Integrate risk and resilience into your business case

Connect your ag sustainability programs to the financial outcomes your business needs.

You need to demonstrate what your sustainability investments contribute to the business, whether you are seeking new funding or accounting for money already spent. For agricultural programs, that often means connecting changes on the ground in sourcing regions to business value: reliable supply, procurement costs, and production continuity.

TERRX helps you build a financial case that finance and enterprise risk management (ERM) colleagues can evaluate alongside procurement and operating teams.

How we support that mandate

• Establish the business exposure. Assess how drought, irrigation-water shortages or disrupted transport could affect crop deliveries, replacement-supply costs and production downtime. Identify where those effects reach your company’s costs and cash flow.
• Evaluate investments already made. Examine whether programs such as water storage or soil-management improvements helped sustain supply or reduce disruption costs. Distinguish observed results from estimates of protection against future events, and assess the benefits your company can capture.
• Support the next funding decision. Compare the costs, expected benefits and timing of further resilience investment with alternatives such as changes in sourcing or contracts. Identify the local resources needed for the proposed investment to work.

Decisions this informs: Renew, expand or revise a program; prioritize sourcing regions; and present an investment case to finance, risk and operating colleagues.

Strengthen your farmland fund’s positioning with LPs.

Whether you are raising a new fund or demonstrating the value of an existing one, you need a clear, credible account of what differentiates your investment strategy. How do you recognize risks others may overlook, identify opportunities they may undervalue, and protect income and asset value?

TERRX helps you substantiate that account with analysis of weather and water exposure, existing resilience and adaptation opportunities. The work supports fundraising, ongoing investor reporting and discussions about future commitments.

How we support that mandate

• Build evidence for your investment thesis. Connect your fund’s approach to physical risk and resilience with the financial outcomes LPs care about. For a new fund, test the assumptions behind the strategy and prospective investments. For an existing fund, assess the portfolio and investments already made.
• Identify potential mispricing. Assess where property prices may understate or overstate weather and water exposure, or overlook existing resilience. Use that analysis to support acquisition decisions and explain your approach to finding value.
• Substantiate income and valuation assumptions. Examine how groundwater availability, irrigation costs or repeated drought could affect tenant economics, rental income and asset value. Give LPs a clearer view of the assumptions supporting your portfolio.
• Demonstrate the financial rationale for adaptation. Evaluate existing resilience investments and compare the costs, expected benefits and timing of further improvements. Explain how those investments could protect income or support exit value, and translate the findings into LP communications and reporting.

Decisions this informs: Fund positioning and fundraising, LP reporting and recommitment discussions, acquisition priorities, and adaptation investment.

Test whether the infrastructure asset and its supply shed can support returns over its useful life.

You need to understand an asset’s exposure over the years it is expected to operate and avoid committing capital to capacity that could lose its economic purpose. A processing facility may remain physically intact while water constraints or declining crop supply leave it unable to sustain the utilization assumed in the investment case.

TERRX assesses both the facility and the systems it depends on, connecting those exposures to throughput, margins, cash flow and the risk of an asset becoming stranded.

How we support that mandate

• Examine direct and supply-region exposure. Consider flooding or wildfire affecting facilities, power lines and transport routes, alongside aquifer and irrigation-reservoir levels affecting the crops supplying the asset. Test whether the location and catchment can support operations over the asset’s useful life.
• Test the assumptions behind the investment. Examine how reduced crop availability, interruptions to power or transport, or higher water costs could affect utilization, operating costs and cash flow. Identify where the financial case depends on conditions that may not persist.
• Evaluate protection and adaptation options. Compare facility protection, storage, sourcing changes and investment in the resilience of the supply region. Assess what existing protections contribute and whether further investment could justify its costs within the asset’s remaining life.

Decisions this informs: Location, capacity and acquisition terms; expansion or retrofit; and whether to hold, repurpose or exit an asset as its operating conditions change.

Synthesize portfolio-wide physical risk and adaptation capacity.

You need to protect the returns that support your institution’s commitments, whether those returns fund pension payments, an endowment’s mission or other long-term obligations. Within a farmland portfolio, that requires understanding both the risks to income and value and the capacity of managers and local operators to respond.

Due-diligence frameworks such as PRI’s supplementary Climate Module for private equity LPs provide a reference for assessing managers’ treatment of physical risk. TERRX can help you examine the underlying exposure and adaptation assumptions, and identify where further evidence is needed.

TERRX connects asset-level weather and water exposure to portfolio decisions. Where the engagement covers your wider real asset portfolio, we also examine shared dependencies across farmland and supporting assets.

How we support that mandate

• Identify concentrations that diversification may conceal. Funds with different managers may depend on the same aquifer, irrigation system, crop region or transport route. Assess how those shared dependencies could expose multiple holdings to disruption at the same time and affect income and exit value.
• Evaluate managers’ evidence and local capacity. Examine the assumptions behind managers’ risk assessments and resilience claims, including the value of investments already made. Assess whether proposed responses have the water, infrastructure, knowledge, finance and management capacity needed to protect returns.
• Inform allocation and oversight. Compare exposure and adaptation options across holdings, with attention to costs, benefit timing and investment horizons. Identify where deeper diligence, manager engagement or additional investment could change the portfolio’s outlook.

Decisions this informs: Manager selection, commitments and recommitments, portfolio allocation and the questions you bring to ongoing manager oversight.