This month, Mirova announced a $30M carbon prepurchase from the Kheti soil carbon and regenerative agriculture project in northwest India. Mirova is a sustainable investment asset manager dedicated to improving the environment and reducing social inequality, according to its website. This is the asset manager’s largest carbon investment to date, and the largest known soil carbon project investment ever.
The investment comes from Mirova’s carbon strategies, which has mobilized more than USD$350 million since 2020 from corporate partners with ambitious commitments to protect and restore nature.
Varaha, India’s largest carbon project developer, will manage the project, working with more than 350,000 smallholder farmers to implement regenerative agriculture practices in the region. Kheti stood out to Mirova because of its scale and potential for long-term impact on both soil health and local livelihoods, said Charlotte Lehmann, Mirova’s Senior Investment Director for Natural Capital. In addition, the Varaha team’s ability to adapt and respond to Mirova’s requests was key to forming the long-term partnership.
The project will repay Mirova’s investment via verified carbon credits, delivered over several years, each representing one ton of carbon emissions avoided or removed from the atmosphere.
While the credits reflect the climate benefits of the project, they are not the core goal of the investment, said Lehmann. The fund’s mandate is to preserve and restore nature. “We see [carbon credits] as a financing tool to get to that purpose… Today, if you want to finance a nature-based solutions project, and you aren’t talking about philanthropic cash, carbon credits are a very powerful tool to foster these projects and make them a reality on the ground,” she said.
From pilot to 700k ha of regenerative agriculture
India is the world’s second largest producer of rice. Each year, smallholder farmers flood their fields to facilitate rapid planting of rice seedlings, control pests, and provide the crop with the moisture it needs to grow. Globally, rice paddies emit some 60 million tons of methane each year, a greenhouse gas 28 times as potent as carbon dioxide. After the rice harvest, farmers traditionally burn the leftover stalks to make way for a wheat crop, emitting additional carbon into the atmosphere.
The Kheti project uses carbon finance to cover the costs of two specialized machines that allow farmers to maintain their traditional rice-wheat crop cycle but modify the planting process to slash the attendant emissions.
Kheti provides farmers with a direct seed drill to plant rice directly in dry soil, skipping field flooding, the main culprit behind the methane emissions. Following the rice harvest, Kheti farmers use a super seeder machine, which churns the crop residue into the soil, and simultaneously plants the follow-on wheat crop. This tilling coupled with direct seeding boosts soil carbon over time, drawing down atmospheric carbon, reducing reliance on synthetic fertilizers, and improving the soil’s water retention.
Varaha funded the project’s early growth from its company equity. The project has already onboarded 26,000 local farmers across more than 200,000 hectares of farmland in the Punjab and Haryana states of India by providing access to machinery. The early funding also made it possible for the team to take thousands of soil samples, gathering enough data to calibrate soil carbon models for the region, and use Verra’s VM0042 methodology to verify the soil carbon sequestration.
Mirova’s investment will provide the capital for Varaha to scale the project to 700,000 hectares—nearly three times its current size—and engage 350,000 smallholder farmers. The asset manager will deliver the finance in several disbursements based on project milestones including social impact benchmarks, operational implementation, and carbon credit certification.
Extensive due diligence
Lehmann first met the Varaha team at a conference in early 2024, introduced by a mutual acquaintance. From there, Varaha entered Mirova’s standard due diligence process, which included a deep dive into the VM0042 methodology, third party project data analysis, and a site visit. The due diligence and deal structuring took over 18 months to finalize, longer than Mirova’s usual 6 to 10 months, due to the size of the deal.
A core focus of Mirova’s due diligence was ensuring that the VM0042 methodology would facilitate high-integrity soil carbon measurements, said Lehmann. As Mirova’s due diligence progressed, the methodology itself went through a series of updates to improve baseline data collection and reduce chances of leakage. Once the methodology review was complete, the Mirova team could move to project due diligence.
Earlier this fall, the updated VM0042 methodology received a Core Carbon Principles label from the Integrity Council for the Voluntary Carbon Market (IC-VCM). While the Mirova team had already decided to move forward with the Kheti project before this news came out, the announcement affirmed what their due diligence process had already uncovered, according to Lehmann.
Moving on to the project due diligence, Varaha’s ongoing data collection and monitoring, reporting, and verification (MRV) systems to ground-truth the soil carbon changes were a big part of Mirova’s decision to move forward with the prepurchase, said Lehmann. Varaha works with participating smallholder farmers to regularly geo-tag soil samples and measure carbon gains using biogeochemical models. The results are aggregated from the unit to project level and verified by a third party.
Local climate resilience and the overlooked carbon removal opportunity
In addition to the global climate benefits of the project, participating smallholder farmers will see improved soil health, which can boost crop yields over time and increase resilience to climate-related weather events, like drought and flooding.
While reforestation projects have been the most popular nature-based carbon removal pathway to date, Madhur Jain, CEO of Varaha thinks soil carbon projects deserve another look as a scalable carbon removal opportunity. The landmark deal proves that smallholder farmer regenerative agriculture projects can be bankable, he said, and supply high volumes of verified carbon removal to meet future market demand.