Q&A With One of PCG's founding Partners, Jim Pines.

How did you personally enter the regenerative food and agriculture space?

I have a broad background in agriculture; I own a few farms in Wisconsin, one in Illinois, and I also co-founded an ag-tech company that merged my interest in agriculture with my business interests. However, as I developed that company and learned more about commercial agriculture, the more disenchanted I became with “the norms” associated not only with agriculture, but also the food system  and policies it supported. I was appalled when I came to the realization of the impact that commercial farming placed on our environment and the food that we consume. I decided that more of my time needed to be spent moving agriculture towards practices that I undertake on my own properties; redirecting  agriculture back to its historical natural state, which is really what regenerative agriculture does.

With that background in mind, can you tell us a little bit about Provenance Capital Group—why this firm, and why now?

As I became further engaged with regenerative agriculture, I thought initially that as a steward of my family office, that my role would be to find large scale projects that were meaningful and invest in them. It didn’t take me long to realize that there was no capital coordination process or financial infrastructure in place to connect investors with those in need of capital. These types of structures exist in all other industries. I was sure that there were many regenerative enterprises that required capital but there was no source for an investor, such as myself, to identify and diligence these opportunities.  Accordingly, I felt that I would have the most impact by funding an entity that could create the missing financial infrastructure for regenerative food and agriculture rather than investing in specific projects. That is how Provenance Capital Group was created.

The fact of the matter is that this whole regenerative movement will not be able to scale and succeed unless there’s a recognition that capital is as important as talent, ingenuity and intentions.  Unless great enterprises can obtain funding, they will not be able to provide their highest potential impact. Provenance is the bridge between the investors that want to push this movement along through investments, and the entrepreneurs that have the business solutions that require the capital.

And what is the opportunity here? What is the opportunity from both the enterprise side as well as the investment side?

We’re in a unique period of time where change is taking place in the investment community: more  investors that are willing to sacrifice total economic return as long as there are desirable environmental and social impacts associated with the investments that they undertake. This growth is taking place amongst all demographics and appears to be a trend, not a fad, as people allocate resources based upon beliefs rather than solely economic outcomes. Naturally, the dollars that they invest will have to provide some type of adequate return, but instead of requiring double digit returns, many can live with a few less percentage points if the environmental and social outcomes are there.

Can you provide an example of systems level change that will have to take place in order further the regenerative economy that you envision?

My background is in operations, so I have a deep respect for those that actually have to get the work done.  So, let’s use farmers as an example. In commercial agriculture, if it wasn’t for government subsidies there wouldn’t be any large-scale farming in the United States. Average farm income was actually a negative number in 2019, meaning a very high percentage of all farmers lost money. Most farmers have to work two jobs simply to meet their economic needs. If these collectively are not  symptoms of a system that is completely broken I’m not quite sure what is.

However, as consumer demand for food changes from its current lowest cost mentality to a belief/value and nutrient-density based ethos, operators will have an opportunity to reduce costs and obtain premium pricing for their products through regenerative practices.  Now, that’s really easy for me to say, but implementing this at the farm level is extremely challenging, It’s a very difficult transition from commercial to regenerative.

To name a few of the challenges that farmers face, there is cultural pushback both from families and the communities, required tiers of vertical integration, banking hurdles and different types of equipment needs. However, the opportunity is legitimate and the infrastructure to fund those enterprises needs to be established in order for them to undertake those difficult changes. Operators can ‘do well and do good’ because of the positive external impacts on the environment and society that proper farming practices will create. However, it’s not realistic to think they are going to do it at the expense of their personal economics.  Regenerative practices provide the ability to do both.

Similarly, can you talk about systems level change from the investment community perspective

We are in the midst of the largest generational wealth transfer in history.  In these circumstances, the new cadre  of decision makers have very different values than those who created the wealth above them and they are willing to place greater emphasis on impacts than those who drove decisions prior to them.

Importantly, this change dynamic is not isolated to foundations, family offices and high net worth individuals. In general, more retail investment clients  are placing demands and requirements on traditional investment entities – such as brokerage platforms – to include impact type investments either as a component of their portfolios, or at a minimum, as an alternative that is available for their investor base.  Finally, stakeholders in trusts, insurance companies, pension funds and other entities having higher fiduciary standards have demanded exposure to impact investments, further accelerating demand.

What about the role of Venture Capital?

I don’t feel that there is currently a place for venture capital in the regenerative landscape with the possible exception of a very few technology companies.  Venture capital, as it is currently conducted,  shares very few similarities with the investment model for regenerative enterprises for a number of reasons.

First and foremost is the lack of sensitivity of most venture firms for impact when evaluating investments.  Most of the return parameters in the regenerative space simply would not meet their return requirements. Additionally, the regenerative investment model normally has a longer investment horizon than traditional fund time frames. Regenerative investments can have a 10 -year time period (or longer) rather than 5-7 years which is normal for most traditional VC investments. Finally, the regenerative investment model encourages founders and entrepreneurs to maintain a healthy ownership interest in the company after the outside investment is made.  We pride ourselves on finding the right investor for our clients that will allow the entity to flourish through long term engagement of its founders.

What are you hoping for PCG’s legacy and then ongoing what are you hoping for PCG into the future?

With everything that has happened in our world over the past couple of years, I struggle and get frustrated with those who are not willing to take an active role making  things better for others.  Over the years, I have observed many people that have good intentions but are not willing to engage themselves because they feel that the task at hand is too large to overcome. The  fact of the matter is that everything that is big started out small.  That is how we operate at PCG.  We are not intimidated by the challenges that lay ahead of us, we simply try to do things one day at a time knowing that this ultimately will lead to the results that we aspire to achieve.

The current state of the regenerative food and ag space, particularly around investing, is no different than where the internet was in the late 1970’s. It’s just a little seed head that’s sprouting out of the ground and there’s no set of instructions or roadmap for those immersed within its boundaries.  Although the industry is in its very early stages, the practices of regenerative food and agriculture are not. On the contrary, they have been around forever.  Understanding environmental and biological systems and learning how to work with them rather than destroying them has the potential to address many of the problems that we struggle with as a society.  PCG’s mission is to integrate the use of these natural systems and associated practices with the reality of our economic environment.  We are that bridge.

I want to be able to look back on this time and PCG 10 years from now, and say, “You know what, we were right at the inflection point of this movement , and we did a few things that really mattered”.  I hope to see this industry flourishing, billions of dollars of capital flowing in, projects and companies being funded and know that we have contributed to the results of a better agriculture and food system, environment and society overall.