Reaping the benefits of sustainable agriculture: New CSFN study and Ivey Academy podcast

Agriculture in Canada is closely linked to a natural environment that farms depend on for irrigation, pollination, erosion protection and many other services that can be threatened by unsustainable practices. Agricultural production is also under heavy pressure from the effects of climate change and faces demands to reduce the sector's greenhouse gas emissions, which account for around 10 percent of Canada’s total.

A systems-level change is required to support farmers in taking on these challenges and reaping the benefits of sustainable agriculture, according to a new study from the Ivey Centre for Building Sustainable Value, supported with a Canadian Sustainable Finance Network (CSFN) Grant from the Institute for Sustainable Finance. The report by Dr. Diane-Laure Arjaliès and her team at Ivey School of Business at Western University is titled Advancing Regenerative Agriculture in Canada: Barriers, Enablers and Recommendations. (Learn more with the podcast recording of a recent webinar launching the report, featuring Dr. Arjaliès, ISF Research Advisory Council member John Uhren of BMO, and Charlie Angelakos of McCain Foods.)

The paper’s authors argue that “healthy ecosystems are foundational to farming and support its economic success. Thus, the financing of regenerating ecosystems should also be seen as foundational to agricultural production.”  

Regenerative agriculture conveys benefits including carbon sequestration, improved soil health, and the preservation of natural assets such as forests and wetlands which “leverages nature’s goods and services to support agricultural production.” The report authors stress that it should not be seen as “an antonym to productivity,” but instead “a channel to leverage natural ecosystem services to support production.”

Principles for regenerative agriculture include but are not limited to: 1) minimizing soil disturbance, for example through no-till farming; 2) protecting soil surface, for example with perennial ground cover; 3) maintaining living roots; 4) ensuring crop diversity; and 5) integrating livestock, for example grazing practices that use manure rather as fertilizer. 

Farmers well understand the risks of climate change and the benefits of preserving soil health. But barriers remain to investment in regenerative practices. These include:

• Valuation models for land and agricultural production do not yet consider ecosystem services and the value of nature beyond an exploitative lens.
• Transitioning to regenerative agriculture carries high up-front costs, and learning the techniques takes time, but the added value is only realized over long time horizons.
• Despite the stated demand by downstream food industries for regenerative agriculture, there is doubt for farmers about customers’ willingness to pay enough to cover the additional costs.
• Over 40 per cent of all farmlands in Canada are rented. Landownership structure and tenure, and fragmentation of farmland create uncertainty that farmers will be accurately compensated for the full extent of the goods and services they provide that accrue to society.

Supporting Farmers in Transition, and Financing Sustainable Agriculture

Financial incentives are needed to bridge the transition to sustainable agriculture, overcome lagging incentives, and stabilize the economic livelihood of risk-averse farmers.

In the face of a growing population, projected labour shortages in the agricultural sector and growing concerns over climate change, more government investment is required. But there is a vital role for private sector investment to play. Current financial flows into nature fall short of where they need to be to achieve biodiversity, climate, and land restoration targets. More capital is required, and financial tools like crop insurance, payments for ecosystem services, green bonds, blended finance, and impact bonds can be used to support the transition.

However, shifting to regenerative agriculture is more than just a financing challenge; it requires various other conditions for success, involving the whole value chain. The authors’ recommendations include:

1. Clarify ‘regenerative agriculture’ and its role in supporting current farming practices.
2. Account for the value of nature in agricultural production to create markets and translate ecosystem services into financial value.
3. Develop an inclusive financial infrastructure in cooperation with the various actors along the value chain.
4. Ensure a just transition, empowering other ways of knowing and doing.
5. A systems-level solution is required. This means engaging a variety of actors through small actions to make significant change happen.

“It is our hope that by tackling the issue of regenerative agriculture through multiple perspectives in this report, we can inspire new actors to engage with nature-based financing and regenerative agriculture,” say the authors.

About the Institute for Sustainable Finance

ISF (ISFCanada.org) was launched in 2019 as a Canadian-specific hub of expertise and collaboration for advancing sustainable finance. Housed at Smith School of Business, Queen’s University, ISF is independent and non-partisan. It focuses on developing research, education, and collaborations among academia, industry and government to improve Canada’s capacity for sustainable finance as the shift to a low-carbon economy occurs. ISF’s work is generously supported by Ivey Foundation (inaugural supporter), McConnell Foundation, McCall MacBain Foundation, Chisholm Thomson Family Foundation, Smith School of Business, Queen’s University and Founding Contributors BMO, CIBC, RBC, Scotiabank and TD Bank Group.

Media Contact

David Watson
Associate Director, Communications, Institute for Sustainable Finance
david.watson@queensu.ca
C: 613.796.3605