Soil is one of the most important non-renewable assets for humanity and the planet.
Understanding the financial effects of soil health measures is important for everyone in the agricultural industry. Companies in the supply chain want to invest strategically in activities that help them achieve their sustainability goals, farmers want to safeguard their soils while still making a profit, and federal and state authorities want to increase adoption of soil health initiatives in a cost-effective manner.
Why soil health?
Soil is an indispensable element for producing food, fiber and fresh water, as well as contributing to the planet's energy and climate sustainability, maintaining biodiversity and overall ecosystem protection. It is an essential resource for human well-being and the health of the planet.
Degradation, climate change and food security are increasingly urgent and complex challenges. Soil is currently being degraded at an alarming rate due to current practices. It is estimated that 33% of the world's land is degraded and that 24 billion tons of fertile soil are lost every year, representing losses of more than US$400 billion annually. Colombia is no exception to this, 58.11% of the country's soils are incipient and poorly developed, and in the case of Antioquia it was reported that of the 6,200,000 hectares it owns, 30% of the soils register medium and high degrees of degradation.
More sustainable agricultural practices must be adopted, pollution must be reduced and the regeneration of degraded soils must be promoted. Investing in the health of this asset is crucial to:
As the closest financial partners of farmers, agricultural lenders and funders have a stake in the success of their clients, as well as in reducing risk to their own portfolios.
In this blog, we will explore the why, how and considerations that funders, banks or lenders should have to implement Soil Health Programs and maximize the impact of sustainable farming practices, leading to positive outcomes for both farmers and their institutions.
Content summary:
Healthy soil an asset?
Soil health refers to the general well-being and vitality of the soil. It includes factors such as the soil's ability to retain water and nutrients, and the diversity and abundance of microorganisms living in the soil. Healthy soil is important for healthy plants to grow, which in turn supports the food system, the environment and human well-being.
Soil is considered an asset because it provides several important ecosystem services and supports various human activities. Some of the main reasons why soil is an asset are:
Agriculture: It is a crucial component for growing crops, essential for feeding the world's population.
Ecosystem services: Helps regulate water flow, store carbon, filter pollutants and maintain biodiversity.
Natural resource: Contains minerals and nutrients that can be extracted and used for a variety of purposes, such as construction and energy production.
Genetic reservoir: contains a large number of microorganisms and other living organisms with biotechnological potential. The exploration and conservation of soil as a genetic reservoir is essential for sustainable development and the search for innovative solutions to global challenges.
Cultural heritage: It has cultural and historical significance for many communities, and is often linked to their identity and traditions.
Overall, soil is an essential resource that supports human well-being and the health of the planet. Protecting and managing soil sustainably is important to maintain its value as an asset.
The Importance of Measuring Soil Health in Agricultural Operations
Assessing soil health is crucial for farmers to achieve reliable yields, as healthy soils lead to abundant harvests. In agricultural systems, this translates to:
Increasing nutrient availability at the rates plants require, reducing or even replacing synthetic fertilizers. This results in more flavorful and nutritious food for both animals and humans.
Retaining nutrients and sequestering carbon, preventing erosion and leaching while mitigating climate change.
Suppressing diseases, as beneficial soil organisms outcompete, inhibit, and consume harmful ones, leading to a reduction in the need for pesticides, fungicides, and herbicides.
Improving soil structure, which enhances root depth, creates aerobic conditions, reduces water usage, and increases water retention capacity.
Decomposing toxins, as soil organisms break down pesticides and capture heavy metals, preventing their availability to plants (bioremediation).
Enhancing plant resilience to environmental stress conditions.
How Does This Work in Practice? Insights from a Case Study on Soil Health Credit Implementation
EDF and TNC commissioned Beck Ag to conduct a survey among Iowa farmers to evaluate their perspectives on how new loan products could influence their adoption of soil health practices.
Beck Ag surveyed 100 Iowa farmers from a representative sample across different regions, farm sizes, ownership and leasing agreements, and other factors. Each respondent met the following criteria:
Was a primary decision-maker regarding agricultural financing and operating loan needs.
Used an agricultural operating loan in 2020.
Planned to use an agricultural loan over the next two years and intended to actively manage their farm through 2023.
Cultivated more than 500 acres of corn and/or soybeans.
Participants received a stipend of $150, and the survey took place between mid-July and early August 2020.
Key Considerations for Agricultural Lenders Supporting Soil Health Practices
The text presents key considerations for agricultural lenders who want to support their clients in implementing soil health practices. Lenders should:
Discuss the importance of soil health with their clients and provide data-driven insights to help improve soil conditions and increase yields.
Understand the risks, opportunities, and potential value of soil health practices by collaborating with groups that quantify the financial impacts of conservation practices.
Encourage clients to explore soil health management techniques and engage with experts to integrate these practices into their farm management plans.
Develop and assess transition loans for soil health, such as those offering lower interest rates or flexible repayment terms, and work with clients to develop multi-year financial plans and loan packages.
Incorporate long-term financial projections of soil health practices when evaluating loan opportunities, considering their impact on risk, financial returns, and environmental sustainability.
By adopting these strategies, lenders can play a crucial role in promoting soil health practices while ensuring their clients’ long-term financial viability.
Where to Start?
Farmers have access to a variety of financial options, from operating loans to equipment and real estate financing, offered by lenders and financial institutions.
Lenders, aside from farmers themselves, often have the best understanding of a farm’s financial situation. Several factors impact a borrower's ability to repay a loan, including production costs, various risk factors, and key financial indicators such as solvency, liquidity, and off-farm income sources—all of which are important considerations for lenders.
The goal of developing new loan products for financing soil health transitions is not to create additional agricultural subsidies but to realign lending structures to better serve farmers adopting soil health practices. This reduces risks for lenders and reflects these reduced risks in loan terms, creating a mutually reinforcing cycle between lenders and farmers.
The shift begins within organizations by changing internal conversations, as Alejandro Salazar mentions in his book The Emerging Strategy and the Death of the Strategic Plan.
Key Questions to Get Started:
Does the organization understand what soil health is?
Do stakeholders recognize the impact of soil health on the business model?
How does implementing a soil health program align with the organization's mission and values?
How will employees, customers, and stakeholders be engaged in the soil health program?
What resources will be needed to launch the program, including financing, personnel, and training?
Key Elements for Implementation
At SaBio, we have developed a Soil Health Program that includes different solutions for implementing soil regeneration strategies. The goal is to ensure farmers have a realistic financial plan for the transition while managing key components to facilitate adoption. Some of these elements include:
Integrating soil assessments into risk management – Banks can incorporate soil quality assessments into their credit risk management processes to ensure loans and investments align with conservation and sustainable land-use practices.
Offering financial products that support soil conservation – Banks can develop financial solutions that incentivize soil conservation, such as loans for sustainable agriculture, land management, and investments in reforestation and soil restoration projects.
Collaborating with soil health experts – Financial institutions can partner with our experts to gain a deeper understanding of soil health and its role in sustainable development.
Educating customers – Through our technological ecosystem, banks can educate their clients on soil conservation and provide resources for adopting sustainable land-use practices. Additionally, regular regional training sessions can serve as meeting spaces for peers, experts, and allies, fostering collective learning.
Measuring and reporting on program impacts – Banks and financial institutions can leverage our solutions to measure and track the impacts of soil health initiatives throughout their implementation.
By applying these strategies, financial institutions can demonstrate their commitment to soil conservation and sustainable land use while contributing to a more resilient and equitable future for all.
What Benefits Can Be Expected?
Implementing a soil health strategy can lead to:
Improved credit risk management – By incorporating soil assessments into risk analysis, banks can make more informed lending decisions and reduce default risks.
Increased customer loyalty – Offering financial products that support soil conservation attracts environmentally conscious clients and fosters long-term loyalty.
Greater access to capital – Partnering with soil health experts and demonstrating a commitment to conservation can enhance a bank’s reputation and expand financing opportunities for sustainable land-use projects.
Stronger environmental and social impact – Banks can integrate soil health initiatives into their green credit lines, supporting sustainable enterprises and contributing to environmental and social well-being.
Reduced credit risk – Investing in soil conservation and sustainable land use opens new investment opportunities and financial returns, including higher crop yields, improved forest productivity, and lower water treatment costs.
Next Steps
Launch a Soil Health Program with Us to create a positive impact on soil health and support regenerative development. At SaBio, we provide expertise and resources to ensure efforts are effective, scalable, and impactful.
At SaBio, we develop biotechnology-based solutions to regenerate soil health using measurable indicators. Our approach helps farmers optimize input use, integrate biotechnologies, and prepare bio-inputs from their crop residues, enabling them to reduce chemical dependency and increase profitability.
Join us in regenerating and managing this vital resource to make a real difference in the world. Together, we can build a better future for our communities and the planet!
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