. Iroquois ValleyFarms buys land then leases it on a long-term basis to mid-sized local and organic farming businesses. In New Zealand, Agro-Ecological offers a range of supportive finance for organic and sustainable producers, while in Canada Investco Sustainable Food Fund does the same.All these companies currently have live deals on the Maximpact deal site.
Impact investors should look beyond farmers to find opportunities in agribusiness in its widest sense. The term agribusiness embraces every aspect of commercial food production, from growing, to processing,to market delivery. It includes new and high-tech methods and equipment as well as services to producers, including financial ones. It links agriculture with rapid growth areas like cleantech, renewable energy, water technology, bio-technology and sustainable forestry.
This broad sphere provides multiple opportunities to invest for impact a snapshot of Maximpact’s platform demonstrates this with its range of agribusiness deals: a business that caters to the information management needs of coffee farmers; an off-grid cold storage system that allows farmers to get their perishable produce to market in good shape; a eco-lodge that combines sustainable cocoa production with tourism. Several deals combine forest stewardship and agriculture; and important theme for impact. Agribusiness even extends into the ocean, with a deal for Hawaiian company innovating new ways to produce seafood.