5 Questions for Trailhead Capital’s Tripp Wall

The fact that there are less than 60 harvests left in Earth’s topsoil, according to the UN, is the kind of thing that keeps Tripp Wall, Trailhead managing partner, up at night. “As a guy with kids who cares about the environment, I feel a sense of urgency, a call to arms to do something, and to do something a little bit differently.”

Raised in a cattle and timber family, Tripp grew up learning the value of stewardship from his grandfathers. It was an early introduction to a conservation mindset and the interconnectivity of everything from plants, to animals, to water, natural resources and more.

Trailhead Capital is working to make a difference in planetary and human health through the investments we make in game-changing food and ag entrepreneurs. Here is Tripp’s take.

What brought you to Trailhead Capital? 

I’ve run the Governor's Colorado Wildlife Foundation as President and Chairman for the last 16 years. I’ve also sat on the Western States Water Conservation Group for 15 years. While the 501(c)3 work I do is very meaningful, it’s a bit too slow for me. I feel very pressed by the urgency of the looming biodiversity collapse and the lack of good, healthy soils on Earth. 

In my professional life, I was an asset manager at AllianceBernstein where I was on the ESG (Environmental, Social, and Governance) team tasked with investing across private and public assets in a variety of thematics. I wanted to bring those disparate skill sets into the academic innovation space where a lot of ideas were coming out around new food and ag technology, but there was a lack of support from an institutional funding perspective or from a coherent sophisticated institutional investing set. 

That’s why we endeavored to create Trailhead Capital, to bring patient capital and a triple bottom line sort of thinking to venture. It's critical to combine both capitalism and philanthropy to really take some of the risk out, because capital doesn't take science risk or early academic risk. That’s the space for philanthropy. That's the sort of partnership that philanthropy and venture from an early-stage perspective need to have.

What is most exciting to you around agricultural sustainability? 

We know that one of the biggest ways of creating greenhouse gas carbon sequestration, or sinks, is within the agricultural sphere. There are lots of both natural-based and synthetic carbon credit solutions for reduction, but one of the only ways that you can actually pull carbon out of the atmosphere is to hold it in the soil using methodologies in and around regenerative farming. Those include keeping living roots in the soil with perennials, which keep the soil covered and increase both the carbon cycle and the water cycle. 

This means that the soil can sequester with some permanence by keeping carbon in the soil. Something like 25 to 30% of annual emissions come from agriculture right now. 

By implementing certain methodologies, not only can those be erased or put back to neutral, they can actually be reversed to where you're pulling in a substantial amount of carbon. Those are the technologies we're investing in at Trailhead. 

How do water resources fit into all of this, specifically here in Colorado?

Water is fundamental. Without it, nothing else matters. Part of our thinking about increasing the carbon cycle and biodiversity in the soil is based on the presupposition that there is water. In other words, carbon in the soil, living roots in the soil, more microbiology in the soil, creates more water holding capacity. 

One of the things we desperately need right now is to be able to use the surface water in different ways, not necessarily all for food and ag. We can do that by keeping the right amount of living roots in the soil, which keeps water capacity in the soil, meaning farmers need to water their crops or livestock less if they do the right things by the soil.  

In Colorado, we've got some massive policy issues that ag can't fix, specifically consumptive use laws at the federal level. For example, if I'm an alfalfa farmer on the Eastern Plains of Colorado and I've watered my alfalfa to the appropriate amount for the yield, but I have extra acre feet in my water rights, as it stands if I don't use that, I lose it. I lose the ability to monetize it next year or to gift it to my children. That sort of waste mentality is an obvious disincentive. So, number one, we need to change the alignment of the consumptive use policies.

Number two, we need to price water so that we're not subsidizing it from a federal taxpayer perspective for municipalities in California and Arizona who want to grow almonds and pistachios in the desert. If farmers want to do that, fine, but pay us and everybody else the market rate for water. That principal also applies to us here in the suburbs where everybody wants postage stamp green Kentucky bluegrass lawns, which aren't native species. They use an inordinate amount of water. Again, that’s fine if you want a green lawn, but pay for it so that it's not in the back of the taxpayers. 

How has ESG become more central in the investment landscape at large? 

In my mind, ESG historically has been a wonky compliance check box. When you think about ESG, governance is incredibly important. The SEC just ratified rulings about greenwashing and reporting in terms of those environmental metrics in the last few weeks which will help to make ESG more transparent and more robust. At the end of the day, you need transparency and traceability in terms of metrics. 

So, whether it's dignity of wage, diversity and inclusion, or the water or carbon footprint (think acres under regenerative practice), tracking and reporting those KPIs is a process that’s here to stay and will likely become more exhaustive as people better understand it. That means ESG won’t be limited to a board report or an annual white paper.

At Trailhead, for example, we integrate metric information into our quarterly reports such that we have a dynamic set of KPIs not only for the fund at large but also for our portfolio companies individually that speak to what they're trying to accomplish. These KPIs help us to then help our portfolio companies to report and monitor measures and help further their business with their customers, with their investors, whatever the case may be. 

How is the mindset around ESG changing from a business standpoint? 

We're at an inflection point. 

Historically, investors equated ESG with some sort of concessionary return. In other words, to be impact minded, you had to give up some of your upside. I think we now know that there is a sort of environmental inflation to account for, period. Environmental volatility is a reality in our world that is expensive and that as a business owner, you must solve for. 

What that does, however, is allow for investment and technology to come in and solve for some of those problems at market rates. We really believe this is a unique time where you have a vintage in food and ag that's going to be outsized in terms of its return profile while also being able to deliver those sort of intangible impact metrics. And I think once you display that you can have both your cake and eat it too to the investing public and the institutional side of the investing public, it's a new day. 

I think we're at that sort of axial moment right now.

Tripp Wall is Managing Partner of Trailhead Capital.