America’s soil health is in dire straits and a new investment fund, rePlant Capital, has been formed to help clove the crisis with capitalism by tying interest rates for farm loans to improvements in soil’s carbon storage as a way to save farmers from the disastrous impacts of climate change.
A third of the country’s topsoil has eroded in the past 50 years, part of a warning from the United Nations in 2015 that predicts soil degradation will be one of the central threats to human health in the coming decades. Farmers are seeking to regenerate soil after decades of misuse from chemical fertilizers and herbicides, but transitioning to less harsh farming practices is costly and nature cannot solve the problem according to human timeline, requiring 500 years or more to create an inch of fresh topsoil under natural conditions.
Based in Boulder, Colorado and Oakland, rePlant will deploy $250 million to farmers transitioning to regenerative or organic practices, with about $200 million of that going towards loans based on soil health metrics. The balance will fund equity investments in farms that are maxed out on debt. Most of the fund’s investors are women.
“By talking about soil health, you’re immediately talking about water conservation. You’re immediately talking about water filtration and I would argue those metrics are as important as carbon,” rePlant cofounder Robyn O’Brien says, explaining how years of fertilizer and herbicide use have stripped soils of nutrients and made them less effective at absorbing water. “We are deploying technologies and services that will accelerate this change.”
O’Brien, who was named to this year’s Forbes Impact 50, a list of the top impact investors in the U.S., co-founded rePlant after years at hedge funds and advising companies in the natural foods industry. She joined up with Don Shaffer, the former CEO of RSF Social Finance, who deployed $250 million worth of senior loans to more than 200 impact companies in a decade, and David Haynes, a former managing director at one of the earliest impact venture capital funds.
They launched rePlant earlier this year after realizing they were fed up with traditional financing options for farmers and ready to get creative with the ever-present threat of climate change. RePlant’s opportunity is big: $426 billion in U.S. farm debt and over 900 million farmable acres.
“Tying loans to soil health increases was the holy grail for us at RSF,” says Shaffer. “We never quite got there. We’ve got a shot here to support the farmers at the economic level, as they get off the hamster wheel of chasing yield and can focus on being more profitable.”
Starting from scratch has allowed them to build a platform that could reimagine decades of often discriminatory lending to mainly white male farmers, while working with conglomerates like Danone North America from the beginning.
RePlant’s first loan in January 2020 went to Kansas-based McCarty Family Farms, a fourth-generation dairy that has worked with Danone for almost a decade, which is looking to reduce its water consumption. The loan went towards installing moisture probes on cropland surrounding the farm where water can be in short supply but the cows often graze and is one from a pool of $20 million that will go towards Danone’s partners overall.
“The debt load is enormous for a lot of these farmers,” says Haynes, who heads up the equity investing side of rePlant. “How to entice them to become more profitable, and not focus on yield, within the confines of the supply chain to these big multinationals—it hasn’t been done yet.”