By: Robin Saluoks, Co-Founder and CEO e-agriculture.
getty
A few years ago, writing an article about agriculture in a business outlet would have seemed out of place. Who would be interested in a group of farmers plowing their fields with tractors? However, as the reality of the climate crisis becomes clearer, with wars and natural disasters destroying livelihoods across the globe and threatening food security on top of pressure on the global financial sector to clean up investment portfolios and promote a sustainable future, agriculture is now Hotbeds for investment and innovation. This is where smart technical and business minds should go.
Without agricultural transformation, there is no future.
It’s that simple. We all need to eat and drink to survive, but the food system is in dire need of transformation. To name a few statistics, on average 70% of freshwater globally is used for agriculture, the global food system emits nearly a quarter of greenhouse gases, 25% of the world’s land has been degraded, all in the context of the need to adapt to climate change And get ready to feed 10 billion people.
Agriculture is an industry with extremely complex and multifaceted challenges that requires visionaries, strategists and doers. This is an industry full of potential that can make a significant contribution to the future of the world. Since the Covid-19 pandemic, with many exhausted and questioning their purpose on the corporate treadmill, helping transform the agricultural sector brings a sense of fulfillment, purpose and hope. There is also room for financial success. Doing good does not exclude financial rewards.
Paying attention to farmers’ financing channels can promote the development of agricultural science and technology.
Agriculture is increasingly popular with the investment community amid growing pressure to join the climate fight and stop funding polluters. This trend is largely the result of major EU and US legislation and regulations. The Reducing Inflation Act (IRA) of 2022 directs new federal spending to reduce carbon emissions and more, including provisions for the agricultural sector of nearly $40 billion to promote climate-smart agriculture, agricultural conservation, clean energy supplies and agroforestry Wait.
Across the pond, the EU taxonomy provides a set of guidelines setting out the definition of sustainable investing, with the aim of redirecting investor capital towards projects that do not cause harm. Large corporations and financial institutions must report on their sustainability efforts, leading investors to focus on the right industries, including agriculture. In Europe, two-thirds of the economy is financed by banks, giving them enormous powers and responsibilities to assist in the transition to a sustainable future.
An emerging trend is the use of sustainability-linked loans, offering businesses more favorable terms to adopt sustainable practices and take action on climate change. In agriculture, for example, these loans are tied to specific sustainable farming requirements that farmers must meet during the life of the loan. To this end, banks are starting to work with technology companies to provide the mechanisms necessary to effectively manage these new types of loans, including measuring, verifying, and verifying the sustainability-related practices of farmers receiving loans.
The same measurement technology combined with the advent of prepayment mechanisms for carbon credits gives farmers the opportunity to earn additional income by adopting regenerative agriculture. Although controversial, measured, verified and verified high-quality carbon credits are an important element of the transition to a low-carbon future and provide an important source of funding for the agricultural sector, which has long had access problems.
While the global economy is going through an extremely challenging time, the agtech industry is better positioned than most to weather the storm. AgTech venture capital deal value jumped from $6.5 billion in 2020 to $11.4 billion in 2021, and while growth may slow, the investment community is optimistic about the sector. Additionally, we will see more demand for transformative farming technologies in 2023 and beyond, thanks to new financing mechanisms for farmers.
What should you know before entering this industry?
Given these trends, some entrepreneurs may be considering entering the space. While I think now might be a good time to do so, here are some things to consider.
The agricultural sector is a highly subsidized and highly regulated industry. The regulatory environment is likely to change dramatically over the next decade, as governments face increasing pressure to implement viable strategies to tackle the climate crisis. While this opens up many new opportunities for innovative entrepreneurs, it also creates a minefield of red tape and bureaucratic hurdles to consider. Still, no one should hold back from this – the rewards of working in an industry that feeds us are worth it.
