A new form of regenerative agriculture

Source: LOIM. For illustrative purposes only.

Externalities and inefficiencies: a sustainability challenge

Modern agricultural techniques rely on ploughing and tilling the land, which releases carbon stored in soils, while the overuse of fossil fuel-based fertilisers pumps more emissions into the atmosphere. The overuse of synthetic pesticides further degrades soils and pollutes water.

Land degradation. The use of heavy machinery, fertilisers and pesticides are routinely used to improve food yields and maximise production. These practices have a direct impact on soil degradation. A United Nations-backed study found that fertile soil is being lost at a rate of 24 billion tonnes every year due to destructively intensive agriculture, and that a third of the planet’s land is classed as severely degraded as a result. It is estimated that between 3.9 and 4.7 million square kilometres of arable land has been abandoned due to soil degradation – equivalent to roughly 30% of global cropland.

Soil erosion – a long-term consequence of destructive agriculture – is now affecting about 20% of farmlands worldwide. This was estimated to have increased by 2.5% between 2001 and 2012.

Estimates project that land degradation could reduce global food productivity by 12%, causing food prices to soar by up to 30% by 2040.

Carbon emissions. Recent research has found that food systems – involving the farming, harvesting, catching, transporting, processing, packaging, distributing, cooking, and disposal of food – are responsible for over a third of global anthropogenic GHG emissions. The majority of these emissions are associated with food production and land-use change.

The International Panel on Climate Change has stated that limiting the impact of climate change to 1.5-2°C, in keeping with the objectives of the Paris Agreement, would require major changes in agricultural practices. To align with this target, agriculture would need to sequester as much as 2.3 gigatonnes of CO2 by 2050.

Biodiversity loss. Biodiversity in agricultural landscapes worldwide is rapidly deteriorating. Insect biomass has declined by more than 70% within the space of a few decades in Germany, for example. Farmland bird populations in Europe are believed to have halved over this same period.

Current agricultural practices are now recognised as the primary driver of biodiversity loss. Agriculture alone is a threat to 24,000 of the 28,000 species at risk of extinction, according to research from Chatham House. The global rate of species extinction today is significantly higher than the average rate over the past 10 million years.

Current usage rates of inputs such as fertiliser, pesticides, energy, land and water have reduced the variety of landscapes and habitats in agricultural lands, threatening or destroying the breeding, feeding and nesting of birds, mammals, insects and microbial organisms. Chemical pollution, including the effects of pesticide use, is now recognised as the second most important driver for the worldwide decline in insect populations.

As a major contributor to global GHG emissions, current food systems are also driving climate change, which further degrades habitats and causes species to disperse to new locations. In turn, this brings new species into contact and competition with others, and creates new ways for infectious disease to emerge.

Regenerative agriculture: a sustainability solution

Current definitions of regenerative agriculture vary between those based on processes or outcomes, or a combination of the two. In general, regenerative agriculture is understood as a sustainable agricultural model based on several key practices, including crop rotation and diversification, reduced use of synthetic agrochemicals, and agricultural techniques that avoid soil disturbance.

To restore degraded lands, regenerative-agriculture practices such as crop diversification, tree planting, reduced tillage, mulching and water-conservation techniques create benefits for both agribusinesses and society. These techniques improve yields via increased soil nutrient and organic content, reduced soil erosion and improved water retention.

Broader environmental benefits also emerge through these practices, including more resilient ecosystems, carbon sequestration, improved water management and stronger biodiversity.

Healthy soils and yields. Soil alone hosts more than 25% of all biodiversity on the planet and is the world’s second largest carbon sink. A 2022 report from the World Economic Forum found that regenerative farming methods stand to significantly improve soil health over an area equivalent to 14% of the European Union’s agricultural land, while improving farmer livelihoods by between EUR 1.9 billion and EUR 9.3 bn annually by 2030.

One of the fundamental objectives of regenerative agriculture is the restoration of soil; either in terms of repairing degraded soil or boosting its quality. The rejuvenation of soil and land provides a number of environmental and economic benefits, with improved nutrient availability having been directly linked to better crop yields and increased climate resilience in China.

Regenerative methods can increase the amount of soil organic carbon in the land, which can have the effect of drawing down carbon from the atmosphere. The effects can also include an improvement in soil quality, reductions in erosion, and water retention.

Research from the International Union for the Conservation of Nature suggests that crop yields stand to rise by as much as 13% by 2040 in response to regenerative farming practices in Africa. These practices have already been credited with an increase in cotton yields from 250 kg to 450 kg per hectare over a five-year period, and a two- to three-fold increase in coffee yields.

Bringing down emissions. Conventional agricultural practices such as ploughing and tilling release CO2 from the soil. The degradation of soil matter is estimated to be responsible for as much as one-third of all CO2 emissions since the industrial revolution. Since the introduction of these conventional methods, up to 75% of soil organic matter has been lost. Furthermore, runoff and siltation of water bodies associated with conventional farming practices promote eutrophication and methane emissions.  

Regenerative agriculture practices, such as no-till farming, rotational grazing, mixed-crop rotation, cover cropping, and the application of compost and manure have the potential to reverse this trend. No-till farming can restore degraded soils by stirring crop residues back into the surface, which could triple the amount of soil carbon content within 15 years.

The United Nations estimates that a 50% adoption of regenerative agriculture across Africa, could lead to a 20% increase in soil carbon content across the continent by 2040. Agroforestry practices deployed in tandem amplifies the effect.

Supporting and promoting biodiversity. Land use in its current form has a negative impact on biodiversity and compromises ecosystem functions that are vital to food production, such as those pertaining to crop pollination and natural pest control.

Regenerative agricultural practices have been found to be better for ecosystem services and build resilience to abiotic stresses, which reduces the need for chemical inputs. These practices have the effect of increasing the stability of food production, while reducing negative environmental impacts.

Intercropping and crop rotation, for example, promote the use of non-crop species to establish diversity within and around fields, in the form of flower strips and hedgerows, for example. This has the effect of protecting and enhancing functional biodiversity. Diversity is further supported and stimulated through addition of organic inputs like manure and crop residues, which lead to soil stratification.

The practices associated with regenerative agriculture protects and supports biodiversity below and above ground. Reduced tillage minimises the disturbance of soil and microbiology. Diversified crop rotation, cover crops, pollinator habitats or buffer strips, and integrating livestock and other animals are important contributing factors to the health and stability of biodiversity.

Aligned companies¹

Companies are creating new profit pools by developing or providing solutions that drive the growth of regenerative agriculture. Below are examples of specialist companies in these industries. They are provided as information only and are not necessarily held in our portfolio or represent investment recommendations.

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