PSP Investments has extended a $125 million financing facility to Indigo Ag that is secured by the Flagship Pioneering-backed company’s intellectual property.
The C$204.5 billion ($165.4 billion; €138.7) Canadian pension highlighted its loan to Indigo in its annual report for the fiscal year ending March 31 that was released in mid-June. PSP wrote that the investment is indicative of how nature-based approaches like agriculture can support efforts to “fight against” climate change.
Indigo’s methodology for measuring carbon dioxide removals derived from farming practice changes is “scalable, affordable and scientifically rigorous,” according to PSP’s report, which noted the Boston-based company’s intellectual property has already been insured by a consortium of insurers.
“Believed to the first of its kind, the financing is backed by Indigo’s intellectual property,” wrote the authors of PSP’s annual report. “This novel deal structure protects PSP from downside losses and improves the risk-return profile of the deal, while helping Indigo leverage the significant value of its technologies to raise funds and continue to grow without equity dilution.”
Indigo was established in 2014 and has raised at least $850 million from investors that have included Flagship, the Alaska Permanent Fund and FedEx, among others. In February, it sold carbon credits derived from agricultural practice changes for $20 per ton of CO2 sequestered to a group of buyers that included Epiphany Craft Malt, apparel company The North Face and Maple Leaf Foods, a consumer packaged goods company.
Indigo noted in a mid-June announcement of plans to rebrand its carbon farming unit as part of a broader market education effort that Purdue University’s Ag Economy Barometer recently found less than 1 percent of US farmers have entered into a contract designed to seize opportunities related to carbon farming.
A Nielsen survey commissioned by Indigo confirmed that finding and highlighted that access to information remains a key barrier to farmer adoption.
“For farmers – a highly conscientious group eager to innovate with new practices like cover cropping and no till, but careful to ensure any practice changes they make are right for their unique operation – more support is needed to meet the need for informed decision-making and get started with a program today,” Indigo wrote in its statement.
PSP noted in its description of Indigo that its offerings also include biological seed treatments and a digital grain and logistics marketplace. It was not clear whether the C$125 million loan to Indigo was drawn from the C$9.7 billion natural resources portfolio that houses PSP’s ag and timber investments and constitutes 4.7 percent of the overall fund.
That portfolio achieved 10.6 percent returns in fiscal year 2021, according to the annual report, which described PSP’s natural resources income as driven by net valuation gains of C$1.1 billion and distributed income of C$0.2 billion that helped offset foreign exchange losses. Overall, PSP reported an 18.4 percent total return that was its highest in 10 years.
PSP, Indigo and Flagship did not reply to messages seeking further detail.