Nature-Based Solutions to Physical Risks in Agriculture

The Bottom Line

Nature-based solutions are initiatives that focus on ecosystem health as a means of protecting human communities, industries, or resources. For example, an agricultural region might choose to invest in forest and wetland conservation to protect against drought and flooding, rather than invest in artificial flood barriers or reservoirs.

Nature-based solutions are often cheaper and longer-lasting than their alternatives, making them beneficial for ag lenders and investors who want to reduce risk in their portfolios.

Working with Nature for Resiliency

Many ag professionals look to technological solutions as the answer to climate change, drought risk, and water stress. Tools like GIS technology and more advanced irrigation methods have improved water risk mitigation and helped build water resilience in agriculture.

To complement these solutions, some of the most powerful and effective tools available to reduce physical and environmental risks are nature-based solutions.

A recent report in Nature Sustainability found that the “economic benefits of protecting nature now outweigh those of exploiting it.” By taking care of natural capital, ag professionals can benefit from ecosystem services and other nature-based solutions that help to ensure the long-term security of their farming operations and livelihoods.

Of course, nature-based solutions and new agricultural technologies aren’t mutually exclusive, and in fact, they can complement each other.

This article will look at how nature-based solutions can lead to improved climate resiliency and overall portfolio health, especially when backed by data-driven intelligence.

What Are Nature-Based Solutions?

The term “nature-based solutions” can refer to a wide range of initiatives, from wetland and forest conservation to coral reef preservation. These ecosystems play a key role in protecting cities, farms, and rural communities from disaster by serving as the first line of defense against extreme weather events such as droughts and floods.

As the International Union for Conservation of Nature (IUCN) explains, forests help to reduce the impact of landslides, wetlands serve as a natural flood control system, and coastal features defend against extreme storms. Aquifers can serve as natural groundwater reservoirs that farmers can draw from in times of drought and healthy headwaters can provide a steady flow of water to watersheds during the warmer months.

While some regions may have no choice but to implement technological solutions, such as the flood control systems in the Netherlands or the aqueducts that irrigate California, nature-based solutions are often a more affordable and more effective alternative than investing in artificial technologies. According to the IUCN:

“Instead of increasing the height of sea walls following the 2011 … earthquake and tsunami, Japan declared the expansion of its coastal forest national park … with an estimated saving of more than JPY 2.5 billion.”

Nature-based solutions aren’t cost-free, and they may require changes to agricultural practices, such as setting aside farmland for habitat restoration. But over the long term, these initiatives can lead to improved ecosystem health and better financial outcomes for farming operations and the ag finance institutions that invest in them.

Nature-Based Solutions in Water and Agriculture

It makes sense to think of nature-based solutions in terms of preventive health. Just as preventive health measures are preferable to reactive surgery, so too is prioritizing the health of an ecosystem upfront, rather than spending more to repair it after the fact.

The CA Department of Water Resources describes two kinds of water infrastructure: gray infrastructure — such as pumps and reservoirs — and green infrastructure, or “nature’s water infrastructure.” Not only is green infrastructure often more cost-effective, but gray infrastructure depends on the health of the underlying green infrastructure.

In a report on nature-based solutions, the Nature Conservancy (TNC) puts it this way:

“We still focus resources on repairing the damage caused by past disasters rather than committing to prevention, preparedness, and increasing our resilience. Our resources still focus almost exclusively on gray solutions — building walls and dams, digging reservoirs, and laying pipes. Investing in nature and protecting our water sources can bring significant added benefits in the form of increased resilience.”

Mitigating Physical Risk

Nature-based solutions are an attempt to address climate risks before they become an unavoidable disaster. In some cases, signs of trouble are already on the horizon. For example, the seven states that depend on water from the Colorado River are revising their expectations of how much water will be available in the future. As TNC explains, “The basin is not experiencing a ‘drought’ so much as shifting to a new normal.”

Only a comprehensive set of nature-based solutions can keep ecosystems intact and protect farmers against acute risks, such as floods, and chronic physical risks such as drought. Climate change presents a unique challenge in that the same infrastructure that farmers depend on to withstand drought is often the very infrastructure at risk of other weather extremes, such as damage due to flooding and storm surges.

Protecting Source Water

One of the primary ways in which nature-based solutions can help is in the protection of source water. This is the approach that the Upper Tana-Nairobi Water Fund has taken to reduce runoff and improve soil health in the Tana River watershed. It operates on the assumption that “it is cheaper to prevent water problems at the source than it is to address them further downstream.”

By expanding catchment areas and improving soil quality upstream, the entire ecosystem benefits. That’s because headwaters are key to healthy watersheds. Not only do headwater forests aid in water filtration, but they also allow the ecosystem to generate more water in the first place, by creating an environment where rain clouds can form. Damage to the forest can impact downstream water supplies.

Robustness and Flexibility

There are two main approaches to managing the health of freshwater ecosystems: flexibility and robustness. Flexible solutions are best for environments that face significant uncertainty in terms of climate risk: for example, a flood barrier that can be removed or relocated as risks change, or a nature-based solution such as wetland restoration, which can also be expanded or reduced as necessary.

Robust solutions, on the other hand, are best for those environments that face a series of alternating challenges or long-term trends. For example:

“We might foresee that a region will experience both more frequent and more severe droughts as well as more frequent and more severe flooding… We may need to plan for a series of alternate futures and try to encompass as many of these as possible in our work to maximize robustness.”

To apply nature-based solutions effectively, ag professionals need to be strategic and advocate for those that will have the greatest impact on their watersheds.

Using Nature-Based Solutions to Protect Portfolios

Ultimately, nature-based solutions provide both robustness and flexibility and serve as a buffer to protect the farms and ranches that depend on them. The long-term benefits of these solutions give them an advantage over short-term fixes.

As more ag professionals take steps to mitigate the risks of climate change in their portfolios and farms, any solutions that reduce physical risks over the long term should be at the front of the line. By advocating for nature-based solutions, ag lenders and investors can protect their portfolios while promoting the health of the entire agricultural system.

Learn about ESG Reporting and capital risk in the AQUAOSO Guide.

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