Monday, May 25, 2009
Sustainable Agriculture Financing
For today’s farmers to have the incentive to adopt sustainable farming methods, stewardship must lead to an increase in the farm’s income. Stewardship is more than just the use of organic farming methods, however, but includes methods such as biodynamic farming. Biodynamic farming produces robust and flavorful crops, uses methods that reduce the usage of nitrogen and phosphorous rich fertilizers, plants vegetation in riparian zones, creates shading, and generates water quality credits, easements, transferable development rights, renewable energy, and carbon credits.
Any and all stewardship methods can be utilized by farmers to generate extra income without reducing crop yields.
The tradeoff a farmer faces between selling crops themselves, versus selling the water rights connected to the croplands, lies in their price comparison. If selling crops such as rice allows the farmer a higher income gain than selling the crop lands’ water rights, the farmer will typically choose to grow the crops instead of fallowing his or her fields and selling the rights. The California Drought Bank, which faced little success when attempting to buy its desired amount of water rights from farmers noted that the price of water rights was too low.
While many organizations focus on educating farmers on the various ways to generate income from stewardship, our society still faces a general lack of knowledge regarding the current existing market mechanisms, and how to generate the financial incentives necessary to increase stewardship.
More agricultural organizations have been joining the Chicago Climate Exchange (CCX) in order to sell the carbon credits they have generated. Such a movement is very encouraging, though it is just the start in a long process toward cementing stewardship as financially viable, attractive, competitive. If we are to expect more farmers to adopt sustainable measures, we must enable them to efficiently create and monetize their farming methods. Mission Markets Inc. provides a crucial step in this process.
- Mike
Posted by Mike Van Patten at Monday, May 25, 2009 0 comments
Mission Market's goal is to increase awareness of and conversation about the social and environmental capital markets. Postings focus on ways to effectively develop viable investment asset classes within the subsectors that make up these markets, with the goal of increasing the flow of capital, information, and transparency, in support of environmental conservation and socially focused initiatives.
Monday, May 25, 2009
Social and Ecosystem Markets Financing Mechanisms
Much has been discussed and debated regarding how to increase capital flows in support of vital social and environmental challenges and opportunities. This debate has become even more pressing considering the current global financial crisis. It is clear that the world lacks the philanthropic capital needed to solve the vital challenges our global community faces.
What can we do to solve this funding gap? Private capital market mechanisms can provide incentives for mainstream investors to fund various social and environmental sectors. In the social sphere, these sectors include microfinance, community investment and CDFI's, and the LOHAS sector, among others. On the environmental side, private investments can and should flow to areas such as conservation finance, sustainable water solutions, terrestrial and marine ecosystem services, and sustainable fisheries and agriculture,.
Microfinance and community investment have been able to raise billions of dollars through private capital market mechanisms, albeit still not in sufficient amounts. The carbon markets are seeing dramatic increases in capital because of current and pending climate change regulation, and the wetland and conservation banking markets have also benefited from the Clean Water Act and Endandgered Species Act. However, the environmental markets are still only at the brink of their potential.
I wrote in an Ecosystem Marketplace article (http://ecosystemmarketplace.com/pages/article.opinion.php?component_id=6652&component_version_id=9948&language_id=12) suggesting that the social and environmental communities should view social as well as conservation finance similar to how the institutional investment community looks at other asset classes: underlying assets and cash flows.
When I speak of the mainstream investment community, I am referring to the growing number of patient capital investors focused on double and triple bottom line returns – not speculators. As a result of the recent crisis’s capital markets turmoil, popped bubbles, higher risk aversion, and lower predicted returns have changed what investors perceive as "market rate returns". The current economic climate has actually opened up the opportunity for the 3%-7% annual returns from investments in the social and environmental markets to present themselves as more attractive than they were the past, when compared mainstream investments.
Below is a list of the various financial structures being created to more effectively support and monetize the social and environmental markets:
Social:
- Social Enterprise Royalty Trust Securities (SERTS), in which social enterprises pay out a portion of their revenues as a dividend to their shareholders.
- Low Profit Social Limited Liability Corporation, or, L3C company, where PRI and market rate return investors can invest in and support social enterprises, and in which cash flow and returns are distributed according to the investors’ interests.
Environmental:
- Water Footprint Credits & Water Restoration Certificates support various water usage and restoration projects globally.
- Stormwater Runoff Credits support the reduction of impervious surfaces to reduce stormwater pollution.
- Marine Impact Credits support marine protected areas and various estuary and marine conservation and fisheries projects.
- Community Quota Entities support local sustainable fishing communities.
The above structures can provide diversified double and triple bottom line market rates of return to investors. Mission Markets Inc., an electronic marketplace for the environmental and social capital markets, supports these markets by helping to scale the various social and environmental sectors as viable investments. Please visit http://www.missionmarkets.com/.
An overview of our marketplace:
Our Markets
- Social Capital Markets - L3C's, B-Corporations, Microfinance, Community Development Financial Institutions (CDFI's), NGO’s, LOHAS Sector
- Environmental Markets - Ecosystem Services & Conservation Finance, Renewable Energy, Sustainable Fisheries, Sustainable Water Solutions, Stormwater Management, Sustainable Agriculture
Our Products & Services
- Capital Raising for Social & Environmental Enterprises, Environmental & Renewable Energy Projects, MIV's, Water Banks, through debt, equity, and credits
- Secondary Liquidity & Transactions for Private Debt, Shares, Environmental Notes & Credits, Transferable Development Rights
- Public/Private Partnering for Financing Fisheries and Conservation Investment Opportunities
- Innovative Environmental Financing Structures Including Carbon Notes, Renewable Energy Notes, Biodiversity Notes
- Transaction Data, Research and Market News Aggregation for the Social & Environmental Capital Markets
- Creation of Pilot Programs for Catch Shares and Marine Impact and Water Usage Credits
- Metrics Quantifying Environmental & Social Performance and Return on Investment
- Stringent Screening and Certification Standards for Social Enterprises and Environmental Projects
Details will follow on each sector and structure and how to effectively scale these markets. For more information please visit http://www.missionmarkets.com/ or email me at mvp@missionmarkets.com
- Michael Van Patten
What can we do to solve this funding gap? Private capital market mechanisms can provide incentives for mainstream investors to fund various social and environmental sectors. In the social sphere, these sectors include microfinance, community investment and CDFI's, and the LOHAS sector, among others. On the environmental side, private investments can and should flow to areas such as conservation finance, sustainable water solutions, terrestrial and marine ecosystem services, and sustainable fisheries and agriculture,.
Microfinance and community investment have been able to raise billions of dollars through private capital market mechanisms, albeit still not in sufficient amounts. The carbon markets are seeing dramatic increases in capital because of current and pending climate change regulation, and the wetland and conservation banking markets have also benefited from the Clean Water Act and Endandgered Species Act. However, the environmental markets are still only at the brink of their potential.
I wrote in an Ecosystem Marketplace article (http://ecosystemmarketplace.com/pages/article.opinion.php?component_id=6652&component_version_id=9948&language_id=12) suggesting that the social and environmental communities should view social as well as conservation finance similar to how the institutional investment community looks at other asset classes: underlying assets and cash flows.
When I speak of the mainstream investment community, I am referring to the growing number of patient capital investors focused on double and triple bottom line returns – not speculators. As a result of the recent crisis’s capital markets turmoil, popped bubbles, higher risk aversion, and lower predicted returns have changed what investors perceive as "market rate returns". The current economic climate has actually opened up the opportunity for the 3%-7% annual returns from investments in the social and environmental markets to present themselves as more attractive than they were the past, when compared mainstream investments.
Below is a list of the various financial structures being created to more effectively support and monetize the social and environmental markets:
Social:
- Social Enterprise Royalty Trust Securities (SERTS), in which social enterprises pay out a portion of their revenues as a dividend to their shareholders.
- Low Profit Social Limited Liability Corporation, or, L3C company, where PRI and market rate return investors can invest in and support social enterprises, and in which cash flow and returns are distributed according to the investors’ interests.
Environmental:
- Water Footprint Credits & Water Restoration Certificates support various water usage and restoration projects globally.
- Stormwater Runoff Credits support the reduction of impervious surfaces to reduce stormwater pollution.
- Marine Impact Credits support marine protected areas and various estuary and marine conservation and fisheries projects.
- Community Quota Entities support local sustainable fishing communities.
The above structures can provide diversified double and triple bottom line market rates of return to investors. Mission Markets Inc., an electronic marketplace for the environmental and social capital markets, supports these markets by helping to scale the various social and environmental sectors as viable investments. Please visit http://www.missionmarkets.com/.
An overview of our marketplace:
Our Markets
- Social Capital Markets - L3C's, B-Corporations, Microfinance, Community Development Financial Institutions (CDFI's), NGO’s, LOHAS Sector
- Environmental Markets - Ecosystem Services & Conservation Finance, Renewable Energy, Sustainable Fisheries, Sustainable Water Solutions, Stormwater Management, Sustainable Agriculture
Our Products & Services
- Capital Raising for Social & Environmental Enterprises, Environmental & Renewable Energy Projects, MIV's, Water Banks, through debt, equity, and credits
- Secondary Liquidity & Transactions for Private Debt, Shares, Environmental Notes & Credits, Transferable Development Rights
- Public/Private Partnering for Financing Fisheries and Conservation Investment Opportunities
- Innovative Environmental Financing Structures Including Carbon Notes, Renewable Energy Notes, Biodiversity Notes
- Transaction Data, Research and Market News Aggregation for the Social & Environmental Capital Markets
- Creation of Pilot Programs for Catch Shares and Marine Impact and Water Usage Credits
- Metrics Quantifying Environmental & Social Performance and Return on Investment
- Stringent Screening and Certification Standards for Social Enterprises and Environmental Projects
Details will follow on each sector and structure and how to effectively scale these markets. For more information please visit http://www.missionmarkets.com/ or email me at mvp@missionmarkets.com
- Michael Van Patten
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