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Hands holding potatoes covered in soil.

New tool to help accelerate the transition to regenerative agriculture

With regenerative agriculture transformation and innovation requiring long-term financing, the Unilever Climate & Nature Fund, AXA Climate and Tikehau Capital are coming together to explore the idea of an investment tool that will help accelerate the shift.

Around the world, our food is often produced at the expense of the soil, endangering its integrity and fertility.

For years, the extensive use of pesticides and fertilisers has been damaging biodiversity, threatening its stability by releasing large amounts of greenhouse gas into the atmosphere and polluting water supplies. In addition, their use has led to growing production costs for farmers.

Regenerative agriculture can help solve this issue by protecting soils, biodiversity and water, and serving as a model that’s more resilient for the farmers themselves.

However, the huge investment and long-term commitment required in areas such as land and technology are often a blocker to scaling up promising solutions.

That’s why Unilever, AXA and Tikehau Capital intend to work together, entering a six-month due diligence process to land the theory of an investment tool that will help accelerate the shift of agriculture and food value chains towards regenerative practices.

This shift is only possible if there’s close collaboration between all parties from farmers, producers and manufacturers to retailers, technology providers and financial investors. The fund aims to promote, establish and nurture this collaboration.

What is regenerative agriculture?

Agriculture, forest and land use together are the second-largest source of greenhouse gas emissions and the main driver of biodiversity loss. Regenerative agriculture practices can reverse this trend and play a crucial role in addressing climate change and environmental challenges.

It’s an approach to farming that works in harmony with nature to ensure the long-term viability and resilience of the land. It builds soil health, crop resilience and nutrient density as well as protecting water and increasing biodiversity. Ultimately, it is about restoring the health of the soils where our food is grown which, in return, will enhance our own health.

A unique combination of expertise

Between Unilever, AXA and Tikehau Capital, we bring a unique set of industry, risk and financial expertise through which we’re aiming to drive the structural changes required.

We each intend to invest €100 million to be deployed over the fund’s life. But we anticipate that public and institutional investors, as well as other industrial players, will join too. The target is €1 billion.

The fund will focus on three main areas. Protecting soil health to enhance biodiversity, preserve water resource and fight climate change. Ensuring the future supply of regenerative ingredients to meet the needs of a growing global population and consumer demand for increasingly sustainable products. And helping unlock technology-based solutions.

“We know that a key way to address climate change is through nature, and agriculture is a part of that solution,” says Eric Soubeiran, who is VP of Unilever’s Climate & Nature Fund. “This is why in 2020 Unilever committed to invest €1 billion in climate and nature projects, connecting value chain transformation with our business and brands, allowing us to take targeted and meaningful action to address climate change and grow responsibly.”

The launch of the fund could not be more timely

In April, the UN published its Global Land Outlook in which it noted that 52% of agricultural land was degraded and that, if nothing is done now, by 2050 an additional 16 million square kilometres would go the same way. That’s an area the size of South America.

The UN also highlighted the role of sustained financing from developed countries and the private sector as a key enabler to fight land degradation and scale up regenerative agriculture.

AXA Climate and Tikehau Capital

As a pioneer in the field of climate and environmental adaptation, AXA Climate will play an integral role in launching and deploying the fund. This AXA subsidiary will contribute through its expertise in climate, environmental and agricultural risk management, and in impact monitoring (particularly via satellite technology), supported by its granular knowledge of the agriculture sector.

Tikehau Capital will bring its experience and expertise in climate-related investments. Having launched the first fund dedicated to the energy transition and the decarbonisation of the economy in 2018, Tikehau Capital now has almost €2 billion of assets under management focused on climate action across its various asset classes.

How we could use the fund

How we could use the fund

We have already identified a number of potential projects that could very quickly accelerate the transition to regenerative agriculture and deliver value. Here are just a few examples.

Regenerative and plant-based ingredients

Several of our key ingredient value chains are focused on a small number of geographical areas. Palm oil from Indonesia and vanilla from Madagascar are a case in point. So to mitigate potential environmental and geopolitical risks, we’re keen to diversify. Our R&D team has already identified potential alternative ingredients that require investment to scale up.

For example, to reduce our dependence on palm, diversify our geographical sourcing strategy and ensure resilience, we’re exploring different types of substitute that can also have the property to impact climate change.

Transition of agriculture practices

To help shift our nutrition and ice cream supply chains towards regenerative agriculture practices, we’re increasingly working with our suppliers on additional land acquisition (for things like crop rotation) and long-term financing needs.

For example, a Knorr vegetable supplier is keen to develop a regenerative sourcing model, but land availability can be a blocking point in our discussion to accelerate crop rotation.

In ice cream, several milk suppliers are looking to reduce their dependence on soy-based protein imports by ‘re-localising’. While this will require new land to produce the feed, the move could reduce the emissions of a litre of milk in developing markets by around 10%.

Traceability and monitoring to commercialise impacts

One of the key roadblocks we’re facing is the capacity to monetise ecosystem services, which starts with the measurement and traceability of sustainability impact. Several small and medium-sized companies offer solutions that, if scaled up, could become the standard. Long-term partnerships in the form of equity stake could help us accelerate this work.

For example, start-ups are developing an AI-based solution that couples soil sampling and machine learning to evaluate the carbon sequestered with a change of agriculture practice. This will allow us to monitor our impact at an affordable cost. At scale, the solution would help us evaluate the benefits of many of our programmes and therefore be instrumental to our net zero ambitions.