How Tech Climate Transitions are Reprogramming the Financial Outlook for the Land Economy

Tech Climate Transitions trends are driving higher standards of sustainability and efficiency in the Forest, Land, and Agriculture Sectors altering competitiveness and market outlooks

Driven by innovative improvements in sustainability and efficiency, the forest, land, and agriculture (FLAG) sectors are undergoing rapid transformation globally. Investments in climate-smart solutions and growing access to advanced agricultural technologies are helping producers meet the challenges of climate change while unlocking new opportunities for growth.

COP29 Broadcasts Strong Signals for Tech Climate Transitions

At COP29, Brazil announced its new Nationally Determined Contributions (NDC), with a target of 59 percent to 67 percent in economy-wide greenhouse gas emissions by 2035 versus 2005 levels. Natural climate solutions are expected to be crucial to Brazil’s low-carbon future, increasing the likelihood of greater investment in advanced technologies that can help farmers financially and reduce emissions.

Brazil also presented its recently formed Climate Investment and Ecological Transformation Platform (BIP) at COP29. This program looks to mobilize national and international capital to boost climate transition and ecological transformation plans, with projects in biodiversity, bioeconomy, and renewable energy. It fosters collaboration between investors and government ministries to advance these goals. An influx of funds from investors could provide the agricultural sector with greater research and development for advanced technologies, supporting the industry’s transition to lower-emission production.

Agreement on some Article 6 carbon market rules at COP29 provides greater certainty on cooperation between countries on carbon markets. This enables an environment that can scale up sustainable agriculture technologies as farmers, foresters and other landowners will see increasing returns to prove their assets sequester carbon. Carbon markets can incentivize farmers and agribusiness to utilize climate-smart technologies. The approval of key Article 6 rules will likely attract more investment in these technologies as more countries look to participate in more stabilized markets.

Governments and philanthropic organizations pledged to tackle methane with almost USD 500 million in new funds for methane abatement pledged by global leaders at COP29. This increases the global level of finance to address methane emissions to over USD 2 billion in recent years. This funding is focused on new technologies that are emerging to tackle methane sources like enteric fermentation. An initiative launched at COP28 has raised more than USD 60 million for research into “cost-effective breakthrough technologies to reduce livestock emissions”, like feed additives aimed at reducing methane from cattle. Technology to address cattle emissions, a significant portion of greenhouse gas emissions from agriculture, is growing rapidly and has recently been cataloged by the Nature Tech Collective’s Cattle Tech Sector Map.

These developments at COP29, along with many others, only reinforce the likelihood that the following technology trends that have emerged in recent years will shape the future of FLAG sectors. Orbitas’ new report, State of Climate Transitions in the Land Economy, explores these trends and the risks and opportunities they pose for the FLAG sectors in further detail.

Three Tech Climate Transitions Trends Expected in 2025

Increasing Investment: Investments in research and development are driving advancements in climate-smart agriculture (CSA) that enhance resilience and enable climate mitigation, improving productivity, lower operating costs and favorable positioning against peers. For example, The Brazilian Agricultural Research Corporation (Embrapa) has led the development and promotion of integrated crop–livestock–forestry, silvopasture and other agroforestry strategies, and the Bill & Melinda Gates Foundation has committed USD 1.4 billion to help meet the climate adaptation needs of smallholder farmers.
Altering Market Competitiveness: Rapidly developing agricultural technology is driving efficiency and creating market leaders by allowing farmers to optimize their operations, reduce waste, and lower their carbon footprint. For example, combinations of innovations including precision agriculture, farm automation and robotics are estimated to reduce 71 percent of the emissions from row crops.
Revolutionizing Production Practices: Emerging solutions for reducing livestock methane emissions provide companies and their investors with opportunities to mitigate the impact of carbon tax policies and other emissions-related costs while reducing substitution risk from low-emission alternatives. For example, feed additives and fat supplements for cattle can cut cattle methane emissions by 10 to 40 percent, while natural solutions such as seaweed can cut these emissions by up to 80 percent. Other solutions include pasture-based rotational grazing and the breeding of larger, healthier cattle.

Risks Driven by Tech Climate Transitions

The transition to adopting new technologies in the FLAG sectors comes with several risks that companies and investors must consider. Here are the main risks that companies and investors will face as technological changes accelerate.

High costs of adopting new technologies: Transitioning to more sustainable agricultural technologies often necessitates substantial upfront capital investment. FLAG sector companies that operate on thin margins may face difficulties in adopting new technologies and further delay the transition to more sustainable practices, causing them to lose market share.

Loss of access to international markets: FLAG sector companies that decline to adopt more sustainable agricultural technologies may risk losing competitive advantage to their peers. As markets begin to restrict purchasing deforestation-linked goods by tracing the source of commodities through supply chains and monitoring forest loss, unsustainable suppliers will risk losing access to international markets and associated revenue.

Technical challenges in implementing new technologies: Increasing technical complexity from newly developed agricultural technologies or more sustainable practices may raise the bar for implementation, requiring access to expertise that is not universally available to FLAG sector suppliers. Regions with poor infrastructure and supply chains dependent on decentralized smallholders, such as cocoa and rubber, may face challenges reducing on-farm emissions, thus losing customers and increasing emissions costs.

Decreased demand from consumers: Introduced through research and development, substitute FLAG products with lower emission intensity, such as dairy and meat alternatives, may disrupt traditional commodity markets, siphoning off demand from consumers interested in low-carbon products.

Opportunities for Tech Climate Transitions to Spur Growth

For companies and investors that can deftly navigate these risks, multiple opportunities can be developed from these same trends. For those seeking to turn technologies to their advantage, there are a few positive trends that have the potential to define market winners in the FLAG sector in the years to come.

Increased productivity: Early adoption of CSA practices allows FLAG sector companies to establish themselves as sustainability leaders, potentially gaining a competitive advantage. By integrating CSA practices early, these companies can benefit from long-term productivity enhancements, reduced emissions and lower operating costs, positioning themselves favorably against peers.

Efficiency gains: Publicly funded agriculture technology advancements offer significant scale and cost reductions for private sector companies and investors. By leveraging these innovations, FLAG sector companies can achieve efficiency gains and reduce expenses, providing a financial incentive for the early adoption of new agriculture technology solutions.

Access to financing: Investors have the opportunity to provide upfront financing for developing agriculture technology solutions, supporting FLAG sectors. This financial backing can help companies overcome initial cost barriers, enabling them to implement cutting-edge technologies that enhance sustainability and maintain business relationships with environmentally conscious stakeholders.

Tech Climate Transitions: A Feature, Not a Bug of the New Land Economy

As global ambition to address climate change grows, the high-emission intensity of FLAG sectors may increase business and investor exposure to emerging transition risks. Activities in the FLAG sector responsible for high greenhouse gas emissions will result in climate transitions driven by technology, policy and legal, reputational, – and market-based repercussions as government organizations, the private sector and civil society increasingly work to mitigate the worst impacts of climate change. This transformation will bring about massive changes in technologies that have the potential to help FLAG companies meet the challenges of climate change and take advantage of opportunities that have the potential to transform the land economy.