The economic losses caused by poor land management are hard to pinpoint over the short term, and good environmental stewardship doesn’t necessarily deliver strong financial returns for farmers straightaway.
But new markets are emerging that place an economic value on public benefits generated by good private land managers.
That’s according to National Australia Bank associate director natural value James Bentley, who spoke at the Australian Bureau of Agricultural and Resource Economics and Sciences conference this week.
“How do we flip the narrative to ensure those who invest in building their natural capital actually get paid?,” Mr Bentley asked.
It seems the answer could be a through a combination of targeted public and private investment.
“We’re seeing astronomical growth for green bonds,” Mr Bentley said, and "this growth is driven by investor demand".
“Where bonds may get really powerful is enabling payments to farmers for ecosystem services.”
Moody's Investors Service forecast the global green bond market, which bankrolls investment in climate change solutions, to grow 20 per cent this year to hit $200 billion.
Mr Bentley cited Forest Resilience Bonds in the US as a model which could work on a wider scale.
Bushfires are a growing problem in the US. Much like Australia, lack of funds for widespread small-scale controlled burning has lead to an increase of damaging wildfires under global warming.
The US has seen nine of its 10 worst recorded bushfire seasons since 2000.
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The Forest bonds source upfront private investment to fund private and public landowners to undertake restoration work that reduces the risk of bushfires on their property.
The investors get a return from public utilities that pay out on the cost savings derived from forest management, like prescribed burns, erosion reduction and so on.
To date, the main reason farmers don't get paid for good stewardship is the lack of solid research and data to demonstrate the benefits of sustainable grazing practices, plantings for biodiversity and other ecosystem services.
But Forest bonds show that private investment can unlock financial returns for farmers, underwritten by the public sector.
The US Fire Service pays out on land restoration because it reduces the impact of severe fires.
Electric utilities pay for prevention of infrastructure loss and insurers pay for reduced risks.
Water utilities pay for the improved water quality and reduced sedimentation from forest catchments that aren’t burnt-out, and for increased inflow volumes, that result from the reduced water use of thinned vegetation.
State and local governments pay for lower fire suppression costs, reduced carbon emissions, and job creation through land restoration work.
“I think this model could apply to sustainable agriculture. A bond aggregator could raise funds to improve environmental management across a pool of funds,” Mr Bentley said.
The successful example of Forest bonds showed there was a “clear need” for public investment to underwrite the green bond market, he said.
Mr Bentley suggested Australian governments could start with a fund similar in size to the Clean Energy Finance Corporation, which was established with $10 billion over five years.
One example of the emerging market potential in Australia is a deal struck between the Port of Brisbane and upstream landholders to reduce sediment run-off, which creates a significant dredging cost to keep shipping lanes open.
“The Port paid farmers to mitigate erosion because it saved money. Also in that catchment you have water utilities willing to pay on a small scale to farmers who manage nutrient runoff,” Mr Bentley said.
The Climate Proofing Australia campaign, which includes the Red Meat Advisory Council, Farmers For Climate Action, Greening Australia and the Forestry Products Association, has launched has a call for government-funding which recognises the public benefits achieved on private land in the lead up to the federal election.