Christian Hiss grew up on one of Germany's first organic farms adhering to the strictest of all eco-labels. Seeing first-hand the threat facing local small-scale agriculture, he is broadening the financial base of organic regional agriculture enterprises by defining their success not only in financial return, but also in environmental and social returns. As such, he is attracting investors who value a balanced investment across these three areas. Through his holding company, Regionalwert AG, Christian is reinvigorating regional economies by creating alternative flows of capital and value chains for small organic farmers and food producers. Regionalwert AG's plan is to spread throughout the Freeburg region, making shares even easier to access through new retail partners, and then to begin the nationwide sale of shares.
The New Idea
Agriculture today is financed much like any other big business: with a view of investment that only includes financial return. This approach, however, is limited in scope and leads to major negative environmental and social externalities. With few sources of capital available to smaller players in the sector, and with an increasingly competitive marketplace, large-scale agriculture is increasingly squeezing out smaller scale regional agricultural economies. As a result, the industry has suffered from significant losses in jobs, open space and community identity.
Christian’s Regionalwert AG broadens the financial base of organic regional agriculture enterprises by defining their success not only in financial return, but also in environmental and social returns. Instead of investing in anonymous green investment portfolios with difficult to measure impacts, Christian offers investors the opportunity to invest in their own region and therefore remain closely connected to their investments.
Christian's key insight is that each return – financial, social and environmental – needs to be well accounted for. To do so, he has developed 64 indicators that cover performance in these three arenas. At each annual meeting, the organization’s shareholders learn about the tradeoffs between these returns and can thus make informed decisions on how to balance them in the future.
As a result of Christian’s vision, the Regionalwert AG has creates regional value chains where they did not previously exist. In addition to buying small farms with social and environmental impacts, the holding company also invests in parts of wholesalers or organic catering firms with much higher financial margins. The result is that all three returns – financial, social and environmental - are soundly balanced inside of the holding. By ensuring a balanced return the Regionalwert AG enables regional, small and medium sized farms and grocery producers to survive in a highly competitive market while also allowing local supply chains and synergies to strengthen the region's sustainable values.
With the Regionalwert AG, Christian has found a sustainable mechanism to connect capital with local agricultural enterprises, thereby creating benefits for entire regional economies. As a leading model for shareholder participation, his idea is not only on track to grow organically, but also to spread to other regions and potentially beyond agriculture.
Without information about their true cost, consumers demand cheaper agricultural products. Although today's highly specialized, large-scale monoculture farms which rely on long distance transport are able to deliver cheap products, more and more of the industry is becoming financially unviable for small producers, while also degrading the environment and disintegrating the regional social fabric.
Consumers, one of agriculture’s central stakeholders, are painfully realizing that farms produce cheap goods at the cost of important economic, ecological and social benefits to communities. Agriculture affects not only the landscape, biodiversity, and the soil and water quality, but also regional employment and local value chains. However, none of these social and environmental factors are priced into products. As a result, consumers are not offered adequate choice, and the public ends up paying a high price for environmental cleanups, preservation areas, unemployment benefits, and a lower quality of life.
Despite the large number of consumers and investors who would be prepared to help shape a more sustainable and regional agriculture, the industry today offers limited informational mechanisms to make responsible investment and purchasing decisions that contribute to a more responsible sector. At present, the agriculture sector is organized to consider purely financial returns, providing no sustainable investment opportunities that acknowledge the social and environmental benefits of local agriculture.
Through a simple market mechanism - a legal holding company with publicly available shares – Christian has created an accessible financial investment opportunity that is changing the structure of the agriculture industry. After Christian sold his first 300 shares in 2008, Regionalwert AG has continually broadened its financial base by issuing new stock, which is then used to acquire small agricultural enterprises from organic farms to organic school catering businesses to encourage local value chains in which each regional business specializes in its core products.
The Regionalwert AG is a public company committed to an ecological and social constitution, and is monitored by a board of directors who are themselves experts in the field of organic farming and ecology. In order to enable 360 degree business decisions, the organization measures and reports not only its finances but also its environmental and social externalities in detail. Together with academic and consultancy partners, Christian developed an innovative reporting method taking 64 economic, ecological and social indicators into account, thus representing a radical departure from the traditionally purely financially-driven agricultural industry.
By bringing patient capital to organic farming, Christian also addresses a wide array of issues confronting regional economies. As a holding company, the Regionalwert AG buys small organic family farms and related businesses that have no one willing to take on the family business. Regionalwert AG then offers a skilled farmer who would not have the money to buy his or her own farm the ability to lease the enterprise on favorable terms. This puts an end to the dying of small farms due to a lack of successors.
Through his organization, Christian also encourages participation, deliberation and decision making from all of his 320 shareholders. At annual meetings, consumers-turned-investors ask important questions about the agriculture industry, transforming questions about maximum milk consumption and a cow’s life span from abstract demands to tangible decisions with quantifiable impacts. In Regionalwert AG, shareholders also have a venue in which they can share ideas and make decisions about key business proposals brought forward by the board of directors.
This form of empowerment, however, extends beyond shareholders. Intensive media coverage, word of mouth and the sheer force of Christian’s innovation have not only made him a well-known figure in his region and beyond, they have also raised the bar for his competitors in organic agriculture.
In the days to come, Regionalwert AG’s plan is first to grow organically in the Freeburg region, making shares even easier to access through new retail partners, including banks and green investment funds. Encouraged by both media and investor interests, one can also expect Christian’s recently introduced reporting method to be a major influence on existing reporting standards of concepts like eco-labels as well as on the wider infrastructure of the sector in Germany.
Christian grew up on one of Germany’s first organic farms. Faced with his parents' expectations to take over the farm, he experienced firsthand the challenges of succession planning in agriculture. Instead of taking over his family farm, he chose to initiate his own venture. In addition to his own successful organic nursery that encompasses 15 staff, he has also launched several other initiatives, including a school improvement project and Germany's first foundation for biodiversity.
Knowing the challenges he faced inheriting his parents’ farm, he did not expect any of his three children to continue his business, so instead he formed his own succession strategy and left his work to launch the Regionalwert AG. After years of experience working in regional and organic agriculture, he saw agricultural holding companies as the true solution to the decline of regional agriculture.
In order to make his project successful, Christian recognized that he needed to better understand the financial context, and has thus enrolled in an extra-occupational online master’s program for social finance in Plymouth, U.K. He anticipates writing his master’s thesis on the Regionalwert AG.