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Performance-based Financing Models for Sustainable Agriculture in the Great Lakes Basin

Year Awarded: 2022
Awarded: $600,000
Team Leader:  University of Michigan

This team will create a new class of agriculture investment products for institutional ESG investors that are measured by the carbon footprint of fertilizer used in crop production. These investment products will have preferred (lower) interest rates based on their performance in delivering environmental benefits by reducing nutrients applied to the land or lost to the water system.

This project is part of a multi-phase strategy that reduces nutrient use and losses in the region by expressing them as reduced carbon emissions. This aligns improved nutrient management on farms with ESG investors’ climate change strategies. Corporations and institutional investors can meet their sustainability goals by passing performance requirements for nutrient management through their value chains.

The team will engage farmers, corporations, financial institutions, and investors across the agriculture finance value chain to learn how economic incentives influence conservation practices. Using the results of this customer engagement, the team will design and focus-group test products to understand the preferences of each customer segment. They will explore which customers value reframing nutrient use and loss as their carbon footprint equivalents. Significantly, this testing will also help the team understand how these products would result in farmers and landowners implementing conservation practices.

This work will set the stage for field testing – in a later phase – the financial products the team has developed.