Investing from the ground up

For more than a dozen years, Clean Yield has been investing in local food and regenerative agriculture enterprises. Our commitment to agriculture is rooted in our history as a company founded in Vermont’s Northeast Kingdom, a place with a strong farming heritage and a recent crop of creative agricultural entrepreneurs. Our commitment to local investing and the principles of Slow Money have reinforced our interest in the agricultural economy. Over the past decade, that interest has deepened as we have learned more about the critical links between healthy soils and a stable climate. We now understand that regenerative agriculture can not only produce healthy food without the use of toxic pesticides; among myriad benefits, it can help mitigate flood risks and pull carbon out of the atmosphere at the same time.
In this issue of our newsletter, we have invited soil-water-health-climate expert Didi Pershouse, author of Understanding Soil Health and Watershed Function, to write about the value of investing in the “soil sponge.” We hope this piece will help explain why Clean Yield enthusiastically pursues investments in businesses that focus on regenerative land stewardship.
By Didi Pershouse
It is rare as an investor to find a single leverage point to effect change and create multiple benefits to the world around us. However, the “soil sponge,” lowly as it sounds, is a tremendously effective point for investment, because it is the basic infrastructure for life on land. When healthy and productive, it can create beneficial feedback loops, because the Earth’s water cycle, carbon cycle, and nutrient cycle all depend on a functional soil sponge.
The soil sponge (also called the “soil carbon sponge”) is a living matrix that soaks up, stores, and filters water; holds landscapes in place; and provides nutrients for an entire food chain, from what would otherwise be bare rock and desert sands. These actions affect human and environmental health, resilience to extreme weather events, and eventually, local and global economies. Though the soil sponge is now severely degraded across much of the globe, it remains ready and willing to jump back into action as soon as we allow it. This article will explain what the soil sponge is, how it affects our climate, environment, human health, and even economies, and suggest a number of opportunities for stakeholders, including investors, to help create the conditions in which the soil sponge can regrow and function.

Healthy Soil Soaks up Water
When helping people understand the soil sponge, I demonstrate its structure and function by poking holes in a cup and filling it with water, then “raining” onto two very different visual landscapes. Consider what happens when a cup rains water down onto bread (as a proxy for healthy soil), versus a cup that rains onto flour (which functions like degraded soil). The bread (soil sponge) will effectively absorb and hold the water without falling apart, whereas the flour will erode as the water beads up and spills off of it (degraded soil).
The spongy structure of healthy soil is created by soil biology through a myriad of actions, including:

1. Plants, fungi, bacteria, worms, insects, and other underground workers bind together mineral particles with biological threads, slimes, and glues, giving soil its structural integrity.
2. These same workers move through the aggregated clumps, creating passageways where air and water can flow.

This work is mostly invisible to human eyes, so we have generally not noticed or valued it.
When a landscape soaks up water like a sponge, flooding and drought are both dramatically reduced. Water is also filtered – both physically and biologically – as it flows, creating cleaner streams, rivers, lakes, wells, aquifers and oceans. A deep soil sponge creates an in-soil reservoir that holds water at the root zone for plants, helping landscapes stay green longer, putting more atmospheric carbon to work building living landscapes through photosynthesis, increasing the profitability of farms, and reducing wildfire risks.
Plants can stay healthy and green, photosynthesize for longer, and provide more nutrients to the rest of us when growing in a deep soil sponge due to:

• more space for roots to grow
• more water available at the root zone for a longer period of time
• more nutrients available at the root zone

Maybe it is time for us to notice and value the work that our underground companions do.
Degraded Soil Creates Flooding and Drought
Degraded soil has an entirely different structure and therefore functions in a completely different way when in contact with water. It has lost its biological workers and has reverted back to a mineral substrate of sand, silt, and clay, which are nothing more than broken-down rocks. The mineral particles in degraded soils are unaggregated and unorganized, because there isn’t enough life in the soil to create the necessary carbon-based glues and threads to hold the sponge together and maintain open pores.
Like pouring water onto flour, in a degraded landscape, rainwater moves sideways across the land—not percolating down into the land—creating flooding and taking topsoil, pollutants, and sometimes roadways and houses along with it.
When water can’t soak into soil, floods are followed by drought, and droughts are followed by more floods. They are two sides of the same issue, and they carry enormous costs to both public and private sectors: increased need for crop insurance subsidies; FEMA, state, and local cleanup and repair funds; rising property insurance rates for homeowners and businesses; and rising costs of food and water.
Soil Erosion Affects Water and Air Quality
Because degraded soil has less structural integrity to hold it together when hit by water or wind, it tends to erode, and it ends up in places where we don’t want it. Richard Cruse, Professor of Agronomy at Iowa State and Director of the Iowa Water Center, has calculated that for every pound of corn that is harvested in Iowa, we lose more than a pound of topsoil. For every pound of soy harvested, we lose two to three pounds of topsoil.^[i] Eroded soil ends up in rivers and oceans, clogging up dams and public waterworks and endangering nuclear power plant facilities. The dredging of silt can cost tens of millions of dollars for a single reservoir. It also ends up in the air—a major cause of our rapidly increasing incidence of respiratory illnesses.
An article on the USDA-NRCS website estimates that the total annual cost of erosion from agriculture in the United States is about $44 billion per year. On a global scale, the annual loss of 75 billion tons of soil costs the world about $400 billion per year.
Around the world, we are experiencing the economic, social, and environmental impact of degraded soil that cannot hold or filter water, and that falls apart when in contact with wind and water. The United Nations Convention to Combat Desertification points to desertification and land degradation as a primary cause of regional conflict and forced migration.
Much of this degradation can be mitigated or even reversed with careful planning that draws on nature’s own strategies to help farms, rangeland, backyards, and public lands recover their structure and function. The soil sponge thrives whenever the soil health principles are being followed. (See sidebar for more on the principles.)

Healthy Soil’s Role in the Carbon Cycle
A healthy soil sponge not only provides resilience to flooding, drought, and other climate events, it also affects the climate itself.
Plants take in atmospheric CO₂ and (through photosynthesis, using water and solar energy) turn it into complex molecules. Plants use carbon to build their own bodies, to feed soil life, and to feed other living things (including us) as part of the carbon cycle we depend on.
All living things, therefore, are made of air. To be specific, about half of the dry weight of all living things is carbon from the air. Soil carbon is the accumulation of that carbon in the “living, the dead, and the very dead” underground. Some of that carbon cycles rapidly through digestion and respiration in the living soil food web. Other carbon cycles more slowly if undisturbed, accumulating in various relatively stable forms like peat, humates, glomalin, and even fossil fuels.
During summer months, because of increased photosynthesis, atmospheric CO₂ levels drop.^[ii]
During winter months in the Northern Hemisphere, trees lose their leaves, crop land is typically fallow, and plants in many areas have dried up from lack of moisture. Without active photosynthesis, and with (intentional or unintentional) burning of dry forests and grasslands, levels of CO₂ in the atmosphere rise. Levels peak in May, when snow melts and soils are typically plowed, creating a flush of microbial respiration, with not enough photosynthesis happening yet to take up the additional CO₂. Soil degradation and deforestation extend those barren conditions of winter and contribute directly to our rising levels of atmospheric CO₂.
Regeneration of the soil sponge can restore a healthy carbon cycle in three ways:

• We can help increase the uptake of atmospheric CO₂ through photosynthesis by increasing the:
  1. land area that supports green growth (by planting cover crops and regenerating forests and grasslands)
  2. the leaf area that captures sunlight (by diversifying the canopy of plants)
  3. and the length of the green growing season, especially in semi-arid areas that currently have a long dry period (by restoring the in soil reservoir provided by the soil sponge).
• We can decrease the oxidation of soil carbon by reducing soil disturbance and degradation.
• By providing a more constant in-soil reservoir of water for grasslands and forests, we can decrease the oxidation of plant carbon from wildfires and preventive burns. Fire and respiration are both forms of photosynthesis in reverse: called oxidation.  They both require oxygen, they both release heat (that was once sunlight) and they both produce CO2 by recombining oxygen with carbon.^[iii]

One caveat: It may take a long time for us to see the results of any of our efforts to decrease atmospheric carbon. The oceans will have to re-equilibrate—and release the extra carbon they have been holding, back into the atmosphere—before atmospheric CO₂ levels go down. That may take 100 years or more. But we have learned that we don’t have to wait for atmospheric carbon levels to go down before we can cool the planet. A healthy soil sponge can help us start cooling the climate right away.
Cooling via the Water Cycle
Think of the difference between grass and pavement on a hot day—not just on your bare feet, but in the air around you. As plants photosynthesize, they also transpire the water they have soaked up from the sponge. Transpiration dramatically cools the plant leaves and the surrounding air through latent heat fluxes. The air temperature above green transpiring landscapes compared to bare soil or pavement is typically cooler by a mean difference of 2.3 and 11.7 degrees Celsius, respectively. The additional soil moisture provided by a healthy soil sponge and the shading from trees and plants affects temperatures as well, through other mechanisms.
Soil microbiologist and climate scientist Walter Jehne reminds us that water, not carbon, is the primary greenhouse gas, and that water is responsible for most of the heating and cooling dynamics of our blue planet. Water was left out of our current climate models because it was considered too hard to model (true) and because water plays such an enormous role in the climate that it was considered impossible for humans to influence (false!).
This offers us various strategies for hydrological cooling that we have hardly looked at. For example, Jehne calculates that a mere five percent increase in evapotranspiration globally could be enough to quickly and effectively cool the planet by the amount it has already warmed. But transpiration can occur only when there is adequate soil moisture for plants, and that depends on the in-soil reservoir provided by a healthy sponge. How quickly can we increase transpiration? As quickly as we can provide the conditions for the soil sponge to flourish and cover bare soils with green growing plants, increase the canopy of green leaves, and extend the season of green growth.
According to Peter Donovan of the Soil Carbon Coalition, during bare fallow periods, most corn and soy fields in the U.S. are photosynthesizing (and therefore transpiring) about as much as a creosote desert. This absurdity presents an opportunity. If we add cover crops to farms like these, and manage our perennial grazing lands to develop a more robust soil sponge that could keep grasslands green longer during seasonal dry periods, we can make a substantial difference in local and regional temperatures.
Who Will Take Care of our Living Infrastructure?
If land managers and policy-makers thought of the soil sponge as essential infrastructure—the way we think of buildings, bridges, and roads—we would be making very different decisions about its management. We would choose carefully who managed our public and private lands. We would pay farmers to rebuild functional watersheds. And we would teach people how to create appropriate working conditions for the underground workers (microbes, fungi, insects, etc.) we depend on for our essential goods and services: clean water and food, a livable climate, resilience to flooding and drought, and protection from wildfires.
By investing in the soil sponge and using the soil health principles, a region could:

• Reduce flooding, flood damage, and associated costs
• Reduce wildfires
• Improve drought resilience
• Provide human and natural communities with abundant clean water and reduce the need for irrigation, water treatment plants, bottled water, and desalination plants
• Reduce or eliminate toxic algae blooms
• Increase net profitability of farms by reducing input and irrigation costs
• Reduce silting of dams and reservoirs and the cost of dredging
• Dramatically improve air quality and reduce the incidence of asthma, COPD, and other respiratory illnesses
• Increase soil fertility and the nutrient density of local foods
• Improve the health and resilience of crops, animals, and humans
• Restore habitat for diverse animals and pollinators

What would that would be worth in your region—and across the world?
What would it be worth to rebuild the sponge in California’s Central Valley, for example, where the vast majority of our fruits, nuts, and vegetables are grown? (And where air quality is some of the worst in the country.) How might we create conditions that enabled the sponge to regrow, and how might we pay for it? I’ve been meeting with farmers, economists, investment firms, and policy-makers in the “Can we Rehydrate California?” initiative to start looking at questions like these.
We know how to do this, and we have guidance freely available from natural systems, as well as innovative farms and ranches around the world. We know how to do it not only at a low cost to implement, but in ways that—according to a groundbreaking study by Claire LaCanne and Jonathan Lundgren—improve the net profitability of farms, restore habitat, and reduce pest damage to crops. We have many great examples of land managers who are successfully restoring the soil sponge, soil fertility, and local watershed function through simple but profound changes.
If it is so easy, why hasn’t it already happened? Many farmers are too scared by their rising debt and tiny profit margins to make a change without a safety net of some sort. Half the farms in the United States are losing money, and farming is the profession with the highest rate of suicide in the United States (and many other countries). Peer pressure is huge, and it is difficult to break from the herd. Big Ag continues to push conventional problem-solving rather than systemic change. Crop insurance programs, and agricultural lending institutions are often too bureaucratic, too conservative, and under too much pressure from corporate interests to make the necessary changes in their rules.
This is where forward-thinking investors come into the picture.
How Can We Invest in a Functional Soil Sponge?
Here are some thoughts, based on conversations with farmers, ranchers, and other innovators across North America:

1. Create loan and insurance options that recognize and reward farmers following the soil health principles rather than punishing them for being unconventional.
2. Invest in independent research that recognizes and measures actual change over time in land function. Choose projects that
   1. work with real farms and ranches
   2. recognize the value of complexity
   3. teach and creatively implement the soil health principles
   4. are committed to open and easily shareable data
   5. don’t depend on funding from “Big Ag.” The independent research at Blue Dasher Farm and the Atlas of Biological Work project at the Soil Carbon Coalition are two prime examples of this.
3. Invest in technology that will allow consumers and land managers to measure the function of the soil sponge. For example: the handheld nutrient density sensor being developed by the Bionutrient Food Association, LandStream remote sensing technology being developed by Abe Collins and John Norman, the Savory Institute’s Ecological Outcome Verification program, and the atlasbiowork.com app and normalized difference vegetation index (NDVI) maps being developed by Peter Donovan.
4. Help create and invest in municipal bonds designed to help regions build resilience to extreme weather events and avoid externality costs by improving soil health and sponge function. These bonds can provide short-term funding to pay farmers to create a functional watershed for the long term.
5. Invest in companies that help to secure land for farmers who are following the soil health principles. Iroquois Valley Farms^[iv] is an example of a firm that secures land for farmers through private investment.
6. Invest in educational programs that get land managers, students, planners, and policy folks thinking in systems, asking better questions, and down on their hands and knees exploring soil health and watershed function. The Land Listeners Project and the Soil Health Academy are examples of this.
7. Purchase land with the express purpose of creating an innovation hub for young farmers interested in growing the soil sponge.
8. Create financial incentives (or reduced rent) for measurable improvements in sponge structure and function on investor-owned land. For example: increases in water infiltration rates, water holding capacity, and aggregate stability; and decreases in bulk density.
9. Invest in companies that are growing the soil sponge and improving watershed function on their own property (or those that want to): Hypertherm is an example of this here in the Upper Valley of VT/NH.

A large-scale transition to farming using the soil health principles could quickly succeed in many regions, if it were creatively organized and funded (through public service announcements, citizen-led initiatives, farmer-to-farmer mentor networks, and municipal bonds, for example). It typically takes two to three years for the soil/plant/microbial system (and the farm management) to adjust. After that transition period, increased farm net profitability will likely offset much of the short-term need for assistance and cost-share programs, while long-term savings on externalities in the public and private sector would more than recoup investment costs.
The Land and Leadership Initiative is hosting a series of classes and free webinars on “Investing in the Soil Sponge.” Sign up here.
Didi Pershouse is the author of Understanding Soil Health and Watershed Function and The Ecology of Care: Medicine, Agriculture, Money, and the Quiet Power of Human and Microbial Communities. She is the board chair of the Soil Carbon Coalition and the co-founder of Rehydrate California. She facilitates workshops and strategic planning groups for people from around the world who want to lead economically viable soil and water restoration initiatives in their own regions. She was one of five invited speakers at the United Nations FAO World Soil Day in 2017. Learn more at www.didipershouse.com

[i] Gelder, B., Sklenar, T., James, D., Herzmann, D., Cruse, R. M., Gesch, K., and Laflen, J. (2017) The Daily Erosion Project – Daily Estimates of Water Runoff, Soil Detachment, and Erosion. Earth Surf. Process. Landforms, doi: 10.1002/esp.4286.

[ii] This animated map from NASA shows the flux of carbon dioxide and carbon monoxide (CO₂ and CO) levels in the atmosphere throughout the year. Notice that CO₂ and CO concentrations are much higher during the months when fewer plants are growing and photosynthesizing.

[iii] Fire and respiration are both forms of photosynthesis in reverse: called oxidation. They both require oxygen, they both release heat (that was once sunlight), and they both produce CO₂ by recombining oxygen with carbon.

[iv] Clean Yield clients are investors in Iroquois Valley Farms securities.