The Next Fintech Revolution: Agriculture Finance

A farm worker labors in a field near the town of Arvin, California. California's Central Valley is ... [+]..Getty Images

The last few years of tech news headlines were dominated by the word “fintech.” From massive fundraises to customer growth to product launches to scandals – new disruptors were everywhere in consumer banking, credit, payments, investment, and crypto. You’d have good reason to think we’ve hit peak fintech.

But the industries where most fintech is focused today represent only a fraction of the $23 trillion global financial services market. Products like Cash App, Robinhood, and Chime all tackle markets that are intuitive to everyday consumers, but consumers only see the tip of the iceberg.

Fintech’s next wave will focus on improving the less well-known, less ‘sexy’ markets fundamental to the global economy – and one of the largest markets primed for disruption is agriculture finance. 2022 saw a quiet but steady rise in fintech products being built for the massive agriculture industry, and they’re only getting started.

So – why disrupt agriculture finance to begin with? For the two best reasons in tech: the size of the market and the limitations of existing service providers.

Looking at the US alone, while farms contributed $134.7 billion to 2020 GDP, the industries dependent on farming – food manufacturing, food services, textiles – contributed over $1 trillion to the economy, accounting for over 5% of annual GDP. For many emerging markets, agriculture’s share of the overall economy is significantly higher – as much as 25% in some countries.

And yet, financial services are not as competitive as you’d expect in an industry the size of agriculture. Looking again at the US market – one of the most well-serviced in terms of agriculture finance – farm debt has continued to climb over the last year, farm loan interest rates are rising sharply, and farm lending continues to increase while the number of farm-focused banks continues to drop.

In a world where demand for food is expected to increase 70% by 2050, requiring $80 billion of annual investments, sluggish legacy players create a large and growing opportunity for new entrants.

While ‘agriculture finance’ refers to a large and heterogeneous set of activities – equipment lending, supply chain finance, commodities trading, farm banking – emerging fintechs have been focused on a few subsectors:

Agriculture Lending: Oxbury Bank in the UK raised funding twice last year to originate £650 million in agriculture loans to UK farmers. Tarfin in Turkey and Agro.Club in Eastern Europe provide supply chain financing to underserved medium-sized farmers who generally have to turn to their ag input suppliers for loans at exorbitant rates.

Companies like Crowde in Indonesia and Campo Capital in Brazil set up a peer-to-peer farm lending network. Players like Traive, AgroLend, Terra LUNA3 +1.9% Magna, and Agree all tackle farm lending across Latin America. ProducePay allows Mexican farmers to take out loans secured by their US purchasers.

Farm Payments: Agriculture tends to be a lagging industry in the use of new payment methods, with transaction products like checks still estimated at 90% of the industry. Bushel recently launched a payment facilitator, digital wallet, and embedded payments feature that connects purchasers to 40% of grain providers in the US.

Pricing Data & Commodities Trading: The deep markets for grain, livestock, and other commodities are paramount to well-functioning agriculture supply chains, and accurate pricing data is the lifeblood of the industry. These markets let purchasers hedge against rising food prices, and large agriculture operations insure themselves against supply chain price fluctuations. FarmLead is one company focused on digitally connecting cash grain trading networks and integrating trade data into other farmer & grain buyer digital tools.

Insurance: Agriculture is the most delicately poised industrial sector when it comes to climate change risks, due to incidences of drought, flooding, and natural disasters. Insurance is incredibly vital to avoid the collapse of precarious farm systems, but traditional insurers have a hard time underwriting farms. That’s where platforms like World Cover, which provides satellite-enabled climate insurance to small farmers in countries like Ghana, Uganda, and Kenya, or GramCover, focused on providing insurance access to farmers in India, come into play.

Marketplaces: While e-commerce platforms like Shopify have opened up global retail markets to independent merchants, most farm marketplaces still operate as centralized offline exchanges. In Kenya, startups like Twiga Foods, FarmShine, ShambaPride, and M-Farm have built platforms to connect farmers directly with buyers, and list easily accessible price information.

Banking: The largest prize for fintechs is to win over new customers in one vertical, such as lending or insurance, and cross-sell them banking products built specifically for their needs. DeHaat in India provides financial services to farmers across credit, materials sourcing, advisory, and sales. New Zealand’s Figured provides financial planning tools for farmers. FarmDrive creates a credit score for Kenyan farmers. Seso provides hiring, workforce management, and asset management tools to simplify farm payrolls in the US.

Over the next decade, we will see a parallel market of products across all fintech categories – banking, lending, savings, payments, investment, HR, payroll, and trading – develop focused specifically on agriculture.

While agriculture may not be the most obvious market for fintech to pursue, it’s definitely one of the largest and most consequential, and I expect to see many of these companies grow quickly and dominate the next wave of fintech.

I write about financial technology, specifically its impact on financial inclusion and opportunities for future innovation.

Source: The Next Fintech Revolution: Agriculture Finance

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World’s Largest Insect Protein Farm Signals Future Of Food Supply

Black soldier flies never eat as adults, so they must binge-eat while they are still larvae (shown). ... [+]Getty

The frontier of the agriculture industry is about to take a big step closer to going mainstream. Chicago-based food processing company Archer Daniels Midland ADM -1.1% (ADM) and InnovaFeed, a French firm that makes insect protein for animal feed, plan to begin building what will be the world’s largest insect protein facility in 2021 in the city of Decatur in central Illinois.

The partnership between ADM, a $28 billion giant, and the startup InnovaFeed amounts to a vote of confidence in a nascent industry that could one day play a key role in the global agriculture sector.

“I’m in awe. If they can pull this off, it will be magnificent,” said Jeffrey Tomberlin, a professor and entomologist at Texas A&M University who has done pioneering research on insect protein. “This facility will be several times bigger than anything else in the world,” Tomberlin said.

ADM and InnovaFeed plan to grow and harvest billions of an extraordinary insect called black soldier fly, whose larvae consume prodigious quantities of organic material and convert it into nutrient-rich protein that can then be sold as animal feed. ADM and InnovaFeed aim to produce up to 60,000 metric tons of animal feed protein per year, plus 20,000 metric tons of oils for poultry and swine rations and 400,000 tons of fertilizer.

Black soldier fly larvae will eat just about anything organic — including non-compostable food waste bound for landfills — and produce hundreds of times more protein per acre than traditional animal feed sources. The new plant will give ADM and InnovaFeed a foothold in the burgeoning market for sustainably sourced food at a time when consumers’ environmental awareness is growing.

The plant would be a major step toward mainstreaming the insect protein industry, which aims to feed farm animals and aquaculture not corn, soybeans or fishmeal — common types of animal feed — but instead black soldier fly larvae and other grubs.

If widely scaled-up, this would mean vastly reducing the carbon footprint and land requirements of farm animals, especially those raised for slaughter. For every kilogram of meat they produce, cows and sheep require around eight kilograms of grains, pigs require about four kilograms and chickens need 1.6 kilograms, according to one estimate. Growing that much grain requires intensive use of land and water.

The process for efficiently cultivating black soldier flies wasn’t well understood until the early 2000s — a big reason why the insect protein industry today remains small, consisting almost entirely of startups, including many in Europe, according to Tomberlin, the Texas A&M professor. InnovaFeed, itself only a few years old, runs the current world’s largest facility, in Nesle, France. The new Decatur facility will produce around four times as much animal feed per year.

Early backers see great potential as demand for sustainably sourced food continues to grow. More than half of U.S. consumers say they want sustainable food, according to a 2019 survey by the International Food Information Council, a nonprofit. Three out of five people in the U.K. are willing to pay more for environmentally friendly food options, according to a survey of 1,000 people by professional services firm GHD released in November.

The success of plant-based meat companies this year, such as Impossible Foods, has raised hopes of shrinking the agriculture sector’s carbon footprint: the food industry is responsible for one-quarter of global greenhouse gas emissions.

The black soldier flies at the new facility, which will be run by InnovaFeed, will gorge themselves on various corn products that ADM already produces at its Decatur facilities. Normally, these corn products would undergo several rounds of additional processing before finally being transported to an end customer, explained Sapna Sanders, InnovaFeed’s Project Director for North America, in an interview.

“We’re able to avoid all those energy-intensive steps,” Sanders said.

The arrangement suits both. ADM gets to avoid the expense and hassle of further processing its corn products. InnovaFeed gets to produce and sell its animal feed, oils and fertilizer to a range of customers. One of its contracts is with the food and drink behemoth Cargill, the second-largest private company in America.

In the future, black soldier fly larvae inside commercial facilities might be doing even more environmental heavy lifting — by eating up the mountains of food scraps and other human food leftovers otherwise headed for landfills.

Roughly one-third of all the food produced in the world for human consumption each year, 1.3 billion tons, is lost or wasted, according to the U.N. Much of that ends up in landfills, where it can’t naturally biodegrade and ends up belching methane, a greenhouse gas dozens of times stronger than CO2.

Part of the reason so much food winds up in landfills is that there aren’t any convenient alternatives, especially for waste that isn’t compostable. But black soldier flies would be happy to eat up all this landfill-bound waste: researchers have found they gladly eat even foods that can’t be composted. (They appear to be uninterested in hair and bones, however.)

Bringing down the costs

The biggest obstacle to scaling the insect protein industry up further is cost. Insect protein is still more expensive as an animal feed product than, for example, fishmeal, or the parts of fish caught by commercial fishing companies that are not consumed by humans (such as offal or bones). Tomberlin has estimated that it will take five or so more years for insect protein to be cost-competitive with traditional animal feed sources, although the industry is still too young to know how far and quickly costs will fall.

The U.S. may not be the first to get there. Compared to Europe, the U.S. government has shown relatively little interest in helping the nascent industry get a leg up, Tomberlin said. Yet even more than Europe, China appears most interested in getting the insect protein industry to commercial scale, he said. It already has some of the largest and most efficient black soldier fly facilities in the world and is intensively innovating, according to Tomberlin.

Nevertheless, that one of America’s largest food companies sees commercial value in insect protein is perhaps a sign that a widespread role for it at the heart of the agriculture sector is perhaps not too far away.

Correction: An earlier photo that accompanied this story pictured another type of larvae, not black soldier fly larvae, as captioned.

I cover the energy industry, focusing on climate and green tech. Formerly I covered oil markets for commodities publication Argus Media. My writing has appeared in The Economist, among

Source: World’s Largest Insect Protein Farm Signals Future Of Food Supply

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U.S. Farmers Struggle Through Drought To Bring Food To The Table But Face More Challenges Ahead

The drought has dragged on for a long time. Last year, orchard farmers in California’s Central Valley destroyed trees that were dying due to lack of water. This year, many more farmers did the same.

Lack of summer rain forced Nebraska farmer Kevin Fulton to go underground to find water for his crops. Not a perfect solution: the Ogallala Aquifer, where Fulton tapped in, has pumping restrictions in some areas, just not where Fulton is located. That’s because the aquifer is running dry.

As drought extends its deadly fingers from California to the eastern side of the Mississippi River — a vast stretch of the continent that produces most of America’s food, including three-quarters of its beef cattle and 70% of its vegetables, fruits and nuts — farmers and ranchers are facing a double whammy. They have to go farther to find water and higher fuel costs are forcing them to pay more to pump whatever isn’t coming from the sky. That predicament is still better than what’s happened to the land that’s not irrigated, Fulton says.

“The pastures are burning up,” Fulton, a 28-year veteran of farming the land he inherited, told Forbes. “Some aren’t going to produce anything and the yields have been drastically reduced. This wears on you mentally. You’re working hard to keep up with the irrigation. It’s depressing. These kinds of things sometimes push farmers over the edge.”

Only heroic efforts by farmers and ranchers have kept supermarket shelves supplied in the parched U.S. Even so, drought is expensive for consumers and limits their choices. Inflation caused by higher production costs will persist as long as hot, dry weather dominates vast swathes of the country. Many of the folks who make their living from agriculture realize that conditions in summer, the most dangerous season, will likely persist into the future.

“The hazards in recent years have been relentless,” Kristy Dahl, the Union of Concerned Scientists’ principal climate expert, told Forbes. “We need to be better prepared for ‘danger season,’ otherwise we’ll increasingly be caught off-guard every year. Climate change is getting worse.”

Despite the drought — in some places, the driest conditions going back more than 1,000 years — American producers have managed to bring in a projected harvest that’s nowhere near as bad as it could be. Soybean production will actually increase 2% from 2021, according to the U.S. Department of Agriculture, and wheat is up 8% over last year as global demand soared in the wake of Russia’s unprovoked war on Ukraine, a major wheat-producing country.

The concern is the corn harvest, which the USDA predicts will be down 5% from 2021, with less of the supply classified as good or excellent compared with last year. Still, the USDA forecasts record-high corn yields in California, Iowa, Washington and Wisconsin.

American food producers polled by the American Farm Bureau Federation last year complained of dangerously dry conditions. The farmers and ranchers surveyed in August 2022 say circumstances are pretty much the same or worse.

Nearly three-quarters of farmers saw a reduction in harvest yields due to drought, while 37% said they were tilling over fields that won’t produce anything because of a lack of water, up from 24% last year. One-third of orchard farmers nationwide, and 50% in California, said they were ripping up trees, an increase from 17% in 2021. In one case, the Farm Bureau said, a California producer dropped all the fruit on five acres of young Cabernet grapes to help the vines survive without water. That ensured that the farmer would have no revenue from those vines.

Similar measures plague the livestock industry, according to the Farm Bureau. Two-thirds of ranchers reported selling off animals or birds, with average herd sizes expected to be down 36%. The biggest herd declines are in Texas (down 50%), New Mexico (43%) and Oregon (41%), a good example of the wide geographic distribution of the distress.

Fulton says 2022 was the worst year of drought in the past decade, and the second-worst in his three decades of farming, after 2012. Some of Fulton’s neighbors are now reducing the sizes of their herds and taking the livestock to the auction barn. Fulton says he’s considering doing the same. Drought kills off the grass that cattle need to graze on, so farmers have to buy expensive hay to feed them instead.

“You can’t feed yourself out of a drought. It doesn’t work from a profit standpoint,” Fulton says. “We’re going to run out of grass.” In mid-August, rains finally hit farms in dried-out Southwestern states, including Texas, Arizona and New Mexico. Then the rains arrived on the Great Plains. Farmers like Fulton welcomed the brief break. But it was too little, too late.

On Fulton’s farm, the effects of a changing climate are pervasive. There are more grasshoppers, which love dry weather and eat the crops. Fulton’s bees have also been less active. Honey production is half of what it normally is, he said. There’s also the looming threat of heat-driven poison: If some plants don’t get enough water, they can produce high levels of nitrates, which makes them toxic for the livestock that eat them.

According to the USDA’s August production report, the rains in mid-August helped to replenish topsoil moisture and “revived drought-ravaged rangeland and pastures. However, hot, dry weather persisted.” From the Pacific Coast to the northern Plains, temperatures averaged at least 5°F above normal. Readings even averaged 10°F above normal in some locations across the interior Northwest and Northern California.

Drought-resistant seeds and drip-irrigation to conserve water are promising solutions, if they can be put to use at scale. A lot of money has gone towards funding startups and research, but there haven’t been many mainstream successes.

This year’s industrially grown commodity crops so far still seem strong overall. But the cracks driven by climate change are starting to show. Darvin Bentlage, a 66-year-old, fourth-generation cattle and grain farmer located north of Joplin, Missouri, says the extreme weather that he and his neighbors face has taken them on a roller-coaster ride. Earlier this year, it rained so much that he had to delay planting. Then the drought came.

“That was a rough start,” Bentlage told Forbes. “In my 50 years of farming it never went from being so wet to so dry – it’s the fastest I’ve seen.” He added: “Pray for rain.” Despite decreasing access to water and extreme weather projections on the horizon, Fulton says he’s optimistic for the future.

“Like most farmers, when we have a bad year, we say it will be better next year. We live to farm another year,” he says. “Sometimes it seems like it can’t get any worse.”

Chloe Sorvino leads coverage of food and agriculture at Forbes. Her book Raw Deal: Hidden Corruption, Corporate Greed and the Fight for the Future of Meat will be published in

Source: U.S. Farmers Struggle Through Drought To Bring Food To The Table But Face More Challenges Ahead

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War-Fueled Global Hunger Catastrophe On The Way With Solutions Tough To Come By


Tens of millions of people, from Europe to Asia, Africa to the Middle East, are expected to go hungry this year due to a grim combination of factors made significantly worse by Russian President Vladimir Putin’s unprovoked war in Ukraine.

The conflict, which involves two countries that together produce nearly one-third of the world’s wheat, helped push the grain’s global price up 21% in just the 10 days that ended March 3. Extreme weather, such as persistent drought in North America, high fuel costs, fertilizer prices through the roof and the need to feed an increasing number of refugees displaced by war and climate change will contribute to the menace of growing hunger in 2022.

“The situation is in many ways bordering on catastrophic, and without substantial and immediate assistance, it will get worse,” said Eric Muñoz, senior policy advisor for agriculture at Oxfam, the Nairobi-based charity. “There’s no better wake-up call than the current moment, with sky-high food prices and skyrocketing hunger, to have a serious conversation about rethinking global food systems.”

Short-term solutions are hard to come by. American farmers, hobbled by what some observers are calling the driest weather in 1,200 years, can’t be depended on to make up for the shortfall. Nutrien, the world’s biggest fertilizer maker, has said it plans to ramp up production by 20%, but prices have been so high that a lot of the world’s growers still won’t be able to afford it.

A more permanent way out of chronic world hunger would be creating more options in more places to grow and access food. Organic farming also shows glimmers of growth, but still accounts for less of 1% of agricultural acreage in the U.S.

Then there’s the problem of getting food to people who are in some cases so hungry they’re starving. Before the war in Ukraine, 26 million refugees, the highest level in history, relied on a network of aid and government organizations for food. Russia’s attack on Ukraine has displaced or made refugees of another estimated 10 million.

The World Food Programme, the UN’s food-assistance branch, expects its costs to rise $71 million a month due to the conflict alone. The organization says it has already had to reduce rations in hunger-stricken Yemen, where it says more than 16 million people are food insecure and “there are pockets of famine-like conditions.”

The Middle East and North Africa are particularly vulnerable to higher food prices, according to the World Food Programme. Lebanon imports about half its wheat from Ukraine, the organization said. For Tunisia, the percentage is 42% and for Yemen 22%. Food prices worldwide are already at an all-time high, and buyers that need to shop around to replace Ukrainian wheat would pay even more, the organization said.

Russia has already curtailed wheat and maize exports, and Ukraine’s agricultural minister said Tuesday that its spring crop could be as small as half what the country expected before the invasion. Ukraine has suspended exports of meat, livestock, salt, sugar, buckwheat, oats, millet and rye.

In 2010, skyrocketing bread prices contributed to the political uprisings of the Arab Spring, which swept through some three dozen countries and forced regime change in Egypt and Libya. Protests against high food prices also played a part in the rise of the violent Islamic State extremist group. The current global food supply is not as bad as in 2010 — when total food supplies were even lower — but the global grain supply is now in a critical situation.

U.S. farmers are hamstrung when it comes to filling the gap in food production. First, there’s the historically lousy weather. Thirty-five states, or 61% of the total acreage of the lower 48 states, were in drought last week, according to government calculations. Extreme or severe dry conditions persist from the Pacific coast in the West to as far as Louisiana and Arkansas in the East.

Then there’s the availability of land. Farmers in places like the U.S. and Brazil are already farming as much as they can. Agriculture requires long-term planning far ahead of a planting season, and companies and organizations purchase food months if not years in advance. Direct contracts with suppliers give growers even less leeway on what crops to raise. That’s why ending the global food shortage is far from as simple as American or Brazilian farmers planting more wheat or corn.

The high cost of fertilizer has also put a drag on global agriculture. Nitrogen fertilizer prices have increased four-fold, while phosphate and potash prices have climbed more than three-fold since 2020. Nutrien said it’s expanding its mining in Southern Canada for potash, an essential source of potassium, to help offset what could be a gaping global shortfall due to sanctions on Russia, a big exporter.

Proponents of industrial agriculture say chemical fertilizers are necessary to harvest large yields and feed a growing global population. Fertilizer overuse, however, is a leading cause of waterway pollution and dead zones like the massive one in the Gulf of Mexico, as well as soil degradation and erosion. Those are all factors which will challenge access to food in the future, and advocates of sustainable agriculture say now is the time to make the transition to more resilient systems.

“These are all price signals that show the world is telling us to change,” said Sanjeev Krishnan, the chief investment officer at venture firm S2G, which is backed by Walmart heir Lukas Walton and has invested in food and agriculture since 2014. “Is this cyclical or structural? In my opinion, it’s structural.”

Just as fertilizer prices were starting to spike, the U.S. Department of Agriculture announced it would create a $250 million fund to invest in alternative and U.S.-made fertilizers. The government of Brazil, which has imported a lot of fertilizer from Russia, is also investing in alternatives. Meanwhile, earlier this month, French President Emmanuel Macron signaled support for more investment in food infrastructure.

“Europe and also Africa will be very deeply destabilized in regards to food because of what can’t be planted right now in Ukraine,” Macron said March 11. “We will have to prepare for that and reevaluate our production strategies to defend our food sovereignty, but also to be able to define a strategy concerning Africa.”

Food security should have the same priority as energy security, said Graham Gordon, U.K.-based head of policy at the nonprofit Catholic Agency for Overseas Development, the world’s second-biggest humanitarian network after the Red Cross.

“We’ve had two years where supply chains haven’t been working,” Gordon said. “How can we rethink food and how can we push for more food sovereignty?”

Chloe Sorvino leads coverage of food and agriculture at Forbes. Her seven years of reporting at Forbes has brought her to In-N-Out Burger’s secret test kitchen, drought-ridden farms

Source: War-Fueled Global Hunger Catastrophe On The Way With Solutions Tough To Come By

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Critics:

The war in Ukraine grows worse by the day, with an estimated 1,500 civilians killed and more than 3 million forced to seek refuge in other countries, according to the Council on Foreign Relations.

Stopping the war as soon as possible is essential for saving lives, protecting Ukraine’s sovereignty, and curbing global repercussions.

In particular, the war has had a devastating impact on local food production. Since the global food system is a fragile web of interconnections, many countries dependent on Russia and Ukraine for food and agricultural supplies now face immediate and looming food shortages that will inevitably worsen the global hunger crisis.  

“I am deeply concerned that the violent conflict in Ukraine, already a catastrophe for those directly involved, will also be a tragedy for the world’s poorest people living in rural areas who cannot absorb the price hikes of staple foods and farming inputs that will result from disruptions to global trade,” said Gilbert F. Houngbo, president of the International Fund for Agricultural Development (IFAD), in a statement

“We are already seeing price hikes and this could cause an escalation of hunger and poverty with dire implications for global stability.” IFAD, a Global Citizen partner, has teams worldwide working to support small-scale producers and improve food security in rural areas of developing countries that have documented the ways in which the war in Ukraine has worsened existing food crises.

The impact has been particularly devastating in agricultural contexts, where the ability to acquire and distribute food is always a vexed ordeal due to chronic underfunding. But new crises are emerging as a result of the disruptions caused by the war…..

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Small-Scale Forestry and Carbon Markets

Small landowners across the world have the potential to use their land in the fight against climate change while making money in the process — -but only if the carbon market lets them in.

To slow the destructive impacts of climate change, the world needs to reduce its net carbon emissions: according to the most recent report from the Intergovernmental Panel on Climate Change, emissions need to decline by 45% from 2010 levels by 2030 in order to limit global warming to 1.5 degrees Celsius. While technological solutions will play an important role in this process, nature also offers a powerful tool: trees.

Trees pull carbon dioxide out of the air and store it, creating ‘negative emissions’ that can help offset carbon released from energy production and other processes. To incentivize the use of forests for negative emissions landowners need a way to document and sell trees as carbon credits. For small and private landowners, turning trees into carbon credits and selling them on the market is a hurdle too big to overcome.

Carbon markets offer a way for anyone to pay for carbon removal as a way of reducing their environmental impact or total balance of carbon emissions. Carbon credits are purchased from forestry, solar, cookstove or any projects that help reduce the total amount of carbon in the atmosphere. In this way, they offer an incentive for landowners to keep their forests alive and healthy, rather than using them for timber, grazing, or other uses:

With a high enough price, helping forests grow can be more lucrative than cutting them down. The Afognak Forest Carbon Project, for example, is expected to earn millions of dollars over 30 years through better land management of the over 8,200 acres owned by the American Land Conservancy and the Rocky Mountain Elk Foundation in Alaska.

For small-scale landowners, however, the math doesn’t always work out. While it is estimated that over a third of all American forest land is owned by individuals, each property averages only 66 acres. This makes embarking on a forestry project a very different experience for small scale landowners versus those that command large swaths of forest. Highly specific knowledge and an upfront capital investment is required to sell carbon credits from a forest.

Landowners need to develop a plan for how they will increase carbon dioxide uptake on their properties. The most common examples are increased tree planting or improved land management. The fees for professional planners and feasibility assessments can be tens of thousands of dollars — -a sizable upfront cost for a small-scale landowner.

Many forestry projects turn to investors to help with such upfront costs, but small-scale landowners have a greater challenge. Projects with smaller returns may not have enough capital to cover assessment costs and still provide value to investors.

For example, projects with less than 1500 acres aren’t expected to recover the cost of fees to sell on California’s carbon market. Additionally, smaller plots of land have a higher risk of being wiped out by disease or natural disaster. As a result, investors may prefer to stick with larger forestry projects and reduce their chance of losing the carbon credits they purchased.

Disparate carbon market standards and verification systems are challenging.

Landowners need to be confident that their land management plans will net them sufficient earnings through the carbon market to undertake the project to begin with. Small landowners may not have the time or expertise to deal with credit systems that can vary by market, location, and time. What’s more, the carbon credit verification and trading process comes with even more fees, eating into already thin margins.

Even for large-scale landowners, navigating the carbon credit verification system can be a challenge. Different carbon markets have different standards for earning credits. For example, projects participating in the California Air Resource Board’s market need to keep their captured carbon sequestered for 100 years, while users of the American Carbon Registry need only do so for 40 years. Different markets can also trade at different prices.

Novel financing mechanisms, opportunities for automation and sharing best practice guides for forestry projects provide a way forward.

Easing the pathway into carbon markets for small landowners is key to making productive use of their vast and diverse acreage. Luckily, many means of lowering the barrier exist and are currently being explored. Different financing options, including by lumping several small forestry projects into one larger one, could help attract investors; several carbon markets allow for such aggregation, though with constraints.

Automating components of the land management planning and verification process, for example through the use of remote sensing and artificial intelligence, could bring costs down as well. Finally, ensuring that clear, accurate, and up-to-date guides to forestry projects are easily available to landowners would ensure that they are always making the most-informed decisions about their land.

While getting small landowners on board is crucial, it is important that the standards for carbon credits don’t degrade in the process. Financial incentives make forestry projects feasible but what matters for the planet is just how many tons of carbon dioxide end up back in trees, not how much money was made from them.

As a key proponent of forestry projects, Sādu is aware of the barriers to scaling these solutions. Some of Sādu’s Sustainability Partners prefer to allocate capital towards nurseries and employment training programs rather than applying for international certifications like Verra, REDD+ and Gold Standard. This is a clear signal that the current certification process is not a fit for all types of projects.

As climate change continues so will the need for ecosystem conservation and carbon sequestration. Additionally, initiatives like 1t.org and LEAF Coalition, which mobilize capital for nature-based solutions to climate change, will continue to create an increased demand for forestry projects. In order to meet this demand the incorporation of small scale forestry projects into verified carbon markets will be necessary.

Service providers of GIS and remote sensing tools like Pachama, Planet, and Natural Capital Exchange, who use satellite imagery to estimate the amount of carbon sequestered by forests, are quickly reducing the barriers to entry for projects of all sizes.

These solutions, in combination with community-based verification apps like Greenstand or Treedom, and algorithmically determined carbon price research by The Cambridge Centre for Carbon Credits (4C) will result in a more robust data set by which the value of forestry credits can be determined. If this data is applied to small forestry projects nature-based carbon credits will become easier to access for both consumers and producers.

Sādu is building a solution to leverage this newly available data for our app users. Our goal is to make it easy to understand the positive impact of investments into forestry projects of all sizes. Once achieved, increased transparency and improved market access will result in longer living forests and a more diverse group of investors benefiting from the growth of the carbon market.

By: Brittany Salas

Co-founder & CEO Sādu. Invest in your health, save trees. #SaduApp #NFTrees. Previously #ClimateTech VC & corporate innovation. @nyucga alum.

Source: Small-scale Forestry and Carbon Markets | by Brittany Salas | Dec, 2021 | Medium

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