Cargill-backed pilot fund eyes private capital and 2021 launch

Quantified Ventures’ Mark Lambert says an expanded Soil and Water Outcomes Fund launched in early April could attract both debt and equity investors in the future.

The firm managing a Cargill-backed pilot fund to incentivize regenerative farming practices in Iowa plans to solicit private capital for an expansion project.

Mark Lambert, director for agriculture at Washington, DC-headquartered consultancy Quantified Ventures, told Agri Investor the firm is developing a framework for accepting investor capital to expand the Soil and Water Outcomes Fund that launched earlier this month. It had been supported by philanthropic grants from Cargill and the Walton Family Foundation.

“We have built this from the outset to be a vehicle that shifts away from what has been predominately a public-funding driven area for conservation, primarily supported by philanthropy and public funding from the federal or state government,” said Lambert, who previously served as a director with Farmland LP.

“To get to the scale that’s needed to effect change – in terms of climate change mitigation, water quality improvement, rural economic development – private capital is going to be needed.”

The SWO fund will pay participating farmers $30 to $45 per acre after changes to enhance sustainability of their farming practices have been certified by a partner organization, Sustainable Environmental Consultants.

Starting with the approximately 10,000 Iowa acres enrolled in the pilot through collaboration with the Iowa Soybean Association, the fund will use SEC’s certifications to create water quality and carbon sequestration credits to be sold to corporate or municipal buyers.

Lambert said the project aims to build towards enrolling more than five million acres annually over the next five to 10 years, through an expansion likely to initially focus on the Corn Belt. While operating the SWO fund as a corporate entity is more likely, he added, the firm could also opt to structure its continuation as a fund.

Lambert declined to address return expectations directly but did say the plans call for a structure that can entice impact investors and other sources of concessionary and market-rate-seeking debt and equity capital.

“We hope it will be a fairly attractive vehicle for loans or debt instruments of some kind to play a role in providing that payment and getting repaid for the sale of outcomes within a relatively short period of time,” he said, adding that the fund expects to create outcome credits that can be sold within 12-18 months of changes to farming practices.

Cargill’s plan to purchase carbon credits from the SWO fund will advance its internal goal of reducing total greenhouse gas emissions by 30 percent from 2017 levels by 2030, its director of row crop sustainability Ryan Sirolli told Agri Investor.

Though Cargill also works directly with producers in its supply chain to encourage sustainable practices, Sirolli added, the company sees support for the fund as part of a supplementary effort to endorse the outcomes-based approaches many companies within food and agriculture increasingly use to promote sustainability.

Sirolli declined to detail Cargill’s long-term expectations regarding carbon regulation or pricing but did say voluntary market-based frameworks like the SWO fund could ultimately reduce the need for formal regulation.

Cargill’s role in the fund, he said, is likely to concentrate mostly on buying off-take credits but the company will also look for other ways to support expansion of the effort, which he suggested could eventually include operations outside the US.

“We would love to see others put real backing behind this too,” Sirolli said. “The hope is that if Cargill is willing to put our money into this, then hopefully others will see it as legitimate and will want to as well.”