Courageous Capital Stewards - Regenerative Agriculture with Mark Lewis

TRANSCRIPT

Dr. Steph

Welcome, everyone. My name is Dr. Stephanie Gripne. You're joining us for Courageous Capital Stewards. And today's guest is Mark Lewis. This podcast is produced by Impact Finance Center. We are almost ten years old. This is our ten-year anniversary. We are a multi-university academic center that spun out of University of Colorado. And the purpose of it really was because many think of the 30,000 higher education institutions around the world, many of them, if not most of them, have entrepreneurship centers.

And those entrepreneurship centers identify, educate and invest in entrepreneurs. Those could be projects, nonprofits, small businesses, startups, and funds. But when you think about it, if we have 20,000 entrepreneurship centers, we should probably have 20,000 investor accelerators whose identifying the individuals, foundations, family offices, and corporations and educating them, and activating them to invest in these amazing social ventures.

And so we saw that as a market gap back in 2010 to 12, when I was an assistant professor, a joint at University of Colorado, and I was also the director of the Initiative for Sustainable Real Estate Development at the University of Colorado Real Estate Center and the University of Colorado Real Estate Foundation. And so that's where today's conversation starts.

Mark, super excited to have you here today. You and I go back almost a decade now. It's been a long time.

Mark Lewis

I'm going to say it's yeah. 12 or 13 years now.

Dr. Steph

It is. It is. We actually met you were an MBA student. Do you want to talk a little bit about how you a what you were doing and we'll go back in time a little bit about your history?

Mark Lewis

Yes. In grad school, I was studying sustainable business, so I took obviously most of the classes in the business school, but a couple in the law school, climate change law and policy and energy law, trying to fully understand what are all the tools in the toolbox for fighting the climate crisis, primarily with capital market solutions, but also trying to understand policy and legal frameworks and international treaties.

Because it turns out this is a global issue. It's going to require all of those tools.

Dr. Steph

Yeah, it's super wild that we met because most people who know me pretty well know that my Ph.D. is in forest economics and my masters is in wildlife ecology. So I love that you and I share a love for climate and a love for using all of the levers, including the free market business levers to solve.

Climate change, you know, is super interesting because I'm actually I think of myself more of a Colorado State University family, which is our land grant University. Both my parents attended school there. My cousin played football there. And it wasn't until I was at University of Colorado that I learned that my great grandmother attended University of Colorado in 1916.

But it was a summer semester short of graduating because the global flu pandemic, the Spanish Flu, had shut down the summer, the university for a semester. So that's something else that we share. Do you want to talk kind of go back about where you grew up, where your family's from and what awakened you to this interest in climate change?

Mark Lewis

Yeah. So my folks actually met at See You in Boulder in the late sixties, early seventies. And yes, I was born and raised in Denver. My dad grew up in Yuma, Colorado, in farm country. His dad ran the grain elevator for barley grain company. My mom's family grew up in the farming country of Ohio and then my dad went on to become a CPA for Arthur Andersen and ended up founding an oil and gas company which he sold in 2004 right as I was wrapping up undergrad and studying climate policy and environmental economics and reading Bill McKibben and Paul Hawken and wrapping my head around the scope of the

problem that needed solving and yet decided at that point to commit my career to the climate crisis and trying to find solutions and, you know, essentially build bridges between folks like my dad and folks like Bill McKibben and Paul Hawken to say we're going to need smart business solutions that can scale to replace the fossil fuels that have given us all of the wonderful things that our society enjoys and quality of life, but also all of the externalities that were associated with that, which have gotten us into a bit of a bind.

So that yeah. Has been my true north my entire career, worked for a little startup biodiesel company, got into the solar business with a group called Gsg, which also taught me a bit about private equity in private investment vehicles. Did grad school where I met you between those two things and then, you know, really started studying carbon removal and realizing we have to go from 420 parts per million of CO2 in the atmosphere to something south of that 280 was kind of a sweet spot for human civilization the last couple million years.

So that led me to regenerative agriculture. I also, right after grad school, did an internship with Localization Partners and started learning about the power of soil to sequester carbon and do other great services like feed people nutrient dense food, create, you know, create and protect pollinator habitat and biodiversity benefits, be better stewards of our precious and dwindling water resources.

So once I kind of went down this soil wormhole, I have never gone back. And it's, to me, the most exciting climate mitigation, adaptation and resiliency tool that we have available to us today. And it can solve not only the carbon problem, but the biodiversity, the water and the human health issues that we face as a society.

So that's that's what I'm up to now.

Dr. Steph

A big plus one for that. It's super. I mean, your story is super interesting for lots of reasons. One, my family goes back to Axton Holyoke. My mom was born in Stirling and my grandpa tried farming multiple times, had a small farm in Loveland. My other grandparents were in Greeley. And then through some wild journey, I end up doing my master's degree on grazing and my Ph.D. with grants, with working, with conservation strategies, with ranchers.

And I felt, in some ways, like I'd left that life 15 years ago. I do feel like a couple of things. One, I remember I took my first soils class as a junior, and I remember thinking to myself that had I taken a soils class as a first year or second year, I would have actually majored in soils.

So I understand your love of soil and the power of soil, which is super interesting. And then I felt I feel like I really walked away from that world and really kind of have gone on a similar journey. We're going to talk about where you are in your journey right now, but started kind of doing transactions for good and then I worked for a private equity fund.

It's wild to me to even say, like I, you know, former private equity. And now I really feel like I'm working on the financial system and I call myself a restoration ecologist in the financial markets now because at first it was like, oh, the transactions, that's that feels good. And I'm learning and doing good. And then the funds was even more and now I'm like, okay, I want even have a bigger impact.

But what's super interesting about your story is you you get a walk through the world as both what we would call a capital steward and a community steward. Right. Like you're a person now who who not only through private equity fund or individually gets to be an impact investor. And to keep you humble, you're actually raising capital right now.

So I think it's it's we can talk a little bit about funds, but tell us about what your most recent adventure is right now, which is Trailhead Capital.

Mark Lewis

Yeah. So Trailhead, we are a venture capital firm. We founded it about two years ago, me and my three partners and we do seed and series a stage investing into regenerative food and agriculture technology companies. So our thesis is that we need tech enabled solutions that can scale what we call regenerative practices. Or another way of framing it is nature based carbon removal, so that do everything from, you know, inoculating tree saplings with beneficial ectomycorrhizal fungi that help them grow faster to autonomous robots.

They can plant cover crops, seeds in between rows of corn and soybeans to virtual fencing solutions for cattle. They can help employ multi paddock rotational intensive grazing, which has soil health and therefore carbon and water and biodiversity benefits. So we're investing across the entire supply chain within food and agriculture and forestry and fiber to, you know, looking for companies that can innovate and disrupt the way in which we grow, you know, food and fiber.

Now, because oversimplified, if we continue to do it the way we do it today, over the next couple of decades, we're going to be in a tight spot and we're already in a tight spot with regards to water, carbon, biodiversity and human health. And so that's the piece I'd like to come back to more recently is I can be as myopic as anyone on the climate crisis, but the the human health crisis is equally important to solve and equally existential to our society.

I mean, you know, everyone it's well documented that health care costs are bankrupting families and bankrupting countries and or at the risk of doing so. And so we've, you know, the food that we're putting into our bodies is a that is what drives human health mean, just like the food that any animal eats is, you know, that's that's what drives, you know, immune function.

And if you have a healthy gut microbiome that drives all kinds of systems in our body. And so there's now increasing evidence that shows that's exactly what the microbiome in the soil does. It creates sort of that living system that similarly drives like the equivalent of cognitive function or immune function or, you know, skin health. And so that interaction between soil plants, human gut, you know, human health, that's what I find really exciting about this space is and what everyone relates to.

I mean, you and I stories are remarkable because our folks grew up so close to each other. But everyone one or two generations ago was tied to the land.

Dr. Steph

Absolutely.

Mark Lewis

And we so everyone and everyone has, you know, biophilia, we all have a love of life. And on some visceral level, everyone can look at a tree changing colors in the fall in Colorado and just, you know, be inspired by that beauty. And that's what's so exciting to me about this space in nature based carbon removal is, you know, sometimes people have a hard time wrapping their head around.

All right. How does that electron from that solar panel, you know, provide, you know, light in my kitchen? It's it's but it's less difficult to wrap your head around sort of how does that tomato benefit my child's health and the way in which that tomato is grown like, oh, yeah, I don't want nasty chemical inputs, you know, residue on that tomato that I'm feeding to my child.

So that's the and there's some people say that, you know, the way to people's hearts and minds is through their mouths and stomachs. And that's one really fun aspect of Trailhead Capital is the storytelling is is there's a visceral understanding on a human level for everybody.

Dr. Steph

Yeah, it's it's it's a beautiful story because it's, it's what you just said when you when it comes back down to the soil, you can take it in so many different directions. For example, I was surprised about two years ago, I got a phone call from the U.S. Forest Service, and I had the great fortune to study with Dr. Jack Ward Thomas, who was the chief of the Forest Service and led the spotted owl issue.

And I'm a Boone and Crockett Club member and thought I would be with the Forest Service for my whole career and ended up essentially frustrated that I was working on. I remember working on the small diameter timber so an escort Utah and thinking there was just you couldn't make the pencil that we had to remove the small diameter wood to to restore the forest good jobs and in this case, probably firewood or and we just couldn't pay.

It was really expensive. It would cost, I don't know, $1,000 an acre. And we might get 100 to the best case, a couple hundred dollars of revenue from it. I just thought, wow, we've got to figure out, I know there's enough money. I know we have this intractable problem. How do we solve that problem? And it doesn't really matter if you're talking about a tree or a tomato from that perspective.

And so I got a phone call about 2 to 3 years ago from a somebody I hadn't heard from Steve Marshall with the Forest Service. And he he called me and he said, “Stephanie, do you remember that we had that little fire problem?” And he knows I was a wildland firefighter first back in 94 and I said, yeah, I'm tracking that smoke issue in the West.

And he said, Well, there's this new technology that can take the small wood that needs to be thinned from the forest to restore the forests in order to glue it together to create panels and wood beams that can replace steel and concrete. And so these are all wood buildings, whether it's a single family house or a skyscraper, are being built out of predominantly all wood.

And all of a sudden, it's a new market for the small wood that was costing money to remove, but there wasn't anything to do with it. And so he said, we've lost pretty much since the spotted owl, our entire supply chain out west. Like, you know, Colorado. I think we have Jim Nicholson as one mill in Montrose, but we don't have a lot of that infrastructure, the workers to to plant the trees or grow the seeds and plant the trees and cut the trees and mill them and put them in a cross laminated production facility.

And then to build the building like we're struggling on the workforce and the entire supply chain. And he said we need a lot of money to reinvest in that all throughout the West. Do you have any investors for us? And I said, Well, I have some bad news and good news. I said, I have a couple investors for you, but we grow investors like you grow trees.

And and so when you think about the supply chain of what you're out with, Trailhead Capital, it's funny, I think of funds a little bit like CSA boxes, community supported agriculture. We all want to do them, but at the end of the day, we're more farmers, markets, people. We're like, Wait, I'm, I'm going to find one reason not to invest in that fund versus invest in that fund.

And and true enough, there's also what I like to say. Investors have their stated preferences and their revealed preferences. And I imagine that's the case for you. And I'm asked you about your fundraising journey where I would say I live literally a block from my farmer's market, and on Sunday I'll leave the house and I'll think I'm only going to get smoked salmon and arugula today.

That's all I need for the weekend. And I will come back with ten things. Right, because it's just the nature of it's biophilia. And we also love connection. You know, part of being on this planet is to be connected to each other and to nature in that space. And once you're connected in that space, something happens. And next thing you know, you're buying and connecting with people and and local food in a beautiful way.

I'm I know you have a long way to go on fundraising, but I just want to congratulate you because you've made it to a place that most people don't when they start to raise their first VC fund. So why don't you tell me a little bit about the good, the bad, the ugly of what's it like raising your first VC fund?

And I say that because Carl Palmer, who runs Legacy works way back when I was at a private equity fund in environmental markets. And he was raising very tough capital. And I helped him when I was of the Nature Conservancy doing menu. And I remember getting to that first $30 million mark. Talk about how easy, difficult, hard, what needs to change in the system about the journey.

Mark Lewis

Yeah, yeah. So we just had 30 million total raised and we've been at it for 18 months. So last April we raised our first 6 million from mostly friends and family and kind of true believers in the mission. And that helped us make our first three investments. And then August of last year we raised another 5 million, which allowed us to make an additional three investments.

And all of a sudden we have six portfolio companies, we have 11 million kind of feels like maybe we have something something to go with here. And then we raised another 9 million in February of this year and then we're now up to 16 portfolio companies. We just had our first exit, which happened much sooner than we anticipated.

But events, the virtual fencing solution that I alluded to earlier just was bought by Merck, the Animal Health Division of Merck. And so that's a nice, quick win for for our LPs. And we're actually now going to recycle that capital since we're only one year into a ten year fund. So that gives us more capital to deploy into additional portfolio companies.

So yeah, we are delighted to have reached 30 million in fund one. I mean that is definitely not not a gimme and we just now have had to institutional fund of funds join us the wire group out of the Netherlands a very very awesome impact deep impact oriented fund of funds. And then woven Earth Ventures out of Palo Alto, Jean Woodward and her team, it's a fund of funds centered around climate tech.

And they had made a bunch of investments kind of more in renewable energy, electric vehicles, built environment. But we're seeking out a food and agriculture climate tech fund, and we are delighted that they trusted us with with that part of their strategy. And so we yeah, it's it's challenging. I mean, I tell entrepreneurs, when when we you know, when I have to tell an entrepreneur that we're not going to invest in their company.

I point out, you know, that I've been told no many, many more times than they have. You know, the the success rate on LP conversations I have versus folks that come into our fund is is pretty slim but it's it's it's I love that I get to be able to tell our portfolio companies stories to the funding community.

That's really a big part of my job is just the the in-between storyteller of here's why there's so much hope because here are the brilliant minds building these amazing solutions to some of our biggest problems. And that's why, you know, I think we're actually going to have outsized financial returns. But we've really built our strategy and our thesis such that if and when we have those massive financial returns, they are accompanied by equally great social and environmental impact in the form of water, carbon biodiversity, human health, jobs created, etc..

So that's when I, you know, and you just use getting shut down by certain investors as motivation to prove to them that maybe they'll have a shot at fund to. But you know the fund one is going to we think going to have outsized returns and there's we're in good company a guy named Chris soccer arguably the most successful venture investor of all time at Lowercase Capital, has launched lower carbon capital and is on the record saying he thinks this strategy is going to outperform because this the problem set is so much bigger.

And so we're looking at a few deals with them and there's other breakthrough energy ventures. Is is Bill Gates, you know, obviously an amazing set of resources and they're also very focused on climate strategies. So there's you know, we're a tiny, tiny drop in the bucket of capital that's chasing these solutions. Thankfully, this is a 30 or $50 million fund, isn't going to get it done.

But yeah, and we're learning all day, every day from, you know, Matthew Norden, who was formerly with Then Rock, now with all the ventures. I was on a board call with him today. I mean, every time I'm in the same room as him, I'm learning a lot about how how this business is done and also how it can evolve.

I mean, that's part of our reason for doing this. And our hope and intention is to also evolve what it means to be a venture capital fund. And can we get innovative with how we partner with entrepreneurs and deploy capital in, engage with our limited partners and our advisors. And yeah, because that's in my view, it's not like this book, The Power Law, came out and every venture capitalist has read it and that's great.

But we also need to continue to evolve that model and think about how do we you know, we need to just always be iterating. That's what we ask our entrepreneurs to do. That's what has to happen in the capital allocation space as well.

Dr. Steph

I want to go a lot of different directions here, but one, I get a little I would say I worry about misalignment for a lot of things in that I've seen manufacturing companies take on Angel investing returns with a ten x. But what I like a lot about what you're saying here is we actually to to save ourselves actually do need a ten X solution meaning that it has to grow.

We have to save ourselves. We're going to need several technology solutions that actually can remove carbon and keep our planet from burning up and making us a little crispy on our planet. And we need to eat healthy food, too, like mental health. And we need a safe place to live. And so that is going to require a massive revolution that could be you could actually see that that technology for just technologies like technology for good could be pretty exciting from that perspective.

I also was surprised that the federal government called me to grow investors for trees and then now the state of California. But to also my surprise, we just started teaching corporations about full spectrum capital, and it really started more to attract and retain a diverse workforce. We got a call from a large health care company and I said, Oh, you should.

If you want to attract, retain a diverse workforce, we can refinance your diverse workforce, personal debt to a low interest rate, zero one, two or 3%. Use an income sharing agreement to actually increase their wages and then finally get them into home ownership, because that's how you build wealth in the United States. So reduce the debt, increase their wages and get them into homeownership.

And that led us to an amazing partnership with Green Biz, which is a media company that has four vertical verticals to it. It has the the Green Conference, which is for corporate social responsibility. It has circularity conference. It has a Green Fin Conference for ESG and impact investing and also has verge, which is climate tech. So they run those for vertical conferences every single year that are destination conferences.

And we had they also have the fifth leg, which is the green biz executive Network. And to be a part of the Green Biz Executive Network, you need to be $1,000,000,000 in revenue as a company. And it's your corporate social responsibility person and they have over 100 members in that group and they're sharing ideas left and right and their budgets are can be nothing to 15, 20 million, $50 million.

But these are the large companies that are offensively, defensively trying to figure out the ESG strategies for these companies. And so we had the opportunity about nine months ago to present to that group, and that led us piloting our first corporate cohort. So we have a six companies in there, could add a seventh right now. And we were on our call last week as we're explaining full spectrum capital that they could mix money on their balance sheet if they need 1% money.

And we were talking I'll just I'll anonymize this. I had a company that was buying a key ingredient was a piece of fruit. They buy it from from over over across over the over the ocean. And they wanted for carbon emissions. Many of these companies back in 2008, these same companies were at this moment of the economy firing their ESG stuff.

And they're actually doing the opposite right now, the same pending financial crisis that we had in 2008. They're actually doubling up. Why are they doubling up? Because Europe just passed the SFR, which is essentially their S.E.C. coming down with law about regulation and and how you're going to have to present your carbon emissions. And we're not going to go down the rabbit hole of scope one, scope two, scope three.

But essentially those externality is those costs that companies push off. And so all of a sudden it's looking possible with our SCC in the United States that there could become regulation that is going to require a company not only to report on the carbon that they're emitting as part of their, say manufacturer, but also the carbon that was used to by the suppliers to get to the manufacturing and even by the consumers using that product.

So and so, to my shock, I'm sitting here working with these top multinational corporations, and almost every conversation is going back to the farmer. The rancher?

Mark Lewis

Yeah. The SCC ESG ruling is I don't think people understand the severity of that. I mean, it's the Securities and Exchange Commission is going to start holding publicly traded companies accountable for their claims around net zero and a bunch of publicly traded companies food, ag, automobile, etc. have said we're going to be net zero emissions by 2030, by 2040, by 2050 and that's going to require a I mean, if solar panels on corporate headquarters aren't going to get you there.

And so that's part of our thesis for why we're really bullish on a regulated carbon market has to continue to come together. You know, the EU has the emissions trading scheme. There are little pockets of regulated carbon markets in the US, but there has to be a mechanism by which these companies can offset their their massive carbon footprints.

And either you can do that through something like direct air capture, which is prohibitively expensive at the moment, and is probably going to continue to be very expensive. Or there's a really interesting technology called enhanced rock weathering that has the same level of permanence, has agronomic benefit, and it can actually drive value to the farmer to the barge driver, to the truck driver all the way through the supply chain.

So we're bullish on, you know, things like that. We're bullish on reforestation as a way to draw carbon of the atmosphere, but also to preserve habitat and preserve riparian corridors and make sure that we're not continuing to lose the water battle. Um, yeah. So we think massive policy tailwinds coming if you look at the United States Department of Agriculture just put out $2.8 billion worth of grants to climate smart commodities.

Um, there's a pretty good chunk of the Inflation Reduction Act, the climate bill between 20 and 40 billion of that is going to food and agriculture. And there's rumors that that that these are precursors to the upcoming farm bill and that we might actually start to put, you know, national policies in place that protect our water. Yeah. They incentivize growing nutrient dense food for people to consume in their local or regional communities.

Um, and seeing that, yeah, this is, there's a new group out called Pact that is specifically pointing out all of the agriculture centric solutions to the climate crisis. So there's, yeah, I think massive policy tailwinds, regulatory tailwinds. And then you sort of think about like sooner or later I can imagine a world where health insurance companies, health care companies start to get a better policy.

If you can prove that you're feeding your family healthy food and drinking water and you know, generally that's, you know, kind of preventative medicine. Um, and I can also imagine a scenario where insurance companies for, you know, on, on the farm level would say, yeah, we will give you a better rate if you can prove that you have healthy soil and therefore you are more resilient against the next drought or the next flood or I mean, for every 1% increase in soil organic matter, you can hold between 20 and 30,000 gallons of additional water.

So in terms of drought, when that rain does come, if you have soil organic matter, if you have healthy living soils, you can put that water to use and you can you can create that sponge. So you're going to be way better off in that scenario than your neighbor who has newsworthy organic matter and isn't able to capture that that rain event and so there's all of these things are tailwinds that I think are going to make us hopefully in a resilient position.

And I think it will be economically advantageous to our our thesis.

Dr. Steph

Most people don't realize I have a friend, Lloyd KURTZ, and Tom Khoo, who are the number two and three employees at Kale. The analytics and kale analytics would become MSCI and most people don't. And I haven't found like a dissertation on the history of the consumer credit system, how it came to be. But I'm wondering if there was actually 15 credit bureaus and they they up kind of consolidating into the 3 to 4 that we have today.

And, you know, it's interesting rate, if you're late on your credit card bill, you have different scorers with your Experian versus your trans American. And so most people don't realize there was this there was a decision made early on as these impact credit bureaus were basically starting to aggregate data sets for investors. There's about 13, I call it, impact credit bureaus out there right now.

It could be Morningstar or Sustainalytics I w financial. There's a set of them out there, but they essentially their business model was a B business to business model, meaning that they would only sell to investment advisors who are focused on impact investing and wanted to pay a basically a licensing fee to them to get access to it. So historically, you would probably have to have $10 million in net wealth in order to have an investment advisor that would have access to one of these databases.

So you would you would have to say, hey, I'm an investor with a soul or I'm a philanthropist that's going to allocate more of my money for good then you would have to find an investment advisor that would have a subscription to one of these databases. And these databases right now are still at very even though the the reports are 100 pages are very early days where you might get wildly different scores for the same company because they're waiting different things and so it's super interesting because that data is now starting to creep down into the $1 million net wealth.

And and you can imagine a day when you have you and I, we take along or maybe it's even like a fun game of investment beliefs and they keep popping them up. And how important is it child welfare? How important is it slavery? How important is healthy food for everybody? Is that a human right? And you end up putting these beliefs and and you'll have a SKU code and that data set will sink into the everyday consumer and you'll be able to everything you buy in every restaurant you attend or you go to, you go to eat a meal or every event you go to a ten, you'll be able to like click the SKU

code and that Environmental Social Government's report will be available to instantaneously say, well, this is how this activity is matching up with your values. You've said you've cared about this, and you can say like, Oh, I care about arts and culture, and maybe they're not so great on that, but I can live with that or I can't live with that.

I'm not judging one for another thing. But when you're talking about the tsunami, the regulatory wall is coming to us as this data sets of slowly been building and building the building and and the minute regulation hits in that data is required for reporting right now the companies that report a lot of private companies don't report only mainly public companies report and they're reporting mainly for some do it for offensive purposes.

Some do it because it's just expected. But as we start getting some agreement on this is how we're going to measure this and this is how you manage it, it's going to be a game changer. And just to walk people through the basics of if I'm a company producing clothing and I have raw materials, there's when I think of my carbon, the first thing I want to do is avoid doing anything that's going to emit carbon.

Well, technically, if you're in manufacturing and using a raw material, you can't avoid carbon. So then the next thing as you do is, is you minimize that. And so what can you do to use fabric that is less carbon intensive? Can you use suppliers that are local so you don't have to transport it? And then the last piece is what you're really talking about here is is the mitigation piece of it.

You are still emitting carbon right now. That's a negative externality from or costs that the company is putting onto society that all of us are equally paying. And with this combination of the regulation and these data sets coming together, all of a sudden it's going to be a lot more transparency in the market about who is emitting what.

And then the social question of how are we going to to measure that and how are we going to account for that and how are we going to price that into everything we do?

Mark Lewis

Yeah. So the first investment we made at Trailhead was a company. How good in that? In April of last year, we invested in the series A, they've since raised a big Series B and they built what we think is the world's largest database for impact metrics around food ingredients so they can drill down to the greenhouse gases, the biodiversity score, the water usage, the animal welfare score, the farm worker safety score, etc. for on a on a very granular level for individual food ingredients.

And that was our thesis was we want to invest across the entire supply chain from the producer to the consumer, but central to this whole thesis is transparency and traceability of those ingredients. And so that was why we invested in how good was we. We think that is of the utmost importance to be able to prove. And so, yeah, a consumer now can say, all right, if water is my number one issue, then you can start to drill down into, okay, when I go to the grocery store, I need to buy this brand of granola bar versus this brand because you can prove that less water is used in the production of that product.

Or if your number one issue is biodiversity, you know, we can help the consumer to say you should buy this tomato versus that was grown in this manner versus that tomato that was grown in a different manner. And so, yeah, that's we think the consumer has the power here. I mean, yes, the regulatory bodies have the power. Yes, the corporates have the power.

But there is immense power in our collective consumption and the choices we make all day, every day when we break bread, you know, three times a day with our friends and family to actually create the future that we want and to reward the farming practices that we want. And so there's a couple of other you know, there's the regenerative organic certification group, there's Savory Institute has launched ecological outcome verification through the land to market.

There's a few others that are, you know, moving beyond just USDA certified organic, but telling the consumer a more holistic story of, you know, here's we can prove to you that this food was grown in a way which builds soil health or which, you know, treats animals to the absolute highest standard or, you know, guaranteed pays a fair wage to all of the laborers involved in bringing this food to your table.

Dr. Steph

Let's let's go back to my my fruit farmer for a second and combine what you're doing and what I'm doing together in the same bucket or the same problem is. And, and so they're buying this fruit from overseas, and they want to find a way to increase productivity of this fruit locally. So they have a local producer. And so there's two strategies to two strategies to do that.

One strategy is to do technological improvements and to increase production of organic fruit. I'm just going to call it fruit and second one is to buy additional land. And so what we are doing with the corporate balance sheets and full spectrum capital is we're basically mapping the money within the company and outside of the company that all care about this farmer, for lack of a better word.

And in some cases, some of these companies we're working with have $6 billion of cash on their balance sheet, $21 billion of cash at a half a percent financial return, and so what we're realizing that you can take that same strategy of you can say, well, what if I need a big bucket of I'm going to lend money out at 1%, especially with these wild inflation rates we have right now.

And the farmers are more compressed with their bills and they could really use a break. So how do you get a big bucket of money to lend out at 1%? You're probably going to need money. I'm going to guess -8%. So you have to bundle up a bunch of capital. And I can't imagine you going to your investors going, I have a great -8% return for you, which is exactly what I'm doing with these corporate corporations and and part of it is, is is helping them understand that any expenditure on their balance sheet is a -100% loss.

And so if a CSR person says corporate social responsibility person says to me, I only have $15 million of a budget which seems small when when they're their larger cash balance sheets in the billions, I say yes, but that's -100% loss capital. So we can go walk over to your friends over in Treasury and say, can you give me and do the math?

Can't do it in my head. $600 of of will increase your cash from half a percentage point to one percentage point. So well where is that cash right now? Our big bank. Where is that big bank investment? I don't know. Some faraway place. Well, take $650 of that cash that was getting a half percent. Bring it back into the company in the supply chain.

It was $50 that you would give that you're going to give away in corporate social responsibility. And they get 100%. I'm just guessing the math is something like $650 at -7%. So you're increasing the financial return for Treasury, doubling its financial return. Yeah, taking that money that was non impactful or whatever it was doing, bringing it back in.

Now we have a big bucket of capital and go to the farmer and say, Hey Farmer, do you have any debt? Do you have any doubt on your farmland, on your equipment, medical debt? Let's refinance that at 1%. Do you have any social enterprise ideas? Can we you know, if you want to expand land, whatever you want to do, you have any assets that could be made more efficient?

The farmland, the technology, the equipment? And lastly, the big holy grail is a page. You say like do you have an intervention that's going to save somebody else money, but they don't have the money to pay you upfront. So can we create a three way contract? And so that's essentially what doing is. How can we within the corporate balance sheets create a big bucket of 1% money?

And some of them we're like, listen, we need outside money. Great, let's go find a foundation, a family office, a loan program. If we can create that 1% bucket of money, income in that agricultural supply chain to refinance debt, make assets more efficient, create social enterprises, all of a sudden that makes what you're doing even more possible from that perspective.

And and money isn't their issue. Right? And so it's super wild to me to be dusting off my master's degree in agriculture and in grasses and rangeland, to be coming back together and and kind of like restoring the financial flows within the company and outside the company to to do this. Because I think those two worlds could come together in a very beautiful way, for sure.

Mark Lewis

Yeah, it's so one of the co-investors with us. And how good is Danone, the venture arm of Danone? So they're the world's largest B Corp. So they co-created the product market fit that they needed to replace a case by case lifecycle assessment LCA every time they go, tweet one ingredient in one of their products, we came up with a whole new product.

So that's what how good is developed this SAS platform. And now it turns out that B Corp status that Danone had was ahead of the pack because now again with those you see ESG rulings all of the other publicly traded companies need a similar SAS, LCA tool. So now General Mills, Unilever, Nestlé, etc. are saying we actually need that that tool as well because we need to be able to prove to our all of our stakeholders from our employees to our shareholders to our banking partners, that we we understand the total environmental impact of our business, and they don't at this moment.

And so they need tools to help them understand all the water, the greenhouse gases, if they're going to live up to their net zero pledge. You know, how many carbon credits do they need to buy to offset what they can't mitigate? You know, through internal abatements they don't know yet. And so these are the tools that we think are really exciting to invest in.

Now, to say these are tech enabled solutions that can scale and ultimately reduce the liability of these massive companies that potentially are going to have some some issues on their hands if they if they just can. Business as usual isn't going to work.

Dr. Steph

That I love, what I love about this. The space in this field is used to work with investors who get awakened to have a soul that every single investor has, something else they love. And the moment they realize they can use their skill set of investing for what they love, that's A beautiful moment. And then also watching and philanthropists awaken to the fact that they're all right.

They already are investors. In fact, if we walked out the front door and walked down the street and asked every single person, are you an investor? The fact is, every single one of us is an investor. Every time we buy anything from the grocery store, we're buying into a supply chain and making a decision about what the quality of that is, what how we're paid workers.

And yes, we have to deeply acknowledge right now that if you're a person of color, if you're a long, low income individual, the deck is stacked against you. Yeah. And so we have to both solve the climate crisis, climate crisis, while also what we call this this topic, climate equity of of deeply understanding that those who have been most impacted by climate change already are the ones that are least prepared to be resilient.

And so how do we go on that journey? But I love this last story, and I think it's a good one for us to close out today, because I'm going to CEO Peer Group, the new lead executive officer of B up globally, Eleanor Allen. And for those of you who haven't had a chance to meet Eleanor Ellen, she comes to us from water for people and she's a phenomenal engineer and I'm super excited to watch and help support her on her journey as she kind of takes B lab into the next generation.

And then just a month ago, the two people who led the effort at Danone were are a part of the the group, this executive network who I had dinner with. And so I've connected Eleanor with the two of them, and the four of them are going the four of us are going to dinner in about a month, just down the street from here.

And it's it's super exciting because you look at Danone, that, that LCA, that lifecycle analysis is important. And then they also the French law passed with the announced support a law that allows employees to co-invest with a direct investment solution with their their employee retirement and they get a tax benefit from it. Imagine if all of our four in one case and Ira's and these barge companies had a part of them that was also deeply invested in those communities and helping co investor invest in the trailhead to to support that.

And then the CEO group we're in is led by Randy Welsh, who is part of a son, father, a last mile water delivery franchise. And in in Africa that is also an investee of Danone. So just brings it all back together. You got to love the small world ness of it all. The we're sitting here in Colorado and connected to B Lab in Africa and Danone and and Trailhead Capital and in fact front and center and how it all can come together.

Yeah, it is just one big family in need of a lot of family reunions to borrow from one of my love letters that a friend sent us.

Mark Lewis

Nice. Yeah. The single most hopeful thing to me is the young people. I mean, I'm a millennial, and everyone from me in Younger, I think, is just like this is the existential threat. And if yeah, if I'm like, okay, I'm a software engineer and I'm being recruited by Meta and Alphabet and Salesforce and, you know, a bunch of other tech companies.

But I care about, you know, my passion is fly fishing. And I see what's happening to our waterways and I want to connect. I mean, just more and more young people are like, I just I have to connect my passion and my worldview with my career. And as a result of that, I mean, the climate tech space is just attracting phenomenal talent.

And I think that's what's so encouraging is that the brightest minds around the world are flocking to these companies to build these solutions. A, because it's fulfilling and it feels good. Be this, this is where the money is going to be made. I mean, this is where this is a fantastic place to build your career for many decades to come, because these problems are going to take a while to solve and they're going to take many, many, many more unicorn, you know, start ups to chip away at the damage we've done.

And so it's a meaning that's what gives me so much hope, is that there's the talent pouring into this space is second to none.

Dr. Steph

Well, I'll leave closes off with this. I know we've just started to have the conversation, but the work we're doing for the federal government in the state of California around forests is something we can copy and paste for regenerative agriculture and imagine if we could essentially I think of it as almost creating a sector wide 100% impact foundation and so rolling out and we're doing the feasibility study for this right now, but basically funding all the individuals and organizations I want to donate to climate and for us finding even the everyday low middle income person that wants to invest in a seed like a modest fixed income return slightly better than what you could get

in Wall Street. And then you essentially have an IRA for a1k option. And then lastly, you have this really unique guarantee model that an awesome nonprofit social capital has, has, has really revolutionized by asking individuals and organizations with a lot of resources, strong balance sheets, to donate a guarantee. But if we as a sector and pick any sector, the natural product sector, the forest sector, the regenerative agricultural sector can form a strategic alliance to say, let's untangle the raising the money from investing the money and actually have three democratized financial products to go raise a lot of money at scale at -100%, 2%, 6 to 8%.

And this guarantee model, all of a sudden you can mix and match that model at scale to co-invest alongside everyone from your actual companies you're invested in to the Trailhead Capitals, to everybody else. So I look forward this to being the start of a first of many conversations we'll end up having over this journey.

Mark Lewis

I love it. Thank you.

Dr. Steph

Thank you, Mark.