How private sector money helps farmers manage land and water

If we want a truly sustainable agricultural sector, one that can help us meet our national biodiversity and climate goals, public sector funding will not be enough, argues Martin Lines, CEO of the Nature Friendly Farming Network. Here he explores the potential of blended finance – comprising both public and private sector funding – in enabling farmers to play their part in safeguarding our environment.

Farming is undergoing its biggest change in decades as, faced with threats including climate change and the decline of nature, it’s starting to switch from an emphasis on maximum yields to one in which food production is balanced with the restoration of landscapes and thriving biodiversity.

Alongside this agricultural transition is a second major change: how farmers are paid, who is paying them and what they are asked to do in order to receive money.

We often hear the phrase “public money for public goods” used to discuss the changing priorities of government when it comes to supporting farmers. This can be seen in the change from area-based payments to agri-environmental schemes, or in other words a move from being paid simply for having farmland to payments explicitly linked to how that land is managed. However, the private sector is increasingly eager to help farmers manage their land sustainably, and this is vital, given that reports have shown a wide gap between government spending and the likely cost of a truly sustainable farming future.

Why are companies paying farmers for environmental actions?

One reason companies are taking an interest in nature-friendly farming is their environmental, social and governance (ESG) commitments. In particular, the recording of scope 3 emissions makes them accountable for the environmental cost of their broader supply chains. For food producers, this means the whole journey from farm to fork, and this can be extremely long and costly if, to give one example, it means cattle in the UK eating soya or maize-based feeds from crops grown on the other side of the world. This is one reason why multinational firms such as supermarkets are grabbing headlines by throwing millions of pounds at converting their entire supply chains to regenerative production methods.

Increasingly, companies also want to show compliance with international environmental targets, such as commitments to halt the dramatic decline of global biodiversity or the progress towards net zero by set dates. Even more importantly, many industries have legally-binding, long-term targets for cleaning up their acts. They are not waiting around, but putting in place 10 to 15-year plans to achieve their ambitious goals.

How can farmers help?

Farming, if done correctly, can be at the heart of these efforts to turn around nature’s decline and prevent the worst effects of climate change. The time for thinking of farmers only as food producers is over.

Farmers are asset managers of natural capital, responsible for optimising the full range of outcomes from their major asset, which is their land. When landscape management and a business ethos combine like this, we can see a path to a future where farm businesses are viable and sustainable in the face of severe threats, and nature’s recovery and food security go hand in hand.

Without careful land management to tackle the increased flooding from extreme rainfall events, or the lengthy periods of drought from hotter and drier summers, maintaining food production in this country will simply not be possible. The decisions farmers make about their land can help the environment and cut emissions as well as shielding them from volatile price spikes which currently threaten their whole business model and way of life. Common sense examples of climate resilient, nature-friendly management include removing costly inputs such as bought-in feed and fertiliser, and having native breed livestock thriving on a diet of pasture and species-rich grasslands.

What are farmers receiving private sector support to do?

Private water companies are among those who are keen to get involved. A lot of attention has focused on pollution in our rivers, and the sector is starting to grasp the potential of landscape-based solutions. Paying farmers to have less livestock in key catchments or change their field management practices can provide better answers to challenges such as phosphates and potash run-off than building costly infrastructure.

A focus on slowing the flow of rivers to deal with flooding has also put the spotlight back on farmland. Upland farms can hold water and prevent it rushing towards populated areas downstream, while in lowland areas water can spread out across farmland, again stopping damage to property. Support can be provided for farmers to offer these vital public goods, for example from insurance companies who could then avoid, or significantly reduce, costly pay-outs.

The drive for renewable energy as part of net zero can benefit farmers too. There are opportunities to receive multiple payments for the same piece of land, for instance by installing solar panels on farmland with grazing animals under and around them. The removal of the onshore wind power ban opens up similarly lucrative prospects.

More fundamentally, farming can also help if a company simply wants to reduce its emissions. Farms can sequester carbon in healthy soil as part of a nature-friendly approach, benefitting all its suppliers attempting to tackle carbon footprints.

What are the pitfalls of this approach?

It may initially seem that private sector involvement in environmental outcomes is an unalloyed good. It provides an extra, and much-needed, source of income alongside the public purse, and there is an apparent natural justice in companies paying to tackle harms caused through their supply chains.

There are, however, a number of potential issues requiring consideration. The first is that, with its long-term thinking, industry is running well ahead of a political scene which has been characterised by delays and row backs in the face of pressure. The result is an unregulated market, when what is needed is standardisation and baseline agreements on how to measure things like soil carbon, water infiltration and biodiversity. It will be hard to get farmers on board if they have to fill out different datasets for each of the multiple companies they are working with.

There is also the risk of further consolidation of agriculture into fewer, bigger farms: it is easier to make sure one farm with 1,000 cows is working to higher environmental standards than 10 separate dairies with 100 cows each. Consolidation, while efficient, is unlikely to lead to resilient supply chains and a good deal for farmers.

The complexity of the current funding situation is also far from ideal. There is money for environmental goals but a lot of funding is piecemeal and coming from multiple different sources, some of which have geographical restrictions which inhibit larger, landscape-scale solutions. Too often, it requires farmers to already be part of agri-environmental schemes and approaches to hear about them. Given that we need an urgent agricultural transition at scale in order to meet environmental targets, high-quality landscape advice that helps farmers unlock the financial potential of their land is a top priority.

Why is this important?

One of the most worrying aspects of the agricultural transition outlined above is how comparatively few farmers are on board. Expert guidance to help facilitate the optimum use of land across the country, with farmers squarely at the heart of delivery, is sorely and urgently needed.

With the right support, farmers have the skills and knowledge to deliver what we need for the environment, climate and biodiversity as well as producing food and maintaining a viable business. Their presence helps support local communities and economies.

Funding is available to shift the priorities of farming businesses, to have environmental benefits sitting alongside the money for meat, dairy, arable crops or fruit and vegetables. They may need to think and act differently, but we do need to keep farmers farming.

Author:

Martin Lines is CEO of the Nature Friendly Farming Network