Agroforestry

Agroforestry intentionally integrates trees and shrubs into food and livestock agricultural systems to mimic the structure of forests. The interaction between the different components of vegetation promotes biological diversity and provides vital ecosystem services and socio-economic benefits. It is the antithesis of large-scale monoculture crop systems. Common agroforestry practices include:

• Tree Intercropping: Tree intercropping integrates trees with traditional agriculture to augment carbon sequestration, biomass, and soil organic matter. Project Drawdown estimates that, over the next 30 years, tree intercropping could sequester between 15.03 and 24.40 GtC-equivalent greenhouse gasses.
• Multi-strata Agroforestry: Multistrata agroforestry systems are composed of several strata of trees and tree crops, reflecting natural forest structures by growing crops under tree canopies. While the simplest systems consist of only two strata—a lower stratum of tree crops such as coffee, and an upper, equally monospecific stratum of shade trees—the most complex systems approach the structural complexity of natural forest. If scaled, Project Drawdown estimates that multi-strata forestry practices could sequester between 13.26 and 23.94 GtC-equivalent greenhouse gasses.
• Silvopasture: Silvopasture practices combine pasture, foraging, and trees on shared land. If expanded, Project Drawdown estimates that silvopasture could sequester 26.58 to 42.31 GtC by 2050.
• Tree Plantations (On Degraded Land): Growing timber trees on degraded cropland, fields, and forests can mitigate carbon emissions. If scaled by 2050, Project Drawdown projects that tree plantation development on degraded land could sequester 22.04 to 35.09 GtC.

Agroforestry is most closely associated with tropical agricultural systems in emerging markets, though the practice also exists in temperate regions. Today, agroforestry is experiencing a renaissance and is no longer seen as a niche agricultural technique; instead it is well-positioned to play a leading role among nature-based solutions. At scale, it has the potential to sequester billions of tons of carbon each year, lower deforestation pressures, support biodiversity, increase agricultural productivity, reduce erosion, enhance food security, improve soil quality, and provide better livelihoods for farmers and farming communities. Additionally, agroforestry practices reduce the need for fertilizers, pesticides, and other agrochemicals that harm surrounding flora and fauna.

Economically, agroforestry already plays a significant role in local food production as well as the production of both locally-consumed commodities (such as fuelwood, fruit, and timber) and globally traded ones (such as rubber, gum, coffee, cocoa, tree nuts, spices, medicinals, and plant extracts). Overall, agroforestry represents a profitable nature-based solution that allows investors to combat multiple climate and sustainability goals simultaneously.

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Estimated Capital Required by 2050: Project Drawdown

In a 2022 report, the United Nations Environment Programme (UNEP) and the Economics of Land Degradation (ELD) Initiative note that sustainable land management practices will become more important over time. The estimated cumulative agroforestry investment necessary to limit global warming to 1.5°C by 2050 is $3.6 trillion. A 2022 policy brief from the Agroforestry Network recommends “increas[ing] financial incentives and investments that enable and add value to the agroforestry sector” as a path towards scaling up agroforestry practices worldwide...

Is agroforestry investable today and what is its level of maturity? What kind of investors would be interested in this opportunity?

Over 30 years of research and field trials of agroforestry techniques has catalyzed increasing development of institutional, financial and corporate investor interest in agroforestry as an alternative to monocrop agriculture systems. This interest has led to the formation of a range of emerging specialty managers active in all major regions, such as 12Tree, Mirova, ECOTIERRA and the Moringa Partnership, among others. Investment forms include equity, blended finance, and impact strategies. Most seek to provide market-rate returns equivalent to agribusiness and real asset investments in emerging markets, though some funds focused on smallholders in emerging markets are ‘impact-first’ strategies.

For instance, the Moringa Fund is a pioneer agroforestry fund established in 2010. In 2015, The Global Environment Facility became an equity partner. The fund currently has €84 million invested in 10 agroforestry companies in eight countries. 12Tree formed in 2017 and attracted $200 million from German pension funds, with $150 million invested in projects covering 32,407 hectares and employing more than 4,600 people. Notably, in 2022, 12Tree began certifying farms using the Verra Verified Carbon Standard (VCS) and the Climate, Community, and Biodiversity (CCB) standard. ECOTIERRA’s Urapi Sustainable Land Use Fund, investing in community-based sustainable agroforestry in Latin America, raised $30 million in 2018 and $50 million in 2021. In July 2021, Mirova, a subsidiary of Natixis, closed its Land Degradation Neutrality Fund - an impact fund focused on land restoration via regenerative agriculture and agroforestry practices – securing more than $200 million in commitments. Finally, reforestation group Terraformation has branched into agroforestry practices with its 2022 acquisition of Agro Resources. Even bolder, project developer ALLCOT Group and the reNature Foundation have partnered with the goal of converting one million hectares of degraded landscape by 2030 through agroforestry supported with carbon credits.

Corporates see the potential that agroforestry offers and its role in fostering sustainable, transparent, and equitable agricultural commodity supply chains (delinked from biodiversity loss) and providing access to low-cost carbon credits. Amazon, as part of its commitment to The Climate Pledge, recently announced its investment in the Agroforestry and Restoration Accelerator in partnership with The Nature Conservancy. The Accelerator ​​will support 3,000 farmers and restore approximately 20,000 hectares within three years and remove up to 10 million metric tons of CO2 from the atmosphere by 2050.

A range of agroforestry-focused technology and platform startups have also received venture funding. For instance, Propagate Ventures, a New York-based startup, is rolling out software to support farmers managing agroforestry-based production systems. It includes education and a crowdfunding platform to facilitate the financing of U.S. farms adopting agroforestry systems. As of 2022, Propagate advised some 20,000 acres of agroforested areas and raised $10 million in Series A funding.

Additionally, while not solely agroforestry-focused, market and technology infrastructure that has grown from the larger AgTech renaissance benefits the field. There are now at least a few dozen AgTech and FinTech startups around the world seeking to connect emerging market farmers to national and global markets in more equitable ways, through platforms and intelligence hubs. For example, B Corp-certified agroforestry platform Belterra provides technical assistance, credit, supply chain connections, and other support to small and medium-sized farmers in order to form productive forests from degraded land. In 2023, Innoterra won a $6.3 million grant from India’s National Horticulture Board.

Founded in 2022, re.green is a large-scale project developer that aims to restore 1 million hectares of rainforest while capturing 15 million tons of carbon per year; they also sustainably market forest products, boost biodiversity, and empower local communities. In 2022, re.green raised $20 million in Series B funding for total lifetime funding of $76.8 million. PretaTerra is an agroforestry intelligence hub funded by NGOs, companies (such as Nestlé and Natura), and philanthropic organizations, with over 150 projects in 20 countries. Their aim is to create versatile and reliable regenerative systems that can shorten the path between investors and ESG projects to create portfolios of regenerative assets.

What are the current capital flows into agroforestry? Where are they coming from?

Agroforestry funding comes from a variety of private (as demonstrated above), governmental, and nonprofit sources. International development capital plays a crucial role, with multilateral and bilateral funding agencies investing hundreds of millions into the field. As one example, food giant Mars – working in collaboration with the International Fund for Agricultural Development (IFAD) and World Agroforestry (a research institute) – is helping to finance Sustainable Farming in Tropical Asian Landscapes (SFITAL), investing $4 million to support small-scale producers in improving the sustainability and profitability of their farms in Indonesia and the Philippines through agroforestry practices. Furthermore, federal agroforestry funding has expanded over recent years. In 2022, The Nature Conservancy (and its partners) received a $60 million grant to fund a five-year, twenty-nine-state project to expand U.S. agroforestry practices through technical and outreach measures. The nonprofit aims to “build…a foundation for scaling agroforestry nationally” by converting 30,000 acres into agroforestry farms. A project of this scale would sequester 1% to 2.5% of all 2020 U.S. emissions. Increased federal funding reflects a growing interest in agroforestry across the USDA, demonstrated by the agency’s first National Agroforestry Survey in 2022.

Where are the opportunities for agroforestry?

Agroforestry has long been practiced worldwide. During the 1980s and 1990s, many countries integrated agroforestry into their national forestry and agricultural policies. Current projections estimate that 1.6 billion hectares across the globe currently use agroforestry systems, with about 22% and 78% established in temperate and tropical regions respectively. Importantly, the costs and rates of carbon sequestration vary by region, with greater sequestration potentials in humid tropical regions than semi-arid regions.

Considerable literature has assessed agroforestry projects in India, Colombia, the United States (including Hawai’i and the Appalachian region), Germany, France, Sub-Saharan Africa, and Fiji, among others. The geographic diversity across these studies demonstrates agroforestry’s global application.

What are the impediments to growth and what is being done to alleviate them?

Systematic challenges impede agroforestry growth. Unsupportive government policies, ambiguous land rights, high transaction costs, and disincentivized market structures obstruct agroforestry expansion.

Past studies have highlighted the challenges of transitioning towards agroforestry systems. A USDA study found that agroforestry’s long growth times may impede farmers from acquiring credit from lenders due to slow returns on investment. Furthermore, farmers have expressed the need for technical assistance in building their agroforestry knowledge and capacity. These challenges transcend borders. In a Brazilian study, local smallholders emphasized that a lack of knowledge, government/community support, and financial assistance hindered their transition to agroforestry.

Furthermore, institutional barriers surrounding measurement, reporting, and verification (MRV) systems obscure efforts to account for agroforestry’s climate mitigation impacts. Since agroforestry remains underrepresented in the UNFCCC MRV systems, its emissions reductions may not be officially counted through MRV reporting; consequently, countries may 1) choose not to expand agroforestry as part of their climate mitigation programs and 2) provide insufficient financial and institutional support to existing agroforestry farmers.

Notwithstanding, national governments are beginning to recognize the importance of incorporating agroforestry policies into their federal agricultural mandates. For example, both Nepal and India have national agroforestry policies designed to promote agroforestry practices within their borders. Additionally, international organizations and non-state actors have begun to challenge policies and practices that prevent agroforestry dissemination. For example, the Food and Agriculture Organization of the United Nations published a policy agenda designed to provide guidance to policymakers as they integrate agroforestry into governmental regulations. According to Bettles et al. (2014), non-state actors enjoy both “proximity and institutional knowledge” that allow them to “provide opportunities for direct and indirect intervention to increase agroforestry adoption.” Thus, companies, nonprofits, and international organizations are uniquely positioned to promote agroforestry practices worldwide.

Barriers also produce investment opportunities. Agricultural platform SaaS and human services companies – like Swiss-Indian Inoterra, U.S.-based OpenTEAM, Indonesian-based PemPem and Koltiva, and California-based Cultivo – help producers make the transition by providing a suite of services including longer-term financing and price guarantees (to help address the income hit during transition to agroforestry), technical assistance programs, traceability services (to ensure premium pricing for organic products), and support for developing carbon credits. These types of companies, most often mission- as well as profit-driven, could very well experience substantial growth.

By mimicking the different forest layers, agroforestry systems are functionally and structurally more complex than conventional monoculture cropping. Having a more diverse vegetation structure improves nutrient and water cycling, reduces erosion, and enhances biodiversity. This creates ideal microclimatic growth conditions to maximize the productivity of crops and livestock sustainably. A study assessing the socioeconomic impacts of agroforestry in Kenya found a “modest yet statistically significant” improvement in agroforestry product income, access to fuelwood, and improved milk yields among dairy farmers.

By increasing agricultural productivity and diversifying farmers’ income, agroforestry practices can reduce the pressure to trade habitats for agriculture, thereby preserving essential ecosystem services and biodiversity.

Although agroforestry systems are less biodiverse than intact forests, integrating trees within an agricultural landscape improves biodiversity by providing wildlife with food and shelter. One agroforestry project in Gorongosa National Park in Mozambique reported that shade-grown coffee and other agroforestry crops were bringing biodiversity back – with ongoing research showing that only a few years after establishment, these “agroforests” sheltered up to 80% of the biodiversity found in the rainforest. Additionally, Damasco et al. (2022) found that agroforestry-certified Amazonian açaí plantations had 50% more tree species and a greater number of threatened species than non-certified plantations.

Agroforestry can also be used to create ecological buffer zones which protect sensitive or critical ecological habitats from human activity. Well-designed agroforestry plots can also serve as wildlife corridors, allowing species to move between different habitats in a fragmented landscape.

The main benefit of agroforestry is that it can convert a significant part of the agriculture sector (which is responsible for about 22% of GHG emissions) into a carbon sink and a climate stabilizer. Zomer et al. found that agroforestry plays an important role in carbon sequestration and may not be accounted for by current global or national accounting. It is estimated that agroforestry could sequester at least 1 gT CO2 annually. Carbon sequestration rates vary by agroforestry practices (i.e., multi-strata, silvopasture, tree intercropping, etc.); therefore, careful project research is required to ensure maximum sequestration returns.

Conversely, increasing the biomass of croplands will enable the sequestration and storage of more carbon than traditional agricultural practices. While there has been great variation in the carbon sequestration estimates, agroforestry certainly sequesters more carbon than conventional monoculture systems. A 2016 meta-analysis of agroforestry studies estimated between 13 and 41 tons CO2-eq per hectare is sequestered for at least the first fourteen years after an agroforestry stand is established. Silvopasture in particular has been recognized as one of the most impactful carbon sequestration solutions. Although it has a lower carbon sequestration rate per hectare per year, its potential to scale is vast – grazing lands for livestock covers approximately 3.3 billion hectares.