Credit Suisse and Equilibrium tie-up bets on ag infrastructure boom

Equilibrium chief executive Dave Chen says production methods that are ‘asset intensive, not land intensive’ will rewrite ‘the face of agriculture and what it means to scale.’

Equilibrium chief executive Dave Chen said the firm’s new partnership with Credit Suisse reflects growing and diverse institutional investor interest in the large-scale infrastructure underlying new methods of agricultural production.

The pair announced plans in late October to jointly develop and manage a sustainable infrastructure platform with a focus on food production, water, waste and energy.

Investors are increasingly excited by new applications of controlled environment food production such as high-tech aquaculture, vegetable-based proteins and protein synthesis, Chen said, in addition to the expansion of existing greenhouses and broadening range of crops grown within them.

“If you step back and ask yourself what these have it common, it’s that they are rewriting the face of agriculture and what it means to scale,” Chen told Agri Investor. “They are asset intensive, not land intensive.”

The larger institutions attracted by the scale of manufacturing-style agricultural investments, Chen explained, are often already focused on sustainability elsewhere in the industrial economy. Ag is able to supplement this focus as well as being able to address the food supply chain concerned accelerated by covid-19. “Ag is ground zero for sustainability. It’s ground zero for resources. It’s ground zero for food security and it’s ground zero for climate adaptation,” Chen said.

Credit Suisse Asset Management, the Swiss bank’s unit leading the deal, said the partnership with Equilibrium is a milestone within its broader effort to provide at least SFr300 billion ($327.8 billion; €277.7 billion) over the next 10 years to meet client demand for investments that “advance institutional sustainability.”

Chen said the partnership demonstrates how the firm is accessing various forms of capital to advance investments that began from its controlled environment funds. Equilibrium indoor farming portfolio company AppHarvest announced plans in September to list on a public exchange via a SPAC – an avenue pursued by various other innovative food companies this year.

“Now you are starting to see opportunities enter in through the public equities marketplaces, across the full gamut of asset risk categories and also in long-duration vehicles and permanent capital structures,” Chen said. “These are all signals about the mainstreaming of this broad category of controlled environment agriculture. You haven’t seen the end of this yet. This is going to go on for a decade.”

Chen declined to provide details of which projects or investment vehicles would be the focus of Equilibrium’s partnership with Credit Suisse. He explained it will focus largely on supporting Equilibrium’s existing businesses and joint efforts to develop strategies to expand the firm’s agriculture infrastructure investment thesis in global markets. In August, Equilibrium made its first controlled environment investment outside of the US when it backed Finka, a Mexican greenhouse company.

Wider investors are also responding to the creation of companies with credible claims of progress towards nation-wide scale of distributed food production, similar to the nationwide coverage sought by telecommunications providers or cell-tower real estate investment trusts, Chen said. Whereas controlled environment agriculture has traditionally been populated by family-owned businesses reliant on bank financing, recent years have seen formulation of corporate structures capable of accessing capital markets and deploying capital in large blocks, he added.

“Fishing was all about how many boats I can put on the ocean. Now it’s going to be how many facilities I can have. Milk was about how many cows I can graze on dairy farms. Now it’s about protein synthesis and protein extraction and formulation,” said Chen. “We used to think that was called food processing, but the differentiation between agricultural goods production and manufacturing; those lines are blurring.”