Climate investment advisory services for soil management and forestry

THE BACKGROUND

Soil is a fragile, non-renewable resource whose loss cannot be reversed over any meaningful time horizon. Healthy soils support ecosystem services and provide vital functions – food production, hosting biodiversity, purifying and regulating water, cycling nutrients and carbon, and supporting human activities.

Soils are threatened all over Europe because of various human activities exacerbated by climate change. The Joint Research Council (JRC) estimates that 60-70% of soils in Europe are considered unhealthy due to current management practices, pollution, urbanization, and the effects of climate change. The costs associated with soil degradation in the EU are estimated to exceed EUR 50 billion annually.

Maintaining and restoring soil health requires transformative changes in practices by all sectors of society across all types of land uses and scales in a joined-up manner. New incentives, policies, business models, and technologies (specifically in the digital domain) will be needed to reach the EU’s ambition for 100% healthy soils by 2050.

Soil health can be restored through a range of measures. While some require longer timeframes, many can have a rapid beneficial impact. Several of these restoration processes could be easily implemented but require a step up in the extent of application to be effective. A more significant societal understanding should drive this increase, demonstration of best practices, and developments in research and innovation of the factors driving soil health. This is the focus of the EU Soil Mission under which FINANCE FOR IMPACT provided advisory services. The Soil Mission is being rolled out in three phases:

• 1/ Induction and pilot phase (2021-2025): development of the implementation structure, pooling existing resources and bolstering innovation capacity in Member States;
• 2/ Expansion and innovation phase (2025-2030): expanding activities, generating and testing innovations;
• 3/ Scaling up and mainstreaming phase (2027-2030): the scale-up solutions, adapting to local needs of a broader set of regions and mainstreaming of good practices across sectors and territories.

THE PROJECT

The EIB is committed to leading and supporting work on healthy soils. These are high on the EU’s policy agenda given the Soil Strategy for 2030, the forthcoming EU Soil Health Law and the Soil Mission. EIB’s leadership in the space builds on the three mutually reinforcing activities of lending, blending and advisory.

The consultants were requested to map out market needs and develop a pipeline of bankable investment opportunities in Europe. The scope included all types of soils (urban, rural, forests, natural) and relevant sectors and activities, such as agriculture and forestry, bioeconomy, mining and extractive activities, nature protection or restoration among others. The assessment was done in view of the overall goal and the relevant specific interlinked objectives of the Soil Mission.

THE RESULTS

The following deliverables were prepared by the consultants:

• Supply- and demand-side mapping
• Pipeline of sectors/projects showing investment potential
• Business case studies providing good practices on the use of nature-based solutions for the mitigation of and adaptation to climate change, including carbon farming, reduction of soil pollution and restoration of deteriorated soils, soil biodiversity including the microbiome and, related to this, circular economy solutions (specifically valorization of waste), digitalization solutions, and Monitoring tools, e.g. soil carbon stock monitoring, development of digital “soil health” certificates…

This assignment also included formulating overall conclusions and recommendations helping to define an EIB Investment Plan for new products or investment vehicles, including: Loans for significant activities that are crucial for the implementation of the Soil Mission (e.g. rehabilitation of contaminated sites, reduction of soil sealing or alternatives to the use of pesticides and mineral fertilizers); innovative financial instruments linked to activities promoting soil health (e.g. carbon and/or organic farming, closer-to-nature forest management, ecosystem/soil restoration); result-based payment schemes for soil protection and rehabilitation; use of risk-mitigation solutions under the InvestEU Fund (e.g. to support companies, municipalities or other relevant operators that provide services for soil protection, restoration or improvement); technical assistance and/or investment grants with a focus on promoting investments and R&I ecosystems ( e.g. for business opportunities to protect and restore soils; and other appropriate facilities.