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It’s not entirely easy to understand what ProducePay does, so let’s get that out of the way first.

The Los Angeles-based fintech company primarily operates as a digital marketplace for produce that connects farmers with distributors and sellers.

“We go to your farm. We understand what your production capacity is. If you need capital to make that happen, we help set that up for you,” explains CEO Pablo Schwarzbeck. “Ultimately, we help you find buyers – or for buyers, help them find sellers.”

Farmers (and distributors, wholesalers, shippers and retailers) only dot com!

To enable the trade of perishable goods such as fruits and vegetables, ProducePay had to become a guarantor of more than 1,500 farms across the Americas. These farms can range in size from a few acres right up to giant multinational corporations that supply hundreds or thousands of grocery stores. And the only way to know who to trust and how to lend money is to get shoes in the dirt. Schwarzbeck, who grew up on a fourth-generation farm in northwestern Mexico, spent nearly 100 days visiting farms during the pandemic last year.

Do these people know what they are doing? Do they have any experience in agriculture? Do they have the infrastructure to support it? Do they have accountants? Do they have a proper team of people other than agriculture who will eventually be able to run this like a business? Do they have partners to buy Products? Do we trust their partners?” Schwarzbeck asks.

ProducePay makes its money by taking a small percentage of each completed transaction on its site. It also lends capital to farmers and distributors that it feels will be able to repay it. And of course they also collect and sell data on crop cost and distribution, among other industry insights.

“Our job is really to create transparency and trust that allows both parties to feel comfortable,” Schwarzbeck says.

The amount the company charges per transaction ranges from 0.5% to 10% and depends on how much value ProducePay can bring to the customer.

“We try to take no more than one out of every four points we get,” Schwarzbeck says, meaning that if ProducePay could help a farm sell 40% more production, it would take 10%. If he can only help them sell 2% more, the company gets 0.5%.

This type of clinical approach to fintech underwriting has been at the core of the ProducePay strategy since its inception. But this summer the company added a new pillar to its underwriting model: climate pricing.

With growing consumer demand for sustainably grown low-carbon foods, ProducePay is adding economic incentives to its platform to encourage farmers to lower their carbon footprint.

Through a partnership with Alcottfintech, a company that specializes in offsetting greenhouse gas emissions, offers fintech a way for farmers to access the carbon market.

Schwarzbeck says many of the farmers he works with were already practicing a variety of sustainable farming techniques. With ProducePay, they can now sell carbon credits on voluntary carbon markets, which means they get paid to grow more sustainably. Details of how this happens and the carbon markets used can vary, but the idea is that ProducePay sets up a farm, determines how much carbon it uses, and then recommends Climate-Smart Agriculture Practices As outlined by the United Nations. Farmers can then practice strategies such as crop rotation, minimal tillage and cover crop use to reduce their carbon footprint. Once the carbon savings are calculated and confirmed through an external audit, they can be converted into credits and sold.

When used as a way for companies to buy their way out of causing climate damage, carbon is offset Remains hesitant to big variety From legitimate reasons. However, following sustainable farming practices can actually make a difference to the Earth’s carbon budget: Instead of buying padding for the damage the company is doing, selling credits incentivizes farmers to do less damage initially. With consumers’ demand for sustainable products constantly increasing, Schwarzbeck says, adding an environmental pillar to their underwriting model has fundamentally changed how the company does business.

“Consumers are really starting to vote with their wallets,” he says. “This has been a tangible movement in the marketplace that has literally changed how we guarantee farmers right now.”

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