Spotlighting Fibershed’s Regional Fiber Manufacturing Initiative (RFMI) and its efforts to help launch Imperial Yarn’s Climate Beneficial™ Wool Pool

Much of the current investment capital dedicated to regenerative agriculture is concentrated directly into land investments meant to encourage a transition to climate-positive practices. However, the downstream pressures, such as lack of markets for sustainably produced products, often limit the effectiveness of these on-land investments.

Regional supply chains must be developed and designed to support regenerative ranchers and farmers who are building resilience and stewarding land in our own backyard. Investments in these processing, marketing, and manufacturing components are necessary to create a more resilient, regenerative system.

One sector where such infrastructure and system investments could have an enormous impact is in U.S wool production and the related regional supply chains. This wool-production and processing system is currently nestled within the larger fast-fashion culture and the global textile industry, both of which have stunning negative environmental impacts. The textile industry is responsible for an estimated 2.1 billion tons of CO2 each year—more than all international flights and maritime shipping combined. Fast fashion demands new styles and rapid production models, which are currently only supported at scale by global manufacturers. And the current system is not resilient or supportive of graziers: In 2020 in particular, the bottom of the wool markets dropped out, (a combination of the trade war with China and COVID), leaving many graziers with a lot of wool and nowhere to sell it.

Wool producers alone cannot reduce this environmental impact or solve these political and economic challenges. However, by rebuilding resilient, regional economies, the ranchers in the western U.S., home of the majority of the nation’s wool production, could meet a growing demand for authentic, long-lasting craftsmanship and, thus, scale circular, regenerative production. This is the goal behind the Regional Fibershed Manufacturing Initiative (RFMI) and the subsequent development of a climate beneficial™ wool pool.

“In order to have an impact with your investment, you don’t need to invest directly in the land,” says FJ Selosse, Co-Founder and Managing Director of Provenance Capital Group. “Investing in processing and infrastructure is a way to support the ranchers and producers who are already stewarding land.”

Investing in the processing capabilities can actually be a more impactful investment for the whole system, as giving money to a ranch to convert to regenerative won’t be fruitful if the rest of the supply chain to support the rancher does not exist. Part of the goal of this work is to scale regenerative agriculture with a full-systems approach and model.

Regional Fibershed Manufacturing Initiative: A Regenerative Systems Model

Provenance Capital Group (PCG) helped Fibershed launch the RFMI. The RFMI is a multi-stakeholder initiative that enables, empowers, and furthers the development and implementation of regenerative and regional fiber systems. This initiative is first being piloted in the western U.S. but is intended to be a replicable model for other fiber regions. The RFMI engages stakeholders and experts throughout a circular soil-to-soil system to identify and prioritize needs and design solutions throughout the regional supply chain.

As an extension of the design of the prioritization process, PCG has identified that investments in regional supply chains are needed to scale regenerative agriculture practices and benefits. PCG is currently establishing a network of mission-aligned investors and also helping entrepreneurs in this space get access to capital. PCG’s enterprise advisory services are being provided to select companies that have been identified through the landscape map.

One interesting example within the RFMI’s work is with climate beneficial wool. PCG and the RFMI are working with a variety of companies in the wool space and are developing a climate beneficial wool pool to aggregate the processing and distribution of climate beneficial wool—a project with systems-changing potential and impact.

Climate Beneficial Wool Pool: Addressing Gaps in Regional Supply Chains to Support and Scale Regenerative Agriculture

The climate beneficial wool pool program has three key elements: the qualification of the climate beneficial wool as coming from ranches that are implementing carbon farm plans; the wool pool itself, which aggregates, cleans, and stores the wool top (semi-processed wool) to act as a storage and distribution facility; and the end business creating value-added products from the wool with a ready market and sales channel. Each of these elements is key to building a regional wool supply chain that is based on a soil-to-soil regenerative agriculture system.

Climate Beneficial Wool and Carbon Farm Plans. A rancher with a viable wool product undergoes work with Fibershed, including soil analyses, development of goals the rancher has for the land, and a working, long-range plan for implementation of climate beneficial practices.

“We work with the Carbon Cycle Institute, which developed the Carbon Farm Planning Module for working relationally with the landowner and understanding quantifiably how we can have an impact on the land,” says Rebecca Burgess, founder of Fibershed. “We utilize these plans as road maps for years on end, as the total achievement can take 10 to 20 years.”

Climate Beneficial Wool Pool. The mission of the wool pool is to make climate beneficial wool more readily accessible for buyers to source from regional, regenerative ranchers and producers. The wool pool addresses critical supply chain gaps, including developing an inventory of prepared fiber, which makes the wool more attractive to commercial buyers because of the shorter lead time.

“The wool pool is a crucial piece of regional regenerative production. The structure allows climate-beneficial wool from the region to scale to access large-scale commercial processing at a lower cost, minimally processing the wool and storing it until the market needs it,” says Selosse.

Business, Market, and Sales Pipeline. This initial wool pool is housed by entrepreneur Stacie Chavez, founder and operator of Imperial Yarn. This was a fairly seamless expansion of Chavez’s existing business, which was already gathering and storing regionally produced wool and selling climate-beneficial wool. Imperial Yarn has a strong pipeline of sales already for 2021, which provides the ability to readily turn around the wool inventory from the climate beneficial wool producers participating in the wool pool.

“Imperial Yarn is a key component to get the climate beneficial wool pool to scale. The wool pool as a standalone organization is too low-margin. Imperial Yarn creates the market, as its business model is already built on turning the top into yarn and selling the end product,” Selosse says.

By building the wool pool into Imperial Yarn’s existing structure, the wool pool could avoid replicating the overhead expenses. PCG supported Chavez in taking on the climate beneficial wool pool by helping build a business strategy, developing a predictive financial model and assessing her capital needs, and structuring and negotiating a financing structure that meets those needs. Since its launch, the wool pool has been successfully funded, the ranchers involved were able to realize revenue during the COVID pandemic, and the wool has been processed and stored.

No Silver Bullets. Regenerative systems will require more regional, decentralized approaches, and this is one example of what it will take to make that happen. In a society that has become increasingly focused on quick solutions to complex problems, the approach of the RFMI and wool pool is to build a longer-term, systems-wide solution to support the transition to and scale of regenerative agriculture. One of the important pieces that needs to shift is the finance and investing strategy.

“With such a long working capital cycle, as it typically takes a year from purchasing the wool to being able to use the clean top, patient and customized capital is required to test out both the demand and supply side of the equation,” says Esther Park, CEO of Cienaga Capital, the investor without whom this project would not have been possible.

The hope is that this initial investment will increase the market for climate beneficial wool where Imperial or other organizations could commit to buying one or more farmers’ whole supply on an annual basis and with sufficient premiums that benefit the farmers.

One financial instrument under consideration is a revenue-based loan (RBL). Historically used in the oil and gas industry, RBLs are loans with a promissory note where the negotiated repayment is tied to a percentage of the company’s revenue. There are multiple ways these arrangements can be set up, but in general they help align incentives on both sides and also help prevent entrepreneurs from having to dilute their equity early on.

“This is a climate and social justice imperative, and it is through partnership with PCG that we are understanding the financial language and setting up the complex financial models to communicate with the investment community to support us in this work,” says Fibershed’s Burgess.


Disclaimer: This article is intended solely to provide general information regarding the organizations herein and nothing contained on this article should be construed as investment advice or an offer or solicitation with respect to the purchase or sale of any security. The past performance of any investment, investment strategy, or investment style is not a guarantee of future results.