We’re entering the era of regenerative investment

Blog post 11 – manuel troya-featured image
7 Aug, 2023
— Arlene Barclay

You can’t fix broken systems with a broken financial system.

Amid the multiple crises we currently face, we need courageous, forward-thinking investment that delivers deep and tangible impact. What we need is regenerative investment.

Climate Farmers has demonstrated that a new approach is possible: one that puts purpose on the same pedestal as profit. We have raised 2.5€ million in funding from Kai Viehof, but it’s by no means conventional. A mission-driven, value-aligned subordinate loan that turns current funding paradigms upside down.

In this article, we’ll explore the emerging concept of regenerative investment while showcasing how investors can – and should – be a key force for mobilising change.

WHY WE NEED TO RETHINK INVESTMENT

Our current system of investment is degenerative by design.

For all its success in creating monetary wealth, it’s equally failed in generating – not least, preserving – natural capital. Ecosystem services we inherently depend on have been depleted in the name of profit and accumulation.

We’ve treated nature as a warehouse, emptying its shelves and extracting its raw materials beyond its regenerative biocapacity. But we need to realise we humans are a part of nature, not above it. A healthy business, economy, or society can’t exist in a living environment blighted by ills.

“We have a responsibility to resolve the contradiction between short-term human satisfaction and the long-term protection of life on earth.”


— Kai Viehof

Many venture capital funds focus on maximising growth rather than impact. Even most of the so-called ‘impact investors’ follow this same playbook. Positive social or environmental impacts, if they occur, tend to be more of a by-product.

But how much sense does it make to maximise growth while humanity and the planet crumble? We need investment that is in service to all of society.

Organisations have a responsibility to fulfil their mission, while investors can – and should – play a critical role in redefining how their funds are distributed.

“Many venture capital funds take something that’s not their own and squeeze out the value. Great ideas that have a positive impact on society won’t develop, grow or thrive through that kind of investment.”


— Kai Viehof

THE ISSUE WITH IMPACT INVESTING

It’s been 16 years since the term ‘impact investment’ was established. Since then, the sector has evolved significantly, but one thing stays true: impact investing has an impact problem.

People in the impact investment community have long pondered whether there’s a trade-off between impact and financial returns. Contrary to this highly contentious debate, delivering deep impact is possible while receiving a fair return. But the emphasis lies on ‘fair’.

As the definition of wealth and capital expand to include more than what money can measure, the value of prioritising deep impact over profit-maximisation becomes more visible.

“If we learn to understand wealth holistically rather than just in monetary terms, we will understand that by regenerating the health and wealth of our communities and ecosystems we are creating wealth for all.”

 

— Daniel Christian Wahl

THE EMERGING PARADIGM OF REGENERATIVE INVESTMENT

Regenerative investment is emerging as a key tool to solve systemic issues. The concept was born in 2015 when John Fullerton laid out the principles of regenerative economics. Profits are viewed as a means, not an end, while circulation replaces accumulation.

“The transition to a regenerative economy is about seeing the world in a different way – a shift to an ecological worldview in which nature is the model. The regenerative process that defines thriving, living systems must define the economic system itself.”


— John Fullerton & Hunter Lovins (2013)

Regenerative investment provides financing that’s tailored to maximise the impact of social enterprises, community-led projects, and restorative environmental initiatives.

Under the model, wealth is redefined in line with multiple kinds of capital rather than strictly financial. It balances the scales of economic control, revises exclusionary credit standards, and deploys capital more impartially by removing repayment terms and collateral requirements that are degenerative by design.

Through the life-centric principles of regenerative systems, a new dawn emerges. We can redefine our role on this earth, prioritising restoration over extraction, collaboration over competition, and purpose over profit.

THE CLIMATE FARMERS CASE STUDY

 

Kai Viehof’s 2.5€ million investment in Climate Farmers provides a unique case study for regenerative investment. Its structure ensures Climate Farmers stays focused on its mission. And while investors are entitled to a fair return, shareholder profit maximisation is not the overriding goal.

The steward-owned model, initiated by the likes of Ecosia, has been applied to our mission. By instituting a controlling entity, all major decisions have to serve both the business interest and our mission to enact systemic change in the agricultural sector.

We were connected to Kai through our friends at ProjectTogether, a dynamic non-profit that unites people, politicians, and businesses to take collective action.

As a funder of the Farm-Food-Climate program, it was through ProjectTogether that Kai’s interest in food systems change was ignited. He has since become part of a funders movement initiated by the organisation that supports enterprises with a strong focus on systemic change.

“Most impact investors we talked to – and we talked to most – expect a social impact company to return profits at the same conditions as a purely commercial enterprise. As founders of Climate Farmers, we forego significant returns in the interest of our company’s mission. We need investors who align in this manner. Kai is a still-rare example of a courageous investor willing to support systemic change.”


— Ivo Degn, CEO & co-founder of Climate Farmers

The large-scale transition to regenerative agriculture can’t be financed through extractive investment. The current model of hypergrowth-and-exit and VC investment is not compatible with the creation of a sustainable future.

To advance discussions around regenerative investment, we’ll host an online event, ‘Regenerative Impact Investment Day’, on 12. September 2023, 4PM (CET). If you’re an investor interested in exploring this emerging paradigm, join us there.

CLOSING REMARKS

As Neal Spackmann once said: “We are not destructive by nature but by habit, and our potential to regenerate mirrors our potential to destroy. If we recognise our true role as a keystone species, we can become the primary vector for earth’s recovery”.

We need to break out of this toxic cycle of extractive economic design. Thankfully, we humans designed this system and it’s within our reach to redesign it.

The transition towards a regenerative economy is within reach. The tools, structures and processes are at our disposal, waiting to be harnessed. Now, we need others to follow suit.