Partner Feature: Financing Sustainable Shifts in the Ag Economy

We sat down with Matt Servatius, head of Cleantech at Wells Fargo and Kenneth Scott Zuckerberg, Sector Manager of AgrifoodTechnology and Packaged Food at Wells Fargo to discuss the challenges agriculture faces and why all classes of investors are an important part of the conversation and solution.

 

Last year, Wells Fargo’s awarded THRIVE a $300,000 grant to support our efforts to help promising technologies and startupsin the agriculture sector evolve from concept to market. A partner of THRIVE since early 2016, the investment followed the bank’s first $100,000 philanthropic contribution to the global startupplatform. Both awards are part of the bank’s larger announcement made earlier this year to commit $200 billion in sustainable financing for projects focused on sustainable agriculture, waste reduction, and water and broad environmental conservation. Outside of the government, Wells Fargo has been the most active agriculture lender for over 19 years. 

Can you talk about the role that Wells Fargo plays in catalysing capital as the sector undergoes digital transformation?

MS: At Wells Fargo, our thesis is that the food system is transforming, and we are seeing that every part of the value chain is being disrupted. As a firm, we understand the solution for our clients, the challenges and disruptions, and can identify the real risks that exist. The bank intersects all different parts of the farm and food chain- many of these farmers are already our customers, so when they are looking for financing to mechanize new technology, we are available at this point.

We also recognize the critical need for different investor classes to participate in financing innovation. Unless it’s a software play, venture capital may not be the right class of investment purely from the standpoint that companies should be unburdened with incessant funding. In order to reach the tremendous scale that is required of these companies as they move through incubation to large corporate companies, there is a diversity of capital that should play a role across the life cycle of these companies. Many companies shouldn’t be giving away equity and should instead be proving out their technologies with institutional grant dollars. So, Wells plays a central role because we cover these different class of investors like family offices, sovereign wealth funds, equity, etc., in order to better enable and support these companies. 

KZ: The big picture is that food and ag is the last trillion-dollar industry to digitize and embrace innovation. When you look at agriculture, there are major risks involved including food scarcity and insecurity, trade risk, climate volatility, and the more risks there are, the more exciting it is for technology to play a role. In this process, we have to ask whether we are prepared, willing and able to bring capital to bear in the process of understanding if these new technologies will work or fail. As a bank, we are in the position to finance all sorts of innovation that need longer investment horizons and flexibility.

What are the key pain points facing the industry?

KZ: Our approach is to find out first where the pain point is and to be the conduit and financing mechanism for the technologies that are addressing them. Of critical importance in the industry is that there is no common operating system, which is a huge issue. On top of this, there is a lack of consistent rural broadband. 

You have to take the complexity and burden off of the farmer as far as adoption goes. Technologists need to think about their models in this sense let farmers focus on their core businesses and don’t make them purchase it. Having them lease it is much more viable.

Labor is undoubtedly one of agriculture’s biggest challenges. If you run a greater demand than your production facility, even assuming no changes to US immigration policy or work permits for foreign workers, then adoption of robotics, automation and other advanced technologies will be key. So how do we do this? In a recent Wells Fargo-sponsored roundtable webinar, I had the pleasure of hosting three industry professionals with expertise in precision farming, robotics and satellite imagery to provide their insight. The group include Sebastien Boyer of FarmWise, Carl Vauseof Soft Robotics and Ron Hadarof Vibe Imaging Analytics. 

Farmers have long been accustomed to spending money on seed technologies (genetics) and new formulations of crop protection chemicals as a means to generate additional yield. With diminishing returns from bioengineered seeds and the reduced efficacy of agrochemicals with increasing weed resistance, there is an industrial logic to committing a portion of ‘innovation investment capital’ to robotics and automation as the new products come to market. 

As the value chain further consolidates and becomes more vertically integrated, there ought to be more top-down support for modernizing and automating processes through technology as a means to monitor and optimize processes, improve operational efficiency and more effectively manage and monitor risk. 

Regarding food waste, I do not subscribe to the idea that we need to produce more, but that we need to be more efficient about our supply.

About Wells Fargo Clean Technology

The Wells Fargo Clean Tech team is comprised of banking professionals with deep cleantechindustry across a multitude of financial firms. The group oversees several cleantech-focused initiatives, including the Innovation Incubator, a $10 million environmental grant program for clean technology startupsand has put $4 billion in solar and wind project investments to work, $9 billion to support LEED-certified and other green buildings, as well as other loans and investments through its Clean Technology and Innovation Philanthropy Program.