Microsoft's Climate Innovation Fund (CIF) has announced it is backing Farmland LP, an investment fund that specialises in acquiring conventional farmland and converting it to organic and regenerative farming principles.
CIF is a $1 billion investment initiative launched in 2020 to speed the development and deployment of new climate technologies.
Key projects it has funded so far include $50 million to help construction of sustainable aviation fuel producer LanzaJet’s facility in Georgia.
It is now backing Farmland LP’s third fund – Vital Farmland III – which is raising $250 million.
The fund's strategy involves buying conventional farms and converting them to organic and regenerative farming principles. By diversifying the crops grown, focusing on higher-value and permanent crops and invest in infrastructure and technology to maximise productivity, the aim is to generate above-market capital appreciation and cash flow for farmers.
Founded in 2009, Farmland LP manages over 18,500 acres of farmland in Washington, Oregon, and California, with more than $300 million assets under management over three funds.
Vital Farmland III has already made significant acquisitions including three properties in Northern California's Sacramento Delta for $35.6 million, totalling 2,625 acres, and a 1,100-acre farm in Oregon growing organic blueberries, wine grapes, and hazelnuts.
What’s in it for Microsoft?
Microsoft said its investment in Farmland LP aligns with its commitment to sustainability and innovation.
It believes that Farmland LP’s approach has significant environmental benefits such as ensuring healthy soils and sequestering carbon, both crucial for high-quality soil carbon credits which can potentially be used to offset the company's carbon footprint.
“Farmland LP’s use of regenerative agriculture practices to ensure healthy soils, and therefore high-quality soil carbon credits, is a critical element of advancing nature-based carbon removal solutions,” said Erika Basham, director of Microsoft’s Climate Innovation Fund.
“We’re excited to invest in their fund and work with them to create a more sustainable agriculture sector.
This investment could also create synergies between Farmland LP's on-the-ground operations and Microsoft's technological innovations in agriculture.
The company has been developing agricultural technologies through its FarmBeats project, which aims to enable data-driven farming.
By investing in Farmland LP, therefore, Microsoft is not only supporting sustainable agriculture but attempting to position itself at the forefront of technological innovation in the agricultural sector while advancing its climate-related objectives.
Can the carbon credit market advance in the US?
Farmland LP said that thanks to Microsoft’s support it will develop soil carbon credits on its 18,500-acre farm portfolio and expand the market for regenerative soil carbon credits.
Farmland LP will package carbon credits from diverse regenerative agriculture practices, which it expects to generate using Verra’s Verified Carbon Standard, the most widely carbon programme in the world. It says this work is instrumental in demonstrating that regenerative practices provide economic benefits to farmers and thus accelerating the sequestration of carbon in soils on agricultural lands worldwide.
This work will also include preparing the necessary protocols, which it calls a critical step towards increasing regenerative agriculture practices globally to sequester vast amounts of atmospheric CO2 as mineralised soil carbon.
“This investment from Microsoft is a significant milestone for Farmland LP and the broader regenerative agriculture sector,” said Craig Wichner, founder and managing partner of Farmland LP.
“Microsoft’s investment in our Fund III is a powerful validation of our approach to regenerative agriculture, and this capital will allow us to acquire additional properties and increase our fund’s economic and environmental returns.”
Challenges to overcome
But the carbon credit market for agriculture is still relatively new and developing. The most recent USDA ag census report mentions that farmers can generate carbon credits by adopting practices to reduce emissions or sequester carbon, but doesn't provide numbers on participation.
Another source indicates there are only around 100,000 regenerative farms in North America that are using practices that could potentially generate carbon credits.
The Rockefeller Foundation's recent report on financing for regenerative agriculture states that only 1% of all carbon credits issued globally to date have come from agricultural projects, despite the enormous carbon sequestration potential of soil.
There is also some scepticism about soil carbon credit programs, with researchers questioning the scientific basis and actual climate benefits.
'We can demonstrate that generating carbon credits from regen ag is feasible'
Farmland LP insists Microsoft's backing can help its efforts at promoting regenerative agriculture at scale. “While the global carbon sequestration potential of soil is enormous, only one percent of all carbon credits issued globally to date have come from agricultural projects,” a spokesperson told AgTechNavigator.
“Microsoft’s investment in Fund III will allow us to generate additional carbon credits, which will demonstrate to other growers that generating carbon credits from regenerative agriculture is feasible.
“Further, Microsoft’s investment will allow us to contribute to the development of carbon credit protocols that currently make it difficult for growers to monetize the carbon that they sequester, and thus incentivise more growers to implement regenerative practices.”
#Microsoft Climate Innovation Fund said it does not disclose the dollar amount on its investments.
