AXA, Unilever and Tikehau Capital have signed a memorandum of understanding to launch a €1 billion impact fund that will focus on regenerative farming.
The vehicle will be seeded with €300 million from the partners, each of which will commit €100 million when the fund launches later this year.
The impact fund will likely have a 15-year term, Tikehau Capital group climate director Pierre Abadie told affiliate title Agri Investor, as the trio seek to establish an ecosystem of investments that will support the transition from conventional to regenerative agriculture.
The fund will invest in three main areas, the first of which will involve providing equity to farms, many of which will have pre-existing relationships with Unilever, to help finance their transition from conventional to regenerative farming.
“Then you’ve got everything that is related to the ag and foodtech and this is what I call the enablers,” said Abadie. “Ultimately, if you want to move to regenerative farming, you will have to have enablers to help the shift in practices and here you need to have proper private equity investment that will be VC and growth type, which could be on the sensors, robotisation and so on.”
Abadie added that the third main area of investment will be alternative consumption, which includes areas such as vertical farming and alternative proteins, which will supplement the fund’s core goal of regenerating and relieving the stress on natural soils.
Investments into farmland assets have not been excluded, said Abadie, but given the trio’s desire to deliver conventional private equity returns of between 15 percent to 20 percent IRR, the vehicle is more likely to focus on financing regenerative agriculture practice changes ahead of doing this work directly.
“The core of target of the fund is to shift conventional agriculture practices to regenerative. In our ecosystem, for example, we have one company that is acquiring land and then leasing it to farmers if they shift to regenerative farming. The farmers then need to have the equity layer to shift their practices. Our fund could finance the farmer that will be on that land at the private equity level since it fits into this strategy,” explained Abadie.
The fund will invest globally in developed regions such as Europe, Australia and the US, and will also receive exposure to geographies such as Southeast Asia and Latin America due to Unilever’s value chain.
The partners are aiming to receive Article 9 certification under the EU’s Sustainable Finance Disclosure Regulation, with the vehicle also linking 50 percent of its carry to the fulfillment of impact targets.