CAN SOIL HEALTH BE REGARDED AS AN ASSET?

The economic benefits of restoring natural capital have been well known. Also, the economic value of ecosystem goods and services, when taking a natural capital accounting approach, often far exceeds the usually accepted value of natural capital. Yet, despite the obvious value in restoring and maintaining natural capital, the world is facing a crisis with respect to environmental breakdown. This crisis, in part, is due to poor connection between the members of society (farmers mostly) who are responsible for, and thus bearing the cost of land management, and society at large (including financial institutions and companies down the value chain) that benefit from good land management. This leads to insufficient, even poor, investments in restoration and sustainable land management. The problem is exacerbated by the fact that the current financial and economic system here and elsewhere neither provides incentives nor motivates land managers towards judicious land management (e.g restoring eroded areas and improving soil health) practices. To change the system and dogma requires investment in natural capital, i.e. in this case the soil as an asset. Is it possible? Yes it is, as the author cited below showed in his investigation. 

To bridge the poor connection between the land manager, the value chain and others, and distributes responsibility also to others benefitting from good land management practices, a system involving easement agreements is proposed. An easement is defined as the right to use and/or enter onto the real property of another without possessing it. In this instance the issuer of the easement (the investor, e.g. company or financial institution) is buying the right to determine the management practices on the land (farm) from an easement holder (the land manager, farmer). In return the marginal change, or additional value generated by the restoration and/or land management, through an easement intermediary, features as an asset value on the balance sheet of the easement holder. This changes investment in natural capital from the expenditure side, and the minimization thereof, to an option of portfolio diversification and value addition while contributing to general economic welfare. In this way, it is possible to invest in natural capital and make that count – by accounting for it on an entity’s balance sheet as an asset. 

How does the land manager (farmer) benefit? The benefit can be by the value addition to the property if selling is on the cards, by increased production off take from well managed land and improved soil health and where regenerative practices such as no till, cover crops etc are to be initiated which require financial input, the easement agreement can provide for it. The proposal furthermore suggests that the land manager does not need to own the property as the easement arrangement can be with anyone that has the right to manage the land, for example even a communal (subsistence) farmer, which then suggests that the easement arrangement can provide a means to the communal farmer to obtain production capital and, where applicable, thereby to be put on the road towards becoming a commercial farmer if the political and cultural associated issues can be solved. 

Reference: 

J. N. Blignaut, 2019. Making investments in natural capital count. Ecosystem Services 37, 100927