Unlocking nature markets: How environmental credits can power regenerative farming

Regenerative agriculture offers a powerful pathway to restore soils, increase biodiversity, store carbon and strengthen the resilience of farmers who represent nearly a quarter of the global workforce. Practices such as reduced or no-till farming, cover cropping, crop rotation and agroforestry, when combined, can deliver significant environmental and productivity benefits.

These gains matter as the global agriculture sector is increasingly driving environmental pressures, contributing to around 70% of global freshwater withdrawals and roughly one-quarter of total greenhouse gas emissions.

With food demand projected to rise 50-70% by 2050, farmers will face mounting pressure to feed a growing population while safeguarding natural ecosystems. Supporting them with clear incentives, policy frameworks and access to finance, including environmental credits, will be central to success.

Transitioning global food systems to regenerative practices will be challenging, requiring an additional $80-105 billion in annual investment by 2030.

Farmers, who are central to this transition, often struggle to access capital or benefit from direct incentives to embark on change. With growing climate-related risks, rising input costs and economic uncertainty, farmers need clear policies and strong business cases to adopt new practices.

Yield and productivity gains over time can be key motivators. For example, regenerative agriculture has proven to boost yields by 10-30% for US farmers using no-till and cover cropping. However, in some cases, farmers face negative cash flow in the early years due to temporary yield declines and higher input costs, for example, due to equipment change needs.

Beyond these transition challenges, adoption is further hindered by additional systemic barriers such as limited financing, weak risk-sharing mechanisms, inadequate capacity building, poor data availability and fragmented support networks.

There is no silver bullet to accelerating the adoption of regenerative agriculture practices. To address barriers, actors across the agriculture and food value chain will need to come together and provide holistic support systems to:

Environmental or nature credits, including biodiversity, carbon and other credit types, are an important piece of this holistic approach, helping farmers generate additional revenue and improve the commercial viability of regenerative practices.

Alongside other solutions, these instruments are well-suited to attract private investment due to their small ticket size, relative liquidity, outcome-based structure and familiarity to investors. When designed and deployed with integrity, they can help mobilize funding for the regenerative transition while directly rewarding farmers and rural communities for environmental stewardship.

Project Hummingbird is a global pilot led by Bayer and PlanetaryX, together with a group of select partners. The project tests a new business model that bundles multiple environmental benefits – such as carbon storage, biodiversity, healthier soil and improved water systems – into a single credit package called Ecosystem Resilience Assets.

This approach aims to make it easier to finance regenerative agriculture and encourage collaboration across the food value chain, putting farmers at the centre.

Guided by the World Economic Forum’s Nature Markets and Biodiversity Credits Initiative, the pilot measures positive environmental outcomes and rewards farmers for them, with at least 75% of the funding going directly to land stewards. Calling these environmental gains “assets” emphasises the importance of the concept of “nature as an asset class” and the need to take a holistic view of ecosystem services, rather than treating them separately.

As a core partner, PlanetaryX provides advanced technology and measurement tools to simplify the generation of Ecosystem Resilience Assets and ensure reliable, science-based tracking of environmental improvements, building on existing regenerative agriculture frameworks.

As the pilot develops, the core methodology will be made publicly available. In addition, Howden will be exploring new insurance solutions to help share risk and make participation more attractive for farmers and private sector participants.

Once fully operational, Project Hummingbird aims to secure buyers for these nature assets from companies seeking to meet net-zero and nature-positive goals and strengthen resilience across their supply chains.

Despite their potential, biodiversity and other environmental credits face several challenges in being effectively integrated into regenerative agriculture, including additional revenue uncertainty due to the nascent state of the market and a potential time horizon mismatch due to permanence requirements.

In addition, a lack of nature data and the additional workload and costs associated with complex measuring, reporting and verification might further deter farmers’ willingness to participate.

Across all these, several enablers can address complexities and unlock the full potential of environmental credits. High-integrity collaboration and partnerships, such as Project Hummingbird, involving communities and farmers, as well as cross-value chain action, will be key to mainstreaming nature markets in regenerative agriculture.

Each stakeholder group has a key role to play in advancing action:

Together, these coordinated actions can transform environmental credits from a niche concept into a mainstream tool for regenerative agriculture, benefiting both nature and farmers, as well as communities.