Apart from air and water, vegetation, or simply put, food is what makes life sustainable on planet earth. This makes agriculture a ubiquitous industry. It doesn’t matter how developed other industries are in a country. If it isn’t agriculturally strong and self-sufficient in addressing the food requirements of its population, it isn’t a developed nation. But with changing times and an environment that is turning volatile, the agriculture industry is in dire need of methods and support that will help it stay strong and secure. It needs technology and financial instruments that can protect landowners and farmers globally to make them robust and face the adversities.
Keeping the requirements of the industry in particular and sustainability as a whole, a team of entrepreneurs is looking to make agriculture and related energy infrastructure to stay resilient through their company, Agvesto. It is a technology platform business with a mission to mobilize capital and insurance to meet sustainable development goals worldwide. Agvesto provides parametric insurance products to farmers, agricultural businesses against natural hazards due to climate change. It also assists issuers such as state government, municipalities, and corporations in issuing green and sustainable bonds.
Understanding the Problems to find Solutions
Agvesto was founded by Dr. Srini Sundaram with a desire to transform the way the agricultural sector is served by financial institutions. Traditionally seen as a high-risk sector, farmers and agricultural businesses have been issued credit at a higher cost than the lent credit. This together with lack of insurance brings a spiral of risks to farmers worldwide when they are working day and night to serve their surrounding population.
Before founding Agvesto, Srini was involved in microfinance institutions in the UK and Europe and advancing sensor and artificial intelligence technologies in the Aviation sector with Rolls Royce. Using the experience gained in the financial sector and industry, and his passion towards earth and natural resources, he wanted to bring resilience and sustainability to the agricultural sector. He recognized that a sector such as agriculture requires long term structural rethinking and hence patient capital was something which as a founder, he was willing to add to the business.
Using his expertise in the science, engineering and financial services sector, he was able to lead the product strategy with the assistance of his team in delivering a best in class product to the market. This quest resulted in building Agvesto, a platform capable of bringing the best in class technology to solve a critical problem society needs to address i.e food security and sustainability.
Understanding Agritech as an Industry
Agritech is a complex sector with various facets to it. Team Agvesto explains the amalgamation of agriculture and technology saying, “Technology has shown value and penetration across various segments such as seed to sale, improving the farm operational practices and land management practices. Technology can also aid some of the manually intensive safety-critical processes so that the farm businesses can become lean efficient machines and hence improve the productivity and yield along the process. The adoption of technology very much depends on the value add, the market conditions the farm businesses operate. What it has shown over the recent years is that this sector has potential to improve the way of lives of farmers and allow them to focus on what they. i.e. farming”
Technology also enables the financial aspects of agriculture such as banking, insurance, investment, and trade finance. The use of technology allows Agvesto to digitize and deliver products through the last mile seamlessly. It also foresees technology transforming the conventional product delivery across various segments enabling them to transit to a new model of delivery that is bespoke and that works for farmers and farm businesses worldwide.
Making a Difference
Agvesto’s overall mission is bringing the farmers and agriculture businesses out of their current structural dependency to a self-sustaining and resilient industry. Using its rich data, Agvesto designs insurance policies with the Insurance carriers and Managing General Agents (MGAs) and works with Brokers to distribute the products to the market using its Digital Platform. These policies are designed to protect farmers against natural perils using a pre-determined Index for a given area that closely tracks the losses. These indices can be a data derived or a machine learning model derived. We use a combination of radar, optical satellites worldwide along with weather station data. To compliment them, we also send weather stations and sensor equipments on the ground to get a full picture of what the physical asset is exposed to. The datasets we acquire during the season is also made available to farmers as we believe he/she is the asset owner and they should be given the data to make better decisions and hence giving them a chance to reduce the exposure when a perils strikes them.
The payout is determined and agreed in advance using these parameters bringing the users the total transparency. The team has garnered vast experience in not only developing and deploying technology solutions but also a very solid understanding of how it can impact the insurance delivery and credit delivery in a given country.
Through its distinguished services, Agvesto was able to protect farmers against natural hazards in the US with its protection parametric insurance products developed in partnership with underwriters and brokers.
Agvesto keeps the product’s payout terms transparent so that there is a little delay between the claim a farm business makes when a natural peril happens to the payout. This is very important in the context of both developed and developing markets where the inefficiencies of loss assessment result in farmers unable to get protection when they most need it after a natural hazard event such as Flood, Drought, Heatwave, Hail, and Wildfire. In certain countries, farmers have lost faith in insurers ability to protect them as delays are observed as much as a year. It feels inadequate to demand as a consumer to instant coffee with modern e-commerce and payment innovations and yet when the coffee producing farmer face losses due to climate related perils, we are happy to have a system that makes him/her wait for months to pay his claim.
Talking about challenges that Agvesto strives conquer, Srini explains, “We believe progressive policy-making towards achieving sustainable development goals and regulatory regimes can unlock the value for Agvesto in various countries. Lack of clear policy framework and regulatory guidelines could mean institutional and private sector investors’ participation will be weak in mobilising capital and in providing innovative products such as parametric insurance. This not only hampers the progress we can make as an organization but also hinders the sustainability of agriculture as a sector.”
Challenges aside, Agvesto is busy developing solutions that are being built using high performance and low latency infrastructure for global delivery. The future, for Agvesto, looks very promising. In the last 12 months, it has ramped up the insurance protection provision and also looking at a wider adoption by producers community worldwide.
The company is also committed to assisting countries, sub nationals and corporate sector to reach their sustainable development goals and this is very much embedded in its product thinking when it develops for various international markets. Agvesto foresees a strong demand for its products that are sustainability, adaptation and resilience-focused in coming years ahead. In this direction, the business is working currently with a number of state governments and municipalities in India to mobilise Climate action and SDG programs through debt financing instruments such as Green and Municipal bonds.
Reducing the cost of capital together with providing protection to vulnerable countries could pave a path to achieving sustainable development goals and the team is fully focused in helping the underserved community worldwide.