Systemic Financing for Regenerative Agriculture in Europe: Evidence from ReForest Living Labs

Abstract The transition to regenerative agriculture is often associated with high upfront, maintenance, and opportunity costs. Agroforestry, widely recognized as a key sustainable land-use system, offers multiple environmental co-benefits, including carbon sequestration, improved soil quality, enhanced biodiversity, and greater ecosystem resilience. This paper examines the design and validation of the Sustainable Financing Scheme developed under the ReForest project to promote agroforestry adoption across Europe. Co-created through Living Labs in eight European countries and tested with empirical data from 38 farms, the scheme integrates ex‑ante, action‑based, and results‑based payments with specialised advisory services to improve connectivity between practitioners, investors, and policymakers. Our results identified three systemic gaps limiting AF sector growth: (1) inadequate funding (with less than 30% of farmers satisfied with current financial support); (2) weak or non-existing private and philanthropic engagement (reported by more than 60% of participants); and (3) insufficient access to advisory services (negatively affecting around 40% of farmers). Consultations with private agrifood and banking stakeholders further validated these findings. They highlighted the need for innovative blended finance and risk-sharing mechanisms, together with participatory approaches, as essential to improving system bankability. Beyond agroforestry, the scheme provides a replicable and adaptable framework for financing other Nature-based Solutions facing similar challenges. JEL Classification Q01; Q14; Q15; Q18; Q57