| Title | Regenerative Agriculture Strategy |
| Country/Location | Global |
| Size | €1 billion (target size) |
| Investment Vehicle / Finance Structure | Private Equity Impact Fund – Article 9 |
| Environmental/Social Outcomes | Nature and climate: Biodiversity, carbon, and water Social: health and livelihoods |
| Projected Returns | 20.0% gross over a holding period of 5-7 years |
| Revenue Model | Private equity investment in corporates generating returns from revenue growth and improved EBITDA margin associated with geographical and product expansion. This can also be done by external growth via acquisitions |
| MRV Tools | Examples of framework used: One Planet Business for Biodiversity (OP2B);Regenerative Agriculture Framework, and core environmental KPIs for biodiversity, carbon and water. Impact to be externally assessed and validated |
What is the vehicle?
The Regenerative Agriculture Strategy, managed by Tikehau Investment Management – Tikehau Capital’s main platform dedicated to asset management, is a global private equity strategy established to drive the adoption as well as scaling of regenerative agriculture practices worldwide. Launched in late 2022, the 12-year Strategy is a Sustainable Finance Disclosure Regulation (SFDR) Article 9 strategy that aims to create a positive impact on the environment and society while delivering potential returns to investors. In launching the Strategy, Tikehau Capital was responding to: strong policy tailwinds such as the European Green Deal and the United States’ Inflation Reduction Act; commitments from large corporates to deploy regenerative agriculture practices in their supply chains; and consumers requesting corporates to consider the environmental impacts of intensive food production.
The Strategy was initiated with the financial backing and expertise of two major partners: AXA, one of the largest global insurers, and Unilever, a prominent consumer goods corporate committed to regenerative agriculture. Each party invested €100 million with additional funding such as the Banque Publique d’Investissement France (Bpifrance) and the European Investment Fund (EIF).
How does it deliver positive environmental and social impact?
Tikehau Capital’s Private Equity Regenerative Agriculture Strategy targets investments in corporates that have a positive impact on at least one of the Nature and climate priority areas: biodiversity, carbon or water – while doing no significant harm to health and social outcomes. The Strategy will track company progress against key indicators annually to ensure continuous progress.
Examples of underlying investments
The Strategy’s first investment was in Biobest, a €350 million company focused on integrated biological pest and disease control and pollination solutions.75 The Belgian company is present in 60 countries and has seen significant growth over the last 10 years with 15 acquisitions. The €120 million investment in the company facilitated Biobest’s expansion in Latin America with the acquisition of Biotrop, a Brazilian company specialising in biological solutions for crop nutrition and protection. The investment was a strategic move to enter one of the world’s largest agricultural markets through an investment in a local firm.
What are the formal KPIs, standards and MRV used to measure the outcomes?
To monitor and assess the outcomes of its investments, the Regenerative Agriculture Strategy relies on a combination of core KPIs and recognised standards and frameworks. Core KPIs include GHG emissions avoided and sequestered (tonnes of CO2e), avoided deforestation (hectares) or ecotoxicity and water pollution (kg of pollutants avoided). The team also collaborates with large organisations in charge of developing frameworks and accreditations to ensure that investments adhere to widely recognised impact standards. For example, Tikehau Capital is a member of One Planet Business for Biodiversity (OP2B) and uses its Regenerative Agriculture Framework to assess its investments. Other relevant frameworks include the Sustainable Agriculture Initiative Platform (SAI Platform) framework. Proposed KPIs for each impact area are established during the impact due diligence phase where a baseline assessment is made. The relevant KPIs selected for each portfolio company are then tracked annually to ensure continuous improvement.
Corporates are responsible for collecting and reporting data, which is then subject to third-party assessment. The results are compiled into an ESG/Impact report for the Strategy on an annual basis and communicated to investors.
Considerations for investors
The subscription period will end in 2024 and the investment ticket size range is between €15-€150 million. The Strategy has an investment period of 4-5 years and a holding period of 5-7 years, resulting in a total duration of 12-years for the Strategy.
The Strategy invests in corporates with demonstrated strong growth in recent years, operating in maturing markets and maintaining a positive EBITDA (earnings before interest, taxes, depreciation, and amortisation) across four verticals: inputs, farming equipment that enables regenerative practices and precision agriculture, ingredients and enablers such as impact measurement and monitoring technologies. The Strategy does not target agricultural land or food brands. The primary objective is to foster the growth of these corporates through market expansion and strategic acquisitions, resulting in high corporate valuations at the end of the holding period.
Sources
- Interviews and correspondance with Gustave Laurent, Laurent-David Charbit, Lindee Wong, Valerie Sueur, Tikehau Capital