Introduction:
Whether it's climate change, security of supply or biodiversity. The agricultural sector is characterised by constant change and is increasingly facing new problems that need to be overcome.
As a result, there are both challenges from ever more regulations and many new opportunities from new business ideas.
Many of these business ideas focus primarily on the topic of sustainability. As a logical consequence, more and more impact investors are entering the agricultural sector.
Impact Investing:
Impact investing is a relatively new way of investing that is often in line with the UN Sustainable Development Goals stands for. In addition to the idea of sustainability, impact investing is also about generating an economic return. First and foremost, it is important that a sustainable impact can actually be measured.
One way of measuring the impact in key figures would be to map the CO2-emissions and the extent to which the business model minimises them. Certified ESG ratings and indices are also suitable for measuring the positive impact.
However, as many smaller or young companies in particular do not have the financial or bureaucratic means to manage such templates, a transparent business model based on the UN sustainability goals seems to make sense at first glance.
In most cases, impact investors are asset management companies, insurance companies, pension funds, banks and also private individuals. The reasons for impact investing are changed customer needs of investors or the solution of social problems without achieving a maximum return.
The UN Sustainable Development Goals:
The UN Sustainable Development Goals were adopted in 2015 as „AGENDA 2030“. The global community has committed to meeting these goals for a better future. These include ecological, social and economic aspects (Figure 1).
Why is impact investing interesting?
Although impact investing is a younger sector, it is growing strongly and enjoys a social tailwind. Reasons for further growth in the sector include rising international environmental standards.
The European Union in particular has set itself particularly ambitious targets in an international comparison in order to reduce greenhouse gas emissions. To this end, far-reaching regulatory measures are being introduced, which in turn may change the market behaviour of companies and private consumers.
These measures include, for example, an emissions trading system to make pollution more expensive, the introduction of sustainable fuels, a clean energy system with its own energy generation and the sustainable refurbishment of existing buildings.
These market changes alone could make the economic situation for impact investing even more attractive in the future.
The EU with particularly ambitious climate targets:
The EU has significantly exceeded its emissions reduction target of 20 % for 2020. According to recent estimates, greenhouse gas (GHG) emissions in the EU Member States in 2020 were 32 % lower than in 1990 (Figure 2). Nevertheless, the EU member states will have to make significantly greater efforts if the net reduction of 55% is to be achieved in 2030. In addition, the COVID-19 pandemic led to the high GHG reduction in 2020 as a special effect.
The reasons for the long-term GHG reduction are a combination of structural economic changes and a special focus on sustainable energy production.
Europe as the driving force behind impact investing:
According to investor surveys, Europe performs particularly well internationally as an investment location for impact investing. As can be seen in Figure Three, the fastest growing regions were Western, Northern and Southern Europe (WNS Europe) and East and Southeast Asia (SE Asia), which recorded average annual growth of 25% and 23% respectively in the period from 2015 to 2019.
The agricultural sector compared to other sectors in the field of impact investing:
While the WASH sector with the areas of water, hygiene and sanitation has seen the strongest growth, the agricultural sector also plays a not insignificant role (Figure 4). Investments in this sector increased by an average of 22% between 2015 and 2019.
While food and agriculture make up a relatively small proportion of assets under management (9 % with no outliers), 57 % of respondents have some allocation to this sector and the highest proportion of respondents (54 %) plan to increase their allocations over the next five years (2020 Annual Impact Investor Survey).
Examples of impact start-ups from the agricultural sector in Germany:
Climate
Klim offers a digital platform that shows farmers regenerative documentation and financing options. The focus is on regenerative agriculture. For example, methods are used where the soil absorbs more CO2 from the atmosphere than it releases. This results in positive side effects such as increased yields and more resilient soil. Overall, this makes agriculture more climate-neutral. This places a special focus on goal „13“ (Climate Action) of the UN Sustainable Development Goals.
Various impact investors, such as the Green Generation Fund and WI Venture, have decided to invest in the young company Klim in recent financing rounds.
skyseed
Skyseed enables the reforestation of forests with the support of drones and pelletised seeds. This enables sustainable CO2-storage possible. The young company first analyses the current situation and then transports the pelleted seeds to the right places in the next step. As with Klim, Skyseed also focuses on goal „13“ (Climate Action) of the UN Sustainable Development Goals.
In addition, skyseed was also able to enjoy fresh capital from impact investors with the participation of WI Venture and Better Ventures.
agriportance as an impact start-up:
In addition to Klim and Skyseed, agriportance also focuses on various sustainability goals. These are primarily the goals „seven“ (Affordabe and Clean Energy), „eight“ (Decent Work and Economic Growth), „nine“ (Industry, Innovation and Infrastructure) and „13“ (Climate Action).
With the current media situation leading to more and more calls for independence from foreign gas supplies, biomethane offers a genuine local alternative. Due to the generally sharp rise in gas prices, the green alternative biomethane is becoming more competitive.
agriportance aims to make the biomethane market more efficient by helping biomethane producers to cope with the bureaucratic and complex greenhouse gas balance and to find a buyer for the quantities produced. At the same time, mineral oil companies are to be supported in finding the right producer in the highly fragmented market with around 9,500 biogas and biomethane plants in Germany.
The objectives are reflected in agriportance's business model. Biomethane is particularly suitable as Alternative energy source. It is virtually climate-neutral, as it releases 85% less CO2 emissions than the fossil alternative natural gas. It is also particularly attractive for use in heavy goods transport. There are already around 900 CNG and more than 100 LNG filling stations in Germany. The 9,500 biogas plants are looking for alternatives as the EEG subsidy is coming to an end. Switching to biomethane Economically promising be.
Summary and outlook:
In the future, impact investing will continue to play an important role in the agricultural sector, due to both social will and political changes. This opens up many opportunities for investors and companies to adapt to the changing sector in good time. agriportance is also making an ecologically, socially and economically sustainable contribution here.
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