Root of the Problem

Soil health is on the investor’s agenda, as concerns about food security rise, but there are large knowledge gaps.  

The ecological damage caused by the modern food and farming industry is hard to overstate. The industry itself is responsible for over 30% of global greenhouse gases, 30% of the food that we produce is wasted from farm to fridge, and 28% of plastic in the ocean comes from the industry, says Rob Appleby, Co-Founder and CIO of Cibus Capital, which runs two sustainability-led funds which invest in food and agriculture firms.

“Chillingly, we have to produce more food between now and 2050 that mankind has every produced in its history at a time when we have resource limitations like clean water, clean air, soil health, and so forth,” he adds. 

Appleby isn’t “jumping off the tallest building”, he says, as the crisis has coincided with the revolution taking place in food and agriculture, largely as a result of investment in ag tech and food tech that “has grown from humble beginnings in 2014 to becoming the largest attractant of global risk capital in the venture capital world”.   

Georgie Thomas, Senior ESG Analyst at Cibus, says this includes technologies which will have an impact on soil health. One emerging technology, for example, is using an insect pheromone to eradicate harmful species instead of pesticides, which harm soil and surrounding ecosystems.  

A full 90% of the Earth’s precious topsoil is likely to be at risk by 2050, according to the UN Food and Agriculture Organization.

“Technologies are being developed to support good soil health and move away from synthetic chemicals that enable a less damaging way to produce food to feed the planet in a healthy, sustainable way,” she says.  

But a key issue with soil health is that there is an extensive knowledge gap, meaning investors are unclear on how to invest or engage to support it.

“The research that has not yet trickled down from academia through to investment. So it’s complicated. There’s no one unit to measure soil health, there’s multiple units. So, it will take time.” 

“Tough to quantify” 

Cristina Hastings, Head of Sustainability at Nuveen Natural Capital, also highlights this knowledge gap. “The link between practices and outcomes is quite hard to quantify,” she says. “And the science isn’t really there yet. There’s no consensus.” 

Hastings explains an issue is the complexity of variables that need to be taken into account to understand soil health. “It’s heavily localised […] so the link between factor and outcomes is tough to quantify on a scientific level.”  

She continues that although good outcomes for soil health such as retaining carbon or water health are known in general, the quantification of soil carbon benefit or water retention is missing.  

“Because of that complexity, investors that are looking for a quick short-term gain, may not get it, because it is a harder case to prove. It’s not like putting up wind turbine and getting results that are easily quantifiable. 

“The punchline is that investors really need to think about being long-term stewards of assets and think beyond the short-term to resilience.”  

Hastings says that Nuveen Natural Capital also takes a holistic view to its investments, accounting for impacts on nature, climate and people, with soil health underpinning analysis across its portfolio.   

A holistic approach to soil health

Cultivo also takes a holistic approach to its investments. Manuel Pinuela, Co-Founder and CEO of Cultivo, says all elements related to soil health are interconnected, in a “natural capital stack”, including food, water, biodiversity and carbon. He describes Cultivo as a nature tech company with a “very clear purpose” of regenerating 1% of the world’s ecosystems.

“Soil is fundamental to all of them,” he says. “Sometimes soil is lost when we’re talking about trees for example, because everything in a forest is above ground. But, actually for those trees to be successful and there needs to be the right soil health and conditions.

“The reality is that our ecosystems are extremely degraded. Part of it starts with a degradation of soils and the loss of soil and therefore, our regeneration activities ultimately are making sure that we have the right soil health conditions. When you look at it from an investment perspective that means that you will be able to unlock a lot of natural capital.”

Pinuela says there are benefits to natural and financial capital to be realised through improvements in soil health. “Essentially as the ecosystem starts to regenerate it also positively reprices that land asset. This diversified investment approach only happens with the right regeneration activities and it’s all connected to soil.” 

Max Boucher, Senior Manager at FAIRR, an investor network focused on animal agriculture, says roundtables it has conducted with investors engaging with corporates on soil health says an issue for them is understanding what ‘good’ looks like, in terms of effective regenerative agriculture practices.

“There’s been some academic studies, but we don’t really know what it is in the corporate space right now,” he says.  

Boucher also says there is a necessity to build credible disclosures. “It’s around how companies can give pointers to investors to understand whether they have the right capacity to measure and track impact.”   

Governments are also looking at the issue of soil health too, with the UK releasing a report on financing a farming transition to a nature positive and low emissions-based approach.  

Helen Avery, Director of Nature Programmes at the Green Finance Institute, says the report, commissioned by the UK’s Department for Environment Food and Rural Affairs, is looking at how to channel private sector finance to farmers to support the transition. The report identified that standards would be needed before finance could be unlocked – including on soil carbon.  

“There are a lot of companies who are baselining farms for their soil carbon, and then offering them money to sell their soil carbon at the moment,” says Avery. “But to be honest, there is no standardised understanding of what the soil carbon standard is and how you measure it.”

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