161 Excerpt. We Can Create a New Normal: Live panel launch for Regenerating Investment in Food & Farming

This is an excerpt of one of the most pivotal conversations on the podcast this year. So many conversations since, and attempts to navigate the paradigm change talked about here, have come back to this launch event, and the stories expressed in it. Having just returned from the Re:Connection Festival in the northern rivers, and a little tour around it, I’ll have more out on the podcast soon about some of this trailblazing work going on.

This conversation marked the launch of a major report and project by not-for-profit outfit, Sustainable Table (you might remember Jade Miles, current CEO, talking about it on last week’s episode). I’m joined here by two international guests – the CEO of Cienega Capital, Esther Park, and the CEO of Steward, Dan Miller. And alongside us are co-founder of the global Wellbeing Economy Alliance, Dr Katherine Trebeck, and regenerative farmer and lead author of the Regenerating Investment in Food and Farming report, Tanya Massy.

We pick it up from about the 40 minute mark, where the panel is gathering steam with some ‘real game changers’ coming on, including stories from around the world on how and where paradigm changes in investment are being achieved right now. Then there’s Q&A featuring other prominent folk around Australia, re-framing questions of scale, working in or outside existing systems, and vital processes of learning and transformation.

To hear the conversation in full, and see a range of links, head to episode 161, Regenerating Investment in Food & Farming.

Head here for automatic cues to chapter markers (also available on the embedded player on the episode web page), and a transcript of this conversation (note the transcript is AI generated and imperfect, but hopefully provides greater access to these conversations for those who need or like to read).

This conversation was recorded online with live audience while I was at the Massy farm, Severn Park, on 20 April 2023.

Title slide: regeneration of food and farming in action (source: Sustainable Table). 

Transcript

Speaker 1: 0:00

When they started talking about we need to go beyond financial returns, that's when I thought this is a conversation that can really be a game changer, because that's when they're starting to break out beyond those sort of metrics that you've been talking about. They started to say, actually we can see the role of investment as committing to the sort of activities that our planet and our communities need more of. So it's almost underwriting the solutions and not seeking those financial returns. And so, beyond quarters absolutely vital but beyond financial returns, opens up a whole new ball game and really cherishing those other sorts of returns and sensing them to and really grappling with how do we know when they're coming and over what time frame, and so that that pioneering conversation I think it's is a sort of thing we need. We need more.

Speaker 2: 0:55

Thanks so much, catherine. Is that I'm wondering, like how that's been in your experience? How have people in finance grappled with that transformation?

Speaker 3: 1:07

Not very elegantly and usually kicking and screaming. I would just say just, there's sort of two ends of the spectrum on that, because when I talk about investing the way that I do, I mean you can imagine it's quite unconventional and some people just throw up their hands and say that sounds too outlandish for me, I can't even deal with it. But there's always a group of people who suddenly relax oh my gosh, you mean I don't have to think about those things. That's what my financial advisor tells me I have to think about, or that's what all my investor peers and friends tell me I have to think about, and it's the measure that our society and our current form of capitalism puts on investment. And so we just get into this rut of like this is the way that we have to think about it, and sometimes it feels really constraining. It feels very stressful that you have to meet these objectives to be a real investor or to do a good job of investing. But I find that for certain folks, when I am able to say you can just throw all of those away, suddenly the shoulder start to drop. They just breathe a sigh of relief. Oh, and in some cases I think they just need the permission to think about it differently.

Speaker 3: 2:24

And I just want to speak to Catherine's point about you know folks leading the way and then creating the new normal.

Speaker 3: 2:30

I would just tell you that back in I would say the 60s and 70s, under in the United States we have something called the prudent man rule and this is sort of the charge to investment managers that they have to create a safe portfolio for their investors, right, so they can't do anything super risky.

Speaker 3: 2:51

At that time venture capital was considered super risky and it was considered unallowable under the prudent man rule. But the forerunners of the venture capital movement were actually family offices, so individual investors and family offices, and it became such the new normal that now it's an asset class, it's considered an asset class and traditional finance, and so that actually gives me hope because if we can start to create the new normal, if those of us like you know, the individuals that are on Dan's platform and the folks that are family offices and wealth holders, if we can just start to lead the charge, I think we can create a new normal around this kind of investing. So that that you know sort of comparison gives me a bit of hope that that we can chart that way that path.

Speaker 2: 3:38

Thanks, esther. I know too, when you talk about the people you'll see their shoulders dropping so forth that there's a I know this because it was a key thrust of the report to hate trust. So I can imagine they're in a room with you and trusting you with what you've shown in your life and what you're bringing to them in that moment. So it just it's a big part of it, isn't it? If we are seeking to make these leaps, that there is trust and where there's trust, and to indeed focus on developing that trust in these processes, first, yeah, but then I've as this bouts it to you beautifully, of course, I'd love to hear a story of how this is playing out for you. I mean, I've read a bit of the stuff going on for you now and it's just extraordinary watching. I think you're saying weekly, now there's another story of capital raise for people that's happening in this way and at some significant scale. Do you want to give us a sense of how it actually works through one of these cases?

Speaker 4: 4:35

Sure, I'll give kind of two examples, one that's been a few years and upcoming. So really what our platform does is provide credit. You know, the goal when I first began this was what type of capital do these producers need? And we've generally found traditional credits not available for these types of resources. The financing for land, equipment, infrastructure, operational capital all of that combined. And so what we do as a business is projects come to us mostly through referrals. We underwrite the projects, we structure the financing and then we sell that through our platform as a loan participation. So people buy a pro rata peri pursues a nice Latin language in there. Basically they're side by side in the deal. Everybody's treated the same. Funders who are putting half a million in or $100 in are all part of a loan, effectively syndicated loan that we originate, underwrite and service. And that's critical for the fact that almost every funder on our platform and most funders in general have never funded regenerative agriculture. It's not, as Esther said, an asset class today, and so how can you give people the comfort to start to move in? And that's what our platform is built for, its purpose built around sourcing these projects, underwriting these projects, supporting the many different elements that are needed as part of the project. So our work goes far beyond providing the loan. It's really around structuring the financing, helping them think about what they need and putting a package together. And that's the trust that we built with with our customers of like. We will look out for them in designing a fair economic structure where the lenders are earning a return. Let's say six or eight percent is our broad range. That's actually fair to them for providing risk capital. They are providing risk capital to small business, but the borrowers, the farmers, can get capital structured as they need it for the right terms, right price.

Speaker 4: 6:21

And from the beginning was about building a regenerative capital market built on true exchanges. You know an individual providing money to a person, receiving return and getting it back. I think so often when it's like banks, it's the theoretical person who's just rent seeking and earning return and so it's very impersonal. You just want to pay the lowest possible and you don't want to give them anything and you're frustrated that they want more. The second you build that direct relationship. Just like somebody is selling food once a fair price and is upset by commodity pricing. It's the same on capital. People want a fair return. People can't take a one percent return. Most people can't and so can you build a real capital market at fair rates. And that's what we've been doing, if like true unsubsidized private capital flowing in through flexible structures to these deals.

Speaker 4: 7:07

The first farm we funded was an urban farm in Detroit. Actually, a farmer of Korean descent grew up in Detroit, took over a lot next to his uncle's dry cleaner, started farming in a tenth of an acre, extremely successful to local restaurants, couldn't get any funding to grow, went to the Farm Service Agency office. They didn't consider him a real farm, just all the classic examples of local bank we'll fund you. Credit union, we'll fund you. Government will fund you. No one will fund you. And I was connected to him, saw the restoration of Detroit through degraded industrial land being turned into farms, and so we provided a $130,000 loan land, equipment, infrastructure, a washing pack, hoop outs, fencing all the classic kind of urban small plot farmer. And they went from 10,000 revenue when we first funded them to now 150,000 revenue a year on one and a half acres building a farm hub, local community stand. And so you've seen like the lenders on the deal made eight to 9%. Their business went 20 times revenue. They now have enough income that they're full-time farming. Previously the farmer was washing dishes at the restaurant he's selling crude to, which is shows they'll do anything to keep this going and then now they can farm full-time. This is what they can do and they can be a hub for the community.

Speaker 4: 8:28

That was one of the kind of small ones where I was. We were learning of like, how do you, how do you, how does this work on an acre? Then how does it work on a hundred acres and then bigger. Now we're really dealing with watershed level projects. So we're working with a group of ranchers in Montana called. They've started a business called Old Salt.

Speaker 4: 8:45

So for ranching families that each had individual kind of direct sale programs come together to create a slaughter, processing and burger shop restaurant retail, so fully integrated all the way through from rancher and employee owned process and sold like a steakhouse and burger shop out West. And so it's about connecting to the land and having customers from Montana who are buying Montana and know the ranches and can learn about the ranches and they don't care about third party metrics because they're seeing the people and they're visiting the places and that personal connection is always gonna be stronger. And so you have an ambitious business. We've provided three bridge loans to them. So far we helped them with a grant. We're now arranging a $9 million financing package where we're the senior lender. We've arranged some government subordinate money, just like lots of different elements, but after 18 months we've finally financed that fully vertically integrated kind of system for them to prove of what regional scale regenerative livestock can be.

Speaker 4: 9:45

Where you have improved farmer and rancher incomes, you have more value retaining in local communities, you have a better end product.

Speaker 4: 9:51

And so now I've gone from the like tiny small scale to seeing at the watershed scale that kind of infrastructure. And that's really connected to my background in real estate development and I really see the infrastructure finance, like kind of network infrastructure, really being the key to unlocking viability for producers and for consumers and for the region. And those are projects I love. I'm going out to visit them and the summer solstice they're having a festival on their family ranch and those experiences that build those relationships. So after that experience, do people want to fund it, do they want to buy the product, absolutely. And so you're in a situation where you have a great product, you have a great story, you have something people want to be a part of. They just haven't had access and so you can give them access. They tend to step in and they self-identify and once they're hooked, like all of you all, it's a very just the lens that you see everything, for better or worse, with your domestic partners. They may hear too much of it.

Speaker 2: 10:50

Right, there's so much in that Dan Well I think of you've almost teed off on all the I've got the principles for navigation page open in this report. Actually, for those who haven't actually seen the report, I lost to get up. And yeah, the principles for navigation, you see the beauty of it that Catherine was referring to, but the principles for wayfinding Tonya was talking about, you've teed off on all of them Really. But yeah, you hear collaboration with large place, obviously, and relationship, and there's your overlaps with everything Esther's talking about. And so often I've noticed, and here right now you're talking about you're not talking about rocket science, you're talking about good solar-the-earth infrastructure needs. Often it's not. We don't need to reinvent anything new here. The needs are commonplace and not some convoluted technology we need to come up with.

Speaker 4: 11:38

But that's the challenge that these businesses aren't going to be able to do for billion-dollar exits. And so the current financial system can only fund that extremely high growth, clear financial return. So what about a good regional business that'll get to tens of millions of cash flow in a few decades? And just how do you build that? And so the investors. We have our lending platform, which has thousands of users. There tend to be local high net worth investors who are the equity capital because they're connected to the land. They see the importance of this business. They know it's not the highest return deal, but they also feel like it could be a successful business. So I think it's.

Speaker 4: 12:13

You need to change the paradigm of people's expectations and individuals can make that decision. Once it's third-party managed money, you don't really have the discretion to make that decision. Are your values the same as the person whose money it is? How do you measure that? How do you report it? So that's the main difference I've found. The second you have any intermediation on the money. You immediately lose that link and you lose that personal decision-making and discretion. And the second you get that kind of like supply chain managed money. It's not going to end up in the impactful project. I've just seen it too many times missed for a million reasons. They want impact data, they want this. The returns are proven. The history of you can always say no to this kind of stuff. Thanks so much.

Speaker 2: 12:52

Dan. Terrific Catherine. I'm going to release you from the shackles of my convoluted questions and I'm just saying you scribbling away. So what's on your mind?

Speaker 1: 13:02

Yeah, I wanted to check out something that Dan said about how experiencing something different matters, and I think that really resonates in the work I do with the sort of macroeconomic system level too, because I think often folks are so stuck in the current paradigm, in the current business as usual, you can't dare to hope that something's different. And in fact you know, I often. Ronald Reagan back in 1983 said there are no limits to growth because there are no limits to human imagination and wonder. And I can't help thinking today it's our limited collective imaginations that are stopping us as societies imagining an economy that is better than growth, imagining an economy that is really purposefully and deliberately designed to cultivate the sort of activities that you're all working on, designed to put people on planet at the forefront, and really explicitly seeing the economy not as a goal in its own right that we all need to be being service-off, but flipping that and doing really what your first nations communities have been living from that millennia, what feminist economists have been telling us for decades, what ecological economists have been telling us for decades that the economy is a subset of society and nature and understanding. That is quite a fundamental shift in perception.

Speaker 1: 14:27

I was saying no, the three change areas perceptions, policies and pioneers and when we start to think about the possibility of seeing the economy not as a goal in its own right but as in service of the sort of activities we need more of, in service of the sort of goals and visions I mean. I just think I work on something called the wellbeing economy. At its simplest is social justice on a healthy planet. So how can the economy be designed to deliver that? And so Dan's point around just the potential to experience the possibility of something different really matters, and whether that is just going to a local worker and cooperative and understanding that that is not geared up to extract profits to remote shareholders.

Speaker 1: 15:11

It is a business that is designed to deliver what their members need, whether it's going to a tool library and getting your phone fixed and we've got one of the leaders in the tool library community on the call here today which should bring it around we don't just throw away things just because it's apparently more expensive to get something repaired. And so just starting to experience a sense of possibility of something different matters so much. And again, I can't reiterate enough, that's why all this pioneering work is more significant than just the footprint of the impact. It's significant because it shows what better can look like. I'm going to have to get kicked out of here in a few minutes. We've been knocking at the door. I will be back as soon as I can.

Speaker 2: 15:53

Terri Vee. Thanks, catherine. I'll bring Tanya back into the room at this stage and you'll bring a question or two to the floor over the next 25 minutes or so, tanya, but do you want to actually start with because there are case studies right through the report of this nature as well. I wondered if there's one or two that really stand out to you that you've had bubbling away perhaps even as we've been speaking.

Speaker 5: 16:19

Yeah, thanks, aj Gosh. I feel like I can't really follow up from Dan and Esther and Catherine. That's been so rich and beautiful, thank you. I guess a couple of things that were flowing through my mind, particularly as Dan was talking about. The Montana example is one of the case studies that we looked at. That was centered around steward ownership models and looking at this really kind of meaty challenge that we face when we're bringing capital into a regenerative business around ownership and shareholders, and how do you actually make sure, if you're working with farmers and land stewards, that ownership and decision making is maintained?

Speaker 5: 16:53

So one of the case studies that we have in the report is sort of a combined case study of purpose. Who are an international organization working to sort of invest and facilitate steward ownership models, working with organically grown company in America, which is a sort of leading organic fruit and veg retailer there, and they kind of went back to ground zero when organically grown company needed to do a big capital raise to look at, well, how do we make sure that sort of purpose remains at the center of this organization's governance and how do we bring capital in a way that is centered around that purpose? So they set up like a sort of waterfall structure with a silent kind of shareholder tiers where investors come in as shareholders but without decision making rights, and there's a sort of dividend structure where the returns are divided up across all the stewards and stakeholders involved, not just to the investors, recognizing that everyone's bringing different forms of capital to play. So I think that sort of touches there on some of what we've heard from. As just one of many the amazing case studies that we heard from, we have some questions that are throwing in thick and fast now from the audience, which is great.

Speaker 5: 18:00

You guys were slow to warm up and now we can't shut you up. We're going to kick off with one from Ellie from Souls for Life. Great to have you here, ellie. He was interested in the panelists views on scale and scaling up. No so often a question that organizations working towards transformation get asked is how will this scale up? And you know we've did some different thinking in the report around scale and scaling deep as opposed to scaling out. But just wanted to hear Esther, catherine, dan, your thoughts on scale and how you come up with that.

Speaker 3: 18:32

Yeah, so I think one of the things that we talk about is scaling across as opposed to scaling up, and one of the things that I talked to my entrepreneurs about a lot is appropriate scale, because you know, some level of scale and efficiency is good and is beneficial for creating a resilient operation. But you know we're not scaling to sort of take over the world. You know we're scaling for what's needed in our regional communities. And so you know, I have a couple of $5 million businesses who are just on the edge of profitability and we have conversations about well, what if you were a $10 million organization with that increase your resiliency, you know? So that one external shock doesn't just put you into a tail spin. So those are the kinds of conversations we have around.

Speaker 3: 19:21

Scale is what kind of scale will create real resiliency? Because you know, one of the things that COVID showed us was that the massive scale and efficiency of the current food system is actually super brittle. Right, you enter a disruption into there and the whole thing falls apart. So what kind of scale do we need for resiliency? And you know there's not one answer to that, but that's a question that we continue to explore with our entrepreneurs.

Speaker 1: 19:48

I just built on that briefly, aj, I have to shoot. I mean, pick up the term resilience. I mean One of the sort of understandings of resilience is having diversity and spare capacity and I think we saw during COVID and I was in the UK we saw it really acutely how current economic systems with their fetishisation of efficiency, had reduced any of that spare capacity and diversity and the sort of the mass production and just-in-time inventory and hyper-specialisation of the economy under this idea of efficiency being the goal. Actually, when something like COVID hit really came back to bite and Eli, on your point of scale, and I think Esther's phrase of scaling across is really beautiful and there's a lovely phrase it's not mine but I can't remember who it was, so I feel terrible not predicting it, but we should think about scale as more about bags of marbles than boulders.

Speaker 1: 20:46

And so how are we connecting? And how? You know how? In collective action, how by having power, with rather necessarily power over, by coming together with communities of practice and leaning on others who bring something that maybe if you scaled massively you would have, but maybe you don't need to have it because a friend or a neighbour or a partner has it. So really thinking about what is the collective that together adds up to something really, really significant. I will be back on as soon as I can rejoin the group.

Speaker 2: 21:21

Nick Catherine thanks. It does strike me that this especially applies when we're talking about food and, by extension, water security and let alone land regeneration. If there's any place we want resilience in, it's in those spaces, dan you.

Speaker 4: 21:39

Yeah, I come at scale. You know from two sides, I think one the business from Stuart from the beginning is how do you create economic viability for producers alongside ecological viability? And you quickly realize that producers on their own, without a connection into the rest of the system that's equitable, have severe difficulty of being viable. And so that's led to that downstream focus on middle infrastructure. And now we're working through our first sets of projects, like a milling facility in eastern Washington, which is big grain country. I mean this is going to be competitive on large tail grain markets at the $38 million facility. It's a lot of money, that's a lot of capital, that's real investment. And so it's you kind of think big is bad. Certainly the national scale where there's no connection, or regional economy is bad, but there's definitely some efficiency needed at a regional level when you're talking about sales networks and aggregation and processing. And so what Tonya said about producer owned sewer ownership has been fundamental to our plans as well, as if we're going to finance these facilities, they have to be producer owned, they have to have employee ownership, they have to retain that ethos for permanence because otherwise they're just going to be consolidated by the big ag players, as they always are. How do you make sure that if it works, it doesn't fall victim to the same consolidation that it always is, and so that ownership has to stay in, and so a lot of our financing is built around? How do you ensure equitable long term ownership for the projects that are delivering scale?

Speaker 4: 23:06

Because when you think about middle infrastructure, really it's a service business to producers. It should be running at relative break even. There should not be an extra profit margin there, and so if you start to link the producers, the processors, the end markets with integrated systems of share benefit, then I think you can have positive scale for big acre ag and kind of crop crops, because it's harder, I would say, to have positive ecology at scale. But for ranching, you learn that actually it's more regenerative at scale. The bigger the herd, the better most of the time, and so you that flips on its head that actually huge roving, hundreds of millions of bison or cows actually is the best outcome. Does that exist today in limited supply? And so I'm starting to coordinate among multiple businesses that regional level, from producer to processing all the way through, and I think these businesses will be competitive from a price basis while delivering a much better quality of production.

Speaker 4: 24:03

So I think that's a very good question. Can it compete enough on price? I don't think it has to match price, but can it be broadly competitive? And a lot of that isn't just their production costs but instead of selling through grocery store where they lose 70% of the margin, or do a direct to consumer subscription sale and get higher margin. So there's a lot of economics across the whole business model that can be brought closer. But it's it's very hard to design these types of deals. I would say everyone is a bit different. We're getting better at it and we're doing one or one a week almost at this point. But I don't look around and I'm like that's a great example of how this has worked. Is for like I think this is a good a chance of Danny at working and let's try and let's hope and that's people understand that it's.

Speaker 4: 24:48

It's this is an attempt that this thing infrastructure capacity is not there today. It's been lost over generations, and so we're going to have to rebuild and develop something that does not exist now.

Speaker 2: 25:00

And I'm hearing so thick and fast how the principles are foremost, just through all the language you're using there, dan, and the scale is a secondary, even tertiary thing. It's how you go about it, it's the main thing. And just a I get to sing out to fellow sand grapers, that's what we call West Australians. For those who don't know the Haggerty family, who operate cropping at scale in extraordinary ways.

Speaker 5: 25:20

To Trans back to you oh, this is like vitamin B shots. This conversation is awesome. Um, next question goes to Dan, but then, esther, I'd love you to step on it too. It's from Beck Gorman, who's on the board of sustainable table and she was a key player in the report as well. He was wants to know in terms of in Montana Example and old salt, and how many layers of government legislation did you have to navigate and how did you manage Kind of to do that? In terms of the paradigm shift of the finance and structures you're bringing in, and I guess, just for both of you More broadly, you're you're working in ways that sits outside Conventional financial models and even government legislations, and how the hell do you come at that? You know, how do you broach?

Speaker 4: 26:03

Yeah, you have to be entirely outside the system, unfortunately, which requires a lot more work, and that's, you know, commodity ag and commodity finance, which built which I mean they're obviously symbiotic and so that kind of cookie cutter structuring Large-scale financing. That's the normal market and so if you're going to build a different type of capital for these other producers, you have to fully have Flexibility to structure it in the way that it needs to be done. So the kind of core basis of our platform is we have full discretion over the capital and how we need to structure it for that business. But we're also aware that other capital is going to be needed for the business, and so we've built Effectively a services business where we're a grant writer who writes grants on behalf of farmers. If you can get grant money it's great, but you can't rely on it and it's slow and it takes forever. We're also Structuring around tax credits. This particular program that we're using, where it's coming in as subordinate financing to fill the equity Cash gap, is from a program called M Pelt I guess is the new name the me processing, intermediate Blending program, which was just part of a new big US bill, like we found out about. The money was sitting with this local economic development group from someone else, like nobody even knew where the money was sitting and how it could get out. So in the US you have this weird situation where the federal government is just raining money down on the market, but these are all new programs, known as that access it, known as where it is, and so we've really become experts at figuring out these federal programs, allocating the money to these projects and presenting like a unified kind of institutional grade package that those types of Participants that are much more risk averse can just come along with us feeling confident that we're overseeing and structuring it and they can have confidence that the project will get executed. So this is a great example of federal policy brought post-covid that I wanted to incentivize.

Speaker 4: 27:57

More meat production has found its way to a project that I think is pioneering Regional meat processing and meat production, and so it is a case where policies making all the difference what what that capital is effectively doing is reducing the amount of equity the borrower would have to raise, and that's generally the limiting factor on these deals. You can lend a certain amount, but how much cash can they actually raise? They can maybe raise 500,000?. Maybe they can raise a million if they're great. They can't raise five million.

Speaker 4: 28:26

It doesn't exist, the money's not there, the networks aren't there, and so so much of our work around integrated capital is how do we make it so that that project has to raise the little smallest amount possible so that it is achievable with their networks? They do have some scheme in the game, but they only need to raise what is achievable for them. So we start with the kind of constraint of how much money can they bring to the table and then, a wrap around that, the strategy for coming up with the rest of it, because all the borrowers we work with under capitalized. Every farm we work with needs more money than they have. Availability of there's no customer working with who's like as what they need. It's all forms of strapped for resources. It's just at what level.

Speaker 3: 29:08

I would just second the having to work completely outside the system, and that is that is mostly what we do.

Speaker 3: 29:14

I would say we have the luxury of having a philanthropy Alongside us, so we do have a family philanthropy, that's. That's a related entity to Siena capital and it's through that entity that we fund the work of technical assistance providers who can help farmers access some of those federal and local regional state funds that are out there, and we also Fund some policy groups and advocacy groups who are working on behalf of farmers to find ways to make funding more accessible, to create programs that are more related to the kinds of farming that they're doing. So you know, here in the US one of the primary vehicles for subsidy is crop insurance, but all of the crop insurance rules are based on the very conventional ways of farming and they actually penalize folks for regenerative practices, and so some of the work is, you know, how can we start to create new vehicles for that, so that, so that they can access the federal funding that's that's available to all the other farmers out there?

Speaker 2: 30:20

Can I duck in there, estee? You mentioned the advocacy part there. I'm so glad it prompted in my mind. There's another key element that comes out of the report strongly, and that is, if I just call it, the story aspect, where it's not just the work itself of regeneration but how these stories are shared and the knowledge is shared and experiences and the relationships built. I'm gathering then this has been pivotal in your case too.

Speaker 3: 30:46

Absolutely. I mean we're. I would say that relationships are the central thing that we focus on. So, even though there's this money thing that happens, really what it's about is the people, the network and fostering those relationships. And so one of the things that we do is we hold these regular meetings called tangos, where we bring our investees, our grantees and maybe some folks in our funding community together to be able to just talk to each other. So we do it on Zoom you go in a breakout room and you tango with one other person, and oftentimes we're helping to try to make those connections where folks who are in advocacy are in relationship with the folks who need the advocacy so that they're producing and proposing real solutions for folks on Zoom, and therein is a capital need to, isn't it to be able to do more of that?

Speaker 5: 31:40

Absolutely.

Speaker 2: 31:40

Time's back to you.

Speaker 5: 31:42

Okay, thank you. A really interesting question here for all of you to grapple in with If we need to move beyond a limitless economic growth paradigm. This is from Ben Simmons and finance ie compound interest and returns is often the engine of this. So what is the role of private finance in a deep growth paradigm? Do we get to a place where we don't have for-profit finance at all anymore?

Speaker 2: 32:06

Maybe we can bounce back to Catherine, noting your magnificent backdrop that you've found Well done.

Speaker 1: 32:11

Thanks, goodness for the commons that are public libraries. Hey, sorry.

Speaker 2: 32:16

Yes, underrated.

Speaker 1: 32:18

I'm probably being way too noisy for a library. So is this something I really grapple with and, to be honest, I don't have full answers, but I am why I grapple with it, is it? You know, in equality, scholars like Thomas Piketty tell us that we know that economic inequality will go up when the returns on wealth are greater than growth, and so this is one of the challenges I have with certain elements of impact investing, where the financial return is still very, very foregrounded, perhaps even on parallel with other elements of impact, and so I think that's why I was so excited I was saying earlier to hear people in the investment community saying beyond financial returns, because what that does is opens up a whole lot of agendas and possibilities and purpose. That's not about adding to economic wealth, which is then going to exacerbate economic inequality, and we know how profound economic inequality is in driving a lot of breakdown in societies and driving environmental impact as well, and I think that's something we need to reckon with, and some of even some of the most innovative folks and thinkers in the investment world haven't yet got answers for this. So there's incredible then.

Speaker 1: 33:34

You may know him and, as you may know him over in the US Frank Dixon, who's working on system change investing, hasn't yet cracked that.

Speaker 1: 33:41

So this is something that we need to grapple with and I think the question around the what are the returns we're looking for and really elevating returns beyond finances it's really key. Hard to do, of course, because of how profoundly influential those agendas are, but also the way stock markets operate, the pace and frenzy and reward for people working in stock markets and working for listed companies and their incentive structures. So it's hard work but it's something I'm grappling with Because I think it's a key that can unlock a whole lot of other change, and so anyone who's got ideas I'd love to chew them over with you. Question around compound interest just sort of look at the work of Tim Jackson and Peter Victor, because that's started, because there's been a lot of thinking that the need for compound interest is what is a key driver of economic growth. The work of Peter Victor and Tim Jackson has sort of said not quite sure about that, so there's a bit of a live debate around the role of interest as a growth driver.

Speaker 4: 34:41

Yeah, and I'll touch upon that a little bit. I've thought a lot about this because when you're providing credit rate it can't deplete the resource that it's financing, and so my first introduction to sustainable investing was through sustainable forestry, where you actually have like the physical biomass growing each year of the wood and it's value increasing by the age, and so you kind of have the idea of 68% growth, not as this like general GDP economic number, but the actual production of biomass. And I think a lot of agriculture is built around these natural systems and so there is some rate of replenishment and growth in natural systems, particularly when connected with through integrated systems. So I do think these businesses can afford financing in the private market if that private capital is valuing the work they do. You could say that our current capital market is not actually a private market and it's a heavily distorted policy market where people don't have to pay for the real outcome. So I think most of the time you will look at our capital system like it's not actually that at all. So it's not a real market. If you're an ag, it's not a market at all. They incentivize over production, they buy the excess supply. It's just a very bizarre system that's really around getting votes and I don't know if they're producing food, but I don't really believe it, and so ultimately I think it's gonna require that type of much bigger change around like return expectations.

Speaker 4: 36:07

Anytime you hear 15, 20%, it's impossible, it's extractive. You can make 15 to 20%, you just can't depend on 15 to 20%, and so what I've found interesting right now is the feds raising of rates and general market rates. Our lending hasn't changed very much because our rates are fairly absolute. It's people making a loan and they're not just like borrowing against the fed, they're just they're looking at their net return, and so our interest rates over the past year have barely gone up maybe 50 basis points, while most lenders are up three or four times from kind of too cheap to fair, and so in many ways like a more normal credit market where capital costs, something I think is a better environment for the growth of regenerative agriculture, because when you have this unlimited growth, cheap money economy that we've had, like it's just hard for anything to prove its value, and I think the durability and resilience of these businesses and their viability to generate cash flow but also create economic and ecological growth, like I think there is a private solution. If anything, I think the private solution is more impactful than the government policy which is responsible for much of the system.

Speaker 4: 37:16

The system could, yes, absolutely not sustain itself without that policy support today. And so it's really, how do you pull out a distorted system? And my view is you have to prove the alternative works unsubscized which is unfair, but it is and you have to prove the alternative works on its own and then you can start to drive the broader decision-making towards that alternative. But I don't think we've yet proven that regenerative agriculture can sustain itself and prove its viability. I think we're five, 10 years from that. So this is really setting up for the real phase of growth, which is, once it's proven, then getting it to scale. We're not even at the point where I consider it proven. I believe in it, I want it to be proven, but I don't think it's there yet.

Speaker 2: 37:59

Thanks, dan. I'd like to chime in there with a quick reference back to Catherine's work on which we won't get a chance to talk about here, but to follow on with it. For those who aren't familiar with governments and the wellbeing economy, government's work that Catherine's been doing around policy and shift at national level, I mean it's underway here in Australia too. She was speaking with Treasury the other day. So yes, so yes, it's begun in Australia. Here and in other parts it's progressed in significant and interesting ways. So that's something to follow up with too. Where policy is coming along, governments are coming along.

Speaker 2: 38:34

And you do remind me, dan, of Paul Hawkins' quip about capitalism, which was a reprise of Gandhi's when he was asked how, what he thinks of Western civilization. When he visited London, paul was asked what he thinks of capitalism and he said much like Gandhi, I think it's a good idea. So he would shift to a system that actually did build capital on the ground, real life capital, not extract from it and call that profit. Run down your capital and call it profits, esther, over to you. And this will have to be our closing gambit too as we draw to a close. But, esther, did you all have comments on that query as well?

Speaker 3: 39:08

Well, I mean to Dan's point about can we prove this out? We have regenerative farmers competing against a very rigged system, right? So if you're talking about price parity, that's a huge. It's highly subsidized on the conventional side and so if you're not being highly subsidized, how can you compete against that kind of a rigged system?

Speaker 3: 39:30

But to the point about returns, I mean, I think one of the things that we've been seeing is the financialization and the increasing financialization of our economy, right.

Speaker 3: 39:38

So if you think about financial capital over time going up like this, that's a really interesting curve and you think, oh well, there can be a lot of wealth created as a result of that. But the curves that you don't see are sort of human potential and our ecology, right. So those curves have been proportionately going down, right. We've been depleting that while the financing has gone up. So these curves have been going opposite to each other and really, what we should be doing is trying to normalize them so that they're in balance with each other, and I think this is the kind of thinking that we need around. Financial returns is like what's gonna balance those things so that we stop depleting the planet, so that we stop depleting our people and victimizing them in this process. So, and since those resources essentially have been going down, how do we think about our returns in light of bringing them back up to a normal state? Do we have to actually have negative returns to bring that back for a bit in order to bring it back in balance?

Speaker 3: 40:47

I think that's an interesting question, and so yeah, I have a friend who says that you know anything more than a 4% return. My question is who is getting screwed?

Speaker 2: 40:58

Yeah, I like the way you framed it, though it's the two. It goes back to the fact that these, a lot of these people have been at it for decades, that there's a balancing to be done. It's a nice frame to bring to it Before we go back to Tanya for a closing and a bit of a what next, Esther, I have to ask you, knowing that you run learning programs and knowing that, I guess, step back one step further, understanding, as it's come up a bit in here, that it's a process of learning and transformation. Right back to Hailey's opening words, transformation in ways that she didn't even anticipate. And you know I'm in that basket. We probably all are to one degree or another. So we don't know, we don't know type of thing. So the learning contexts that we set up are vital in all this. And you run learning programs on your ranch. As I understand it, Esther, with finance, use, investors, philanthropists, can you just give us a little idea of what happens there?

Speaker 3: 41:54

Yeah.

Speaker 3: 41:54

So we run these learning journeys for investors and philanthropists who are in regenerative ag, and it's a chance for them to get on the ground and literally get their hands dirty to understand what is regenerative ag.

Speaker 3: 42:06

So we ask them to put their hands in the soil, we ask them to do soil tests to see what's actually happening underground, and then we come back and talk about how do we apply this in our investing and philanthropy. And some of the underlying thinking around this work that we do is that, you know, our kind of root cause is that we are disconnected from ourselves, from each other and from the land, and so the learning journey is an attempt to reconnect folks, you know, first to the land and then being in community with each other, connecting to one another and when we say one another, also the land is part of one another as well and then reconnecting to self right. So what is it really deep inside that you need? What is it, what's the need that you're trying to need and what's the good that you're trying to put out into the world? And how do these things marry with the investing in the philanthropy work that you do? So those are the kinds of transformations that we aim to seek on the learning journey, beautiful.

Speaker 2: 43:12

thanks so much, you guys. It's been incredible speaking with you.