Writing an article on agriculture for a business outlet was uncommon a few years back. Many farmers plowing their fields with tractors would not have attracted anyone. Agriculture is now a hub for innovation and investment, even though the reality of the climate crisis is becoming clear. With wars and natural catastrophes destroying lives worldwide and threatening food security, and the global finance sector under pressure to improve their portfolios and ensure sustainable futures, it is no surprise that agriculture is a hotbed of investment. This is where smart tech and business minds should be.
There will only be a future with agricultural transformation.
It’s as simple as that. It’s that simple. We all need food and water to survive. But the food system needs to be transformed. Here are a few statistics: 70% of global freshwater goes to agriculture. 25% of the land in the world has been lost to development. All this is against the backdrop of climate change, which means that we must adapt to it and feed 10 billion people.
Agriculture is a complex industry that faces many challenges. Visionaries, strategists, and doers are required for this industry. This sector has the potential to contribute to our world’s future significantly. Many people are feeling burnt out and questioning why they continue to work in the corporate world since the Covid-19 epidemic. Helping to transform agriculture brings joy, purpose, and hope. Financial success is possible. Financial reward is not a prerequisite for doing good.
Agritech can be boosted by focusing on farmers’ access to financing.
Increasingly, investors are embracing agriculture under increasing pressure to stop funding polluters and join the climate fight. Major legislation and regulations in the USA and EU are major factors in this trend. The Inflation Reduction Act of 2023, which directs federal spending toward reducing carbon emissions, contains nearly $40 billion in provisions for the agricultural sector. This includes requirements to support climate-smart agriculture, clean energy provisions, and agroforestry.
The EU Taxonomy, a framework defining what constitutes a sustainable investment across the globe, provides guidelines to help investors redirect capital toward projects that do not cause harm. Investors have focused on agriculture and other suitable industries because large corporations and financial institutions must report on their sustainability efforts. Banks funds two-thirds of Europe’s economy. This gives them enormous power and responsibility for helping to transition to a sustainable future.
One emerging trend is using sustainability-linked loans to provide businesses with more favorable lending terms for adopting sustainable practices and taking action on climate change. These loans are tied to certain sustainable farming requirements. This is the case in agriculture. To this end, banks are starting to partner with technology companies to provide the necessary mechanisms to effectively administer these new types of loans, including measuring, verifying, and validating sustainability-related practices of farmers receiving the loans.
Combining the same measurement technology with pre-payment carbon credit mechanisms, farmers can make extra income from regenerative farming. Although controversial, high-quality, validated, measured, and verified carbon credit is essential to the transition to low-carbon agriculture. They also provide funding for an industry that has struggled with financing.
The global economy is experiencing a very difficult time. However, the agritech industry is better placed than others to weather the storm. The value of AgTech VC deals rose from $6.5 billion in 2020 to $11.4 billion by 2021. While growth is expected to slow, the investment community still sees the sector as a positive. We will see more demand for transformative agricultural technology in 2023 and beyond due to the new financing mechanisms that farmers have created.
What are the essential things to know before you enter the industry?
These trends might lead some entrepreneurs to consider entering the space. Here are some things to keep in mind.
The agricultural sector is highly subsidized and heavily regulated. As governments are under greater pressure to implement effective strategies to combat the climate crisis, the regulatory environment will likely change dramatically over the next decade. This is creating many opportunities for innovative entrepreneurs, but it also means a lot of bureaucratic red tape and hurdles must be considered. This shouldn’t be a reason to avoid the rewarding industry that provides us with our food.
