Executive Profile

Executive Profile: Provenance Capital Group's founder on building a global-warming-proof portfolio

Reposted from  Alex Barreira  – Staff Reporter, San Francisco Business Times
Adrian Rodrigues is a co-founder and managing director at Provenance Capital Group, based in San Francisco. His firm brings early-stage entrepreneurs and long-term investors together to align their financial strategies with regenerative resources and (hopefully) help the planet before we’re cooked.

Imagine a world where money really could grow on trees, or at least in harmony with them. Adrian Rodrigues is trying to. He’s co-founder and managing director at Provenance Capital Group, a San Francisco-based financial services firm specializing in investments whose timeline fits with Earth’s natural regenerative systems, as opposed to the extract-and-deplete ethos behind many human interactions with nature under industrial capitalism. Rodrigues works with early-stage companies that are trying to reimagine global supply chains in industries like food and textiles.

He prepares and connects them with long-term investors such as pension funds or insurance companies looking to protect their portfolios against climate change. With a background in traditional investment banking, Rodrigues likens his role to a “translation microbe” between groups that don’t typically see eye-to-eye. The job requires patience to create partnerships that need to last decades and bear the right kind of fruit, both financially and ethically. “I know it sounds weird, but getting someone to invest in you isn’t that hard,” Rodrigues said. “Mak(ing) sure you’re speaking the same language is much harder.” He’s not the only one speaking it these days. Allies of regenerative agriculture range from Jamie Dimon and Larry Fink to rural ranchers, Tom BradyWoody Harrelson and Al Gore. And its relevance is only growing in a pandemic-rattled economy and the existential threat of catastrophic global warming.

Can you give me an overview of the work you do at Provenance? The crux of what we’re doing is trying to figure out how we move away from just trying to put biological systems in the financial structure of vogue and instead say what is the right way to manage the system for long-term viability, as well as positive ecosystem services such as carbon sequestration, clean groundwater or biodiversity. The way you invest in a regenerative system rather than in an extract-and-deplete system is very different.

We’re trying to create capital inflows to regenerative enterprises so we partner with early stage and mid-stage regenerative businesses, help them with situation assessments and polishing their business model, and then we tee them up for the capital markets in a way where they’re compelling to investors. What’s nice about regenerative agriculture is that you do have this scale where the outputs don’t become unmanageable negative externalities, they help the fertility of the overall system.

How has Covid-19 changed the argument or impetus for investing in this space? Covid has really shown us how fragile our global food system is. There’s been a much deeper understanding of how we’ve depleted our regional production bases and that as a country that isn’t wise. Industrial food production has created these large slaughter facilities that became breeding grounds for Covid, and when those had to close farmers were literally euthanizing their animals by the hundreds because they had nowhere to get them processed.

We had people who wanted food, shelves on grocery stores were empty, we had farmers that had animals that were ready to be processed and connected with those customers, but that central processing infrastructure at such an industrial scale broke down. Now we’re seeing a lot more interesting investments in regional smaller scale processing. I think we might see a renaissance in the idea of regional processing infrastructure over the next couple years to make sure that our country has a backup if there are shocks to global systems.

What are some of the other macro trends impacting your field from an investment standpoint? We’re on the cusp of the largest generational wealth transfer in history, where wealth from one generation is passing on to the next. It’s no secret that beneficiaries of this next generation want their assets to align with their values and that looks very different for a lot of people than just investing in public debt and equities.

From just a pure diversification basis you probably want a portfolio that has some assets to balance any turmoil caused by climate change, and the more regenerative systems you invest in the more agile, the more self resilient they are.

How has your field changed since you began exploring it six years ago? I would say the interest in the space has grown exponentially over the last couple years. It isn’t just Marin County-area people talking about it. Tom Brady is in the 2020 Netflix documentary “Kiss the Ground.” Ranchers like Will Harris in Georgia and Gabe Brown in the Midwest are getting a lot of respect in their local communities. This is really something that is touching the entire country.

We have allies in the current financial system who are also very open about this change being needed, and they’re expressing that to the overall market, people like Blackrock Chairman & CEO Larry Fink and JPMorgan Chase Chairman and CEO Jamie Dimon. And through this I’ve been able to interact with Al Gore a fair bit.

His movies were important, but equally important is that he helped build Generation Investment Management, which is a top-tier investment firm that is only in sustainability and doesn’t have a foot in the extractive system. It’s one of the best performing firms over the last decade.

What are the biggest challenges you face on a consistent basis? I know it sounds weird but getting someone to invest in you isn’t that hard, but getting the right person who is mission-aligned with you, who actually understands what you’re trying to do and to make sure you’re speaking the same language is much harder.

You want to be as buttoned up as possible so you can have a competitive fundraising round where you get to accept the terms and where you’re not the taker of terms. I see many people who have really good ideas that have the ability to execute on them taking capital from people whose time horizon doesn’t match with them.

What else is important to understand about these kinds of regenerative ventures? When you’re investing in regenerative agriculture, you need to do it slowly and intentionally. You don’t want to move fast and break things. It’s really important to do the homework. Otherwise your heart may be in the right place, but the end result of all your actions might actually be a further step backward in the food system that we’re trying to change. Your brand is all that you have especially early on.

It’s really important as a regenerative brand to build a loyal customer base, and that they’re your customer because they understand the value proposition you’re providing and not because you’re spending a lot of ad spend on them. When you develop a relationship over food with the source of that food it’s much more sticky than when you’re selling them a more fleeting experience that isn’t as central to the act they do three times today.