Pioneering a pay-for-success model in agriculture
Land O’Lakes SUSTAIN to provide technical assistance on Pennsylvania conservation partnership
Land O’Lakes SUSTAIN™ has been named a partner to implement a $415,341 federal grant, known as a Conservation Innovation Grant (CIG), awarded to the Chesapeake Bay Foundation (CBF) through the United States Department of Agriculture’s Natural Resources Conservation Service (NRCS). The partnership will build a feasibility study for a first-of-its-kind pay-for-success model on farms in Lancaster County, Pennsylvania.
The project is designed to deliver environmental outcomes through conservation practices on farms that will allow municipalities to satisfy storm water pollution reduction requirements and return profits to capital investors. Red Barn Consulting and Quantified Ventures are also partners and will help CBF match the federal investment for the three-year project.
How it works
Under the pay-for-success approach, select municipalities contract to pay a financial intermediary–think commercial or investment banks–if specific agricultural and environmental outcomes are achieved.
- With capital from private investors, the intermediary contracts with service providers to install conservation practices on farms.
- If the desired results are achieved on farm, the municipality can apply the results to satisfy its urban/suburban stormwater compliance requirement.
- The municipality will then pay the intermediary, which in turn repays investors, with interest.
“We’re excited to partner on this project employing outside-of-the-box thinking to work with all parties to improve water quality in a sustainable way, economically and environmentally,” says Matt Carstens, senior vice president of Land O’Lakes SUSTAIN.
The CIG partners will build the feasibility study over the next year. During that time, Land O’Lakes SUSTAIN will make sure that the on-farm conservation component works for our farmers and agriculture’s voice is represented. Land O’Lakes SUSTAIN will also look to engage our member-owners about opportunities as they become available, likely more than a year from now.
The project will also lay the groundwork for future models. It’s our goal to create proposals where eventually, farmers will receive financial compensation for their conservation efforts. Land O’Lakes SUSTAIN is also actively working on a similar feasibility study in Minnesota.
“By incentivizing outcome-based conservation financing, there’s a great opportunity for partners to work with farmers and agricultural retailers to invest and grow,” says Matt. “Farmers are always eager to enhance their operations to lead the way on conserving resources on their farms and in their communities.”