Climate-Smart Agriculture: A Q&A

Today’s farmers are on the front lines of climate change. Higher temperatures, wildly variable rainfall, and unrelenting droughts, storms, and floods have upended growing seasons and threatened their livelihoods.

“Climate-smart agriculture” promises a more sustainable and resilient farming future — but how do we help farmers get there?

Maggie Monast, Senior Director for Climate-Smart Agriculture, Finance & Markets at the Environmental Defense Fund (EDF), is dedicated to smoothing that transition. Monast works with banks, cooperatives, and others in the agricultural finance sector to make it easier for farmers to adopt climate-smart practices that curb harmful emissions and grow food in a sustainable way — while earning stable profits in a changing world.

Monast is the keynote speaker for the fifth Critical Conversation hosted by the Institute for Sustainability, Energy, and Environment (iSEE) in September, a forum in Chicago for farmers, food distributors, consumers, researchers and other stakeholders to discuss climate-smart commodities and agricultural practices and their potential role in enhancing resilience in the Midwest. The event is sponsored by the Alvin H. Baum Family Fund.

In her Sept. 18 public keynote, “Climate-Smart Agriculture: Overcoming Barriers and Financing the Transition,” Monast will review the public and private investments needed to help transform the way agriculture operates. The next day, invited stakeholders will continue the discussion on several fronts.

In this Q&A with iSEE, Monast explains how the climate is already affecting farmers and how the agricultural sector is responding to what she calls the most significant challenge to farming today — and in the future.

What is climate-smart agriculture?

Climate-smart agriculture involves two main goals. The first is to mitigate climate pollutants from agriculture — which includes reducing greenhouse gases like nitrous oxide and methane, sequestering carbon, and avoiding conversion of natural areas to agriculture. Second, agriculture needs to build resilience to the impacts of climate change that are already occurring to maintain food production.

We’re already seeing climate change affecting agriculture, with rising temperatures, rainfall changes, and drought. Where are you seeing the greatest impact on farmers in the U.S.?

I think the most important thing to realize is that every region in the U.S. is grappling with climate change, and those challenges surface in different ways in different places. For example, we’re seeing a lot of issues with water availability in the western part of the country — tremendous drought followed by tremendous rains. And producers in that area are having to make tough choices about what to plant and how much of it, and how they’re going to use their available water or try to get more water. On the East Coast, we’re dealing with much flashier rains and more frequent and severe storms. I live in North Carolina, and increased hurricane intensity and flooding has been a major issue for farmers. Across the country we’re seeing higher temperatures, which creates a lot of stress on crops, and different crops deal with that differently. In the Midwest, higher temperatures create a lot of stress during pollination for corn, especially with those hot days and nights not offering any respite.

Natural disasters also impact infrastructure and disrupt supply chains, as well as the people who grow our food. Farmers and farm workers are challenged by these weather conditions, whether it’s too much heat or the dangers of extreme weather.

So climate-smart agriculture not only makes sense from a global climate view, it makes sense for farmers as well?

Climate-smart agriculture is inherently local, and it is aimed at addressing the local impacts of climate change as well as mitigating climate pollution that has a global impact. So the right practices and farm management changes really do depend on the local climate stressors, the commodities that are grown in a given region, and how farmers can adapt and build in resilience to those stressors in order to reduce the impact on our food production and the people and the animals involved.

What is a climate-smart commodity?

A climate-smart commodity is any commodity that’s produced using climate-smart practices or management systems toward the goals of reducing climate pollution and building climate resilience. So perhaps climate-smart livestock is endeavoring to reduce methane emissions. Climate-smart grains would be focused on reducing nitrous oxide emissions from fertilizer, improving soil health through practices such as no-till and cover crops, and diversifying crop rotations.

Tell us how your work with EDF is helping to promote climate-smart agriculture.

My work focuses on how we pay for climate-smart agriculture. It’s one of the first questions that a farmer will ask you. They may want to adopt new practices, but any change requires some measure of cost and risk. Many of those changes can also offer longer-term benefits and increased value, but the challenge is getting there.

I work with folks throughout the agricultural system, but especially agricultural finance providers like banks and cooperatives, to help them better understand the cost challenges in that transition and also the benefits and value that can be gained on the other side. The goal is for agricultural finance providers to more proactively support their farmer customers in managing through that transition and ultimately becoming more profitable over the long term with climate-smart agriculture.

What are the barriers to that transition? What needs to change in terms of insurance or financial products to make all of this work?

The agricultural finance sector is still in the early days of figuring out its role as it relates to climate change. For example, along with Deloitte we conducted the first-ever global survey of agricultural finance institutions on climate risks and opportunities last year. We found that 87 percent of agricultural lenders see climate change as a material risk to their business, but just 25 percent have begun incorporating climate change into their decision-making in a significant way. So there’s still a big gap between the perceived risk of climate change and what agricultural finance providers are doing about it.

What we are seeing now is that many agricultural finance providers are trying to understand climate risks, they are starting to build up their teams internally — hiring chief sustainability officers for the first time, creating sustainability reports for the first time — and then trying to learn from their farmer customers and others in the landscape, like supply chain companies, to figure out what they can do and how they can be effective in doing it.

Are they developing new kinds of loans or insurance coverage?

We are seeing a few innovative financial products out in the marketplace. One example is a collaboration between EDF and Farmers Business Network on a farm operating loan that provides an interest rate rebate for farmers who meet environmental standards for climate and water quality. That program started as a $25 million fund in 2022 and was so successful it doubled in size to $50 million this year.

I always try to encourage finance providers to think about what problem they’re trying to solve. Because different climate-smart agricultural transitions will require different financial solutions. So it’s different if we’re talking about a significant risk or an upfront cost, or a long transition period. Farmers need different financial solutions to overcome those financial barriers.

For example, there’s the case of transition risks, where farmers worry about losing some crop yield as they switch to new practices like cover crops. We’ve seen some risk products like warranties that provide compensation to the farmer if he or she does experience a yield drag during cover crop adoption. My hope is that we’ll see a proliferation of different types of financing that are tailored to help farmers overcome the financial barriers they face in adopting these practices.

Is this effort still in the early stages?

I think we are finally seeing the scale of investment that’s needed in climate-smart agriculture, both with the scale of the federal investment that was made through the Inflation Reduction Act and many of the USDA programs, including the Partnerships for Climate-Smart Commodities Program (which funded a new iCOVER project through iSEE). And we’re also starting to see much more private sector investment, whether it’s through major food companies, carbon programs, or agricultural finance providers. While many climate-smart practices are not new, in the past few years are we seeing investment on the scale that is going to be needed to actually solve this problem.

Is the industry fairly attuned to climate risks after seeing the impact on the ground, or do businesses still need some convincing at this point?

The agricultural finance industry is still in the early days of understanding these risks and what they mean for their businesses. As farmers experience the impacts of climate change, of course their finance providers see that, too, in their communities. But the much bigger question for them is what do they do about it? How do they assess those risks in a forward-looking way? How do they incorporate that information into their own planning, and how do they help producers to ultimately reduce those risks? And that’s where this conversation needs to go.

What other kinds of things is EDF doing to advance this work?

Our Climate-Smart Agriculture team works globally on climate-smart agriculture — and then from a variety of different perspectives. So we have policy teams who are working on the farm bill right now in the U.S.  We have a science team that’s really digging into the science around soil carbon and methane, and nitrous oxide, and trying to figure out what types of practices and management shifts really create climate benefits. We have my agricultural finance and markets team, which is focused on unlocking the financing for climate-smart agriculture solutions. And we also have a supply chain team that works closely with companies throughout the food and agriculture sector to help them set goals to reduce emissions and then figure out how to collaborate with farmers to achieve those goals.

Do you have a willing audience? Are they receptive to these ideas?

I’ve been working on agriculture at EDF for 12 years, and I have seen a very significant shift during that time in terms of the openness and willingness of people in the agriculture sector, everyone from farmers to major farm organizations and companies, to talk about climate change and to proactively engage on these topics and try to figure out solutions. I think the biggest reason for that shift is that farmers are really feeling those impacts now. And because of that it’s become much more real. We now have much more interest and engagement by organizations throughout the agricultural system to try to collaborate and figure out what to do about it.

For example, EDF was a founding member of the Food and Agriculture Climate Alliance, a group that is developing climate and agriculture policy solutions in Washington, D.C. Now is the time to be working together on these issues.

Would you say climate change is one of the biggest threats to agricultural livelihoods?

Climate change is the biggest threat to agriculture. Farmers depend on predictable weather and on natural resources to grow crops and livestock, and the pace of adaptation is just not keeping up with the pace that the climate is changing. We’re in a critical period both to bring down emissions and to accelerate efforts to build resilience to the impacts of climate change that are already happening.

Five years from now, or 10 years, what would you like to see in place to achieve real progress?

I hope we’re in a place where the agricultural industry and community has realized that climate-smart agriculture is the path toward profitable, successful farmers and stable farmer livelihoods. And so investment, both private and public, has reoriented to be all-in on climate-smart agriculture.

For example, there’s much better information for farmers to make economic decisions on conventional practices than on climate-smart practices, so at EDF we work with universities to build up farm financial information on climate-smart practices so farmers have the information they need to adopt these practices profitably. Everywhere there’s an imbalance like this, we need to see much more support and investment so that climate-smart becomes the new status quo.

What does that look like, in terms of support?

It means reorienting our research, it means reorienting what our public programs are funding. It means much greater investment by food companies and by finance providers. It means new markets for environmental services provided by farmers. Every current segment of the agricultural system needs to bring that climate-smart lens into how they operate in the future.

An example is our current crop insurance program. The best crop insurance coverage is for the major grain crops, and it supports farmers in maintaining their businesses in the face of natural disasters. However, it’s not forward-looking in terms of what climate impacts are going to occur and how that’s likely to accelerate in the future. We also need a lot more thinking about how we can encourage farmers to adopt practices or make other changes on their farms that actually reduce their underlying risk. We need a crop insurance program that’s more tuned into the impacts of climate change and more supportive of farmers who are taking actions to reduce their underlying risk. That would mean insuring things in a different way that brings the likely increased risks of climate change, and farmers’ ability to reduce risks through management changes, more explicitly into the pricing of their insurance.

— Article by iSEE Communications Specialist Julie Wurth