European Business Magazine caught up with Laimonas Noreika, Founder of HeavyFinance, a climate tech company specialising in agricultural financing, operating as a marketplace for retail and institutional investors to invest in regenerative agriculture to support European farmers and combat climate change.

 Tell us about HeavyFinance

HeavyFinance is a marketplace for sustainable Agri-finance. Our loan marketplace opens the opportunity for retail and institutional investors to add agricultural loans to their debt capital investment portfolio.

With traditional financial institutions shying away from financing small and medium enterprises, the vast majority of total 10 million European farmers have limited access to external financing. Fi-compass, a European Union platform offering advisory services on financial instruments, identified a significant financing gap of 19.7 – 46.6 billion EUR for agriculture.

However, agriculture, being a sector of strategic importance and with very few defaults, can be an interesting addition to any investment portfolio. Furthermore, investments in this sector can transform it from being climate negative to climate positive. HeavyFinance has already facilitated 34 million Euro in agricultural loans with the average loan amount being 30.000 Euro.

What role can tech play in fighting climate change?

Current acceleration in research in quantum computing or significantly less polluting energy production can serve as major contributors in fighting climate change. However, while we are waiting for blue sky research projects to materialise, there are many areas where mass adoption of  pre-existing technologies can have a significantly positive impact.

HeavyFinance is bullish on facilitating financing towards the shift to no-till farming. This technology has been known for a while and has proved to absorb and store 1-4 tons of CO2 emissions per hectare per year. Additionally, no-till soil management practices increase the health of soil, reduces the need of fertiliser and makes soil more resilient to natural hazards like draughts and floods.

We facilitate funding for sustainable agricultural development with the goal of removing 1 gigaton of CO2 emissions by 2050. That would make a major transformation in European agriculture, shifting this sector to become climate positive, while some sectors might still be waiting for blue sky research to materialise to achieve carbon neutrality.

What are the top three things that businesses can do to reduce carbon emissions?

To get to net zero, or the “future state”, companies will start reducing their direct emissions, such as gases emitted by their vehicle fleet, and switch to renewable energy.

However, the gap between “current” and “future” states will remain since there are unavoidable emissions that cannot be eliminated, e.g. trips to important conferences, activities of your suppliers etc.

Businesses can reduce their carbon emissions by increasing energy efficiency and transitioning to renewable energy sources. This can be achieved by implementing energy-efficient practices and technologies, such as smart building management systems and investments in energy efficient materials. Additionally, sustainable practices throughout the supply chain, including sourcing materials from environmentally responsible suppliers such as farmers practising regenerative agriculture, can also help reduce carbon your emissions as a business. Lastly, investing in remote collaboration technologies can help businesses reduce the carbon footprint associated with commuting.

Companies should start by calculating their CO2 footprint, which is crucial in understanding the “current state”.

In reducing CO2 emissions, institutional investors are important actors that can pressure their portfolio companies to achieve carbon neutrality. Institutional investors’ footprints are significantly lower than the combined effect of their portfolio companies’. Thus, influencing emissions reduction programmes on their investment side is what hedge funds, PE&VC etc. decarbonisation journey should be focused on.

It is fundamental to avoid making new investments in hazardous industries such as fossil fuels. On the other hand, divesting from these businesses is also not the optimal solution. Considering the inevitability of the fossil fuel phase out, your potential buyer will likely focus on maximising the short-term gains from your divested fossil fuel business over the environmental protection.

Again, a portion of your emissions won’t be fully avoided, forming a gap between the desired position and the existing situation.

The gap between your footprint and what you can realistically eliminate from your operations can be closed by engaging voluntary carbon credits (or offsets).

Polluting entities can purchase one carbon offset certificate for every tonne of CO2 equivalent they are looking to compensate for. The funds paid for offsets are invested into carbon avoidance or removal projects such as reforestation or carbon farming.

Large corporations, including Microsoft or Amazon, have made their commitments towards carbon neutrality or even negativity, suggesting an increasing demand for millions of carbon credits.

While there is a number of carbon offset projects available, quality, SDG impact and longevity of the projects is what matters.

Why is agriculture so important in relation to climate change?

Agricultural land corresponds form around 38% of global surface area. Another 31% is forest area and is partially related to agriculture, as farmers are often also involved in forestry. They are key actors in fighting climate change.

I’m glad that challenges in the agricultural sector were highlighted in the UN’s Sustainable Development Goals, playing a critical role in ensuring world food security, as well as supporting the sustainable management of land, water and natural resources.

With existing technologies, European subsectors of agriculture like crop production can become climate positive by the end of next decade. Sure, there is still research needed on how to reduce CO2 emission in livestock production that generates methane, which causes 28 times more warming per molecule than carbon dioxide, however, we are seeing some progress in this area too. There are some early indications that special additives in cow feed reduce the amount of methane producedCurrently, agriculture generates 19% of global CO2 emissions – around 51 billion tons a year – and it has a fair shot to become at least climate neutral, if necessary investments are implemented in farms willing to transform themselves.

We have provided funding to over 1,200 farms and we haven’t yet met a farmer who is a climate change denier. They are facing the challenges of climate change now, and they are ready to fight. Investors can make solid returns when joining their fight.

Where do you see HeavyFinance in five years?

Currently, we work with farmers in Poland, Portugal, Lithuania, Latvia and Bulgaria, and in five years, we expect to add 10 more markets to originate agricultural loans from. We have in-house origination and underwriting teams, underlying technologies enabling automated lending and time-proven recovery processes that ensures efficient loan management. Our sustainability department plays a crucial role in assurance of positive outcome of CO2 emission reductions. We work closely with institutional investors, such as financial institutions, debt capital funds or family offices, and retail investors by facilitating the allocation of their capital for agricultural impact investing.