Natural capital liquidity: The co-benefits of landscape hydration

Carolyn Hall is the Chief Executive Officer and Managing Director of The Mulloon Institute, a not-for-profit that helps Australian agriculturalists better manage their natural assets through improved water management. With a background in environmental consulting that balances flood mitigation and biodiversity conservation with improved productivity, Hall is well-versed in reconfiguring environmental trade-offs into win-win co-benefits.

In this interview, part of a series on Australian Agriculture in Transition, Hall speaks to The Action Exchange about the potential for landscape rehydration to build natural capital and improve farm management. 

TAE: Australian agribusiness is experiencing a convergence of multiple, often competing shifts from technology and cultural change to sustainability and climate considerations. Where are you seeing the disruptive impacts of these changes in the sector?

Carolyn Hall: I have noticed disruption. The pressures on farmers have never been greater. We see agriculture as potentially at the centre of Australia's response to climate change. So, in some ways there has been an overdue change in how agriculture is practised and perceived. 

On the ground, we’re seeing disruption in the context of ESG reporting. Farmers are now required to collect, store and manage farm data to report as part of a supply chain. The companies at either end of those chains are reporting against international frameworks such as the Taskforce on Climate-related Financial Disclosures and the Taskforce on Nature-related Financial Disclosures. From our perspective, it's great because we want to support that change. But you can see farmers going, “Oh, my God, there's so much to get my head around”. 

The Mulloon Institute also has a farming operation—we have an egg enterprise and a beef cattle enterprise. We see firsthand the challenges in ensuring that data is captured and communicated.

Looking at technological disruption, what are the main areas where you have seen new technologies have an impact?

I’m seeing the positive impacts of technology, which is fantastic for decision support. For example, digital twins that model farm landscapes and supply systems that enable improved scenario analysis, planning and market strategies, and grazing management decision support software, as well as having access to climate data. These are wonderful tools that farmers have never had before.

How do farmers use those technology tools to make decisions in the paddock?

Using digital twins, farmers can model the implications of their decisions before they make them. So, given predicted weather conditions, the soil type, and my past production in these paddocks, what do I expect will happen? In a grazing setting, you can model when you should sell and when you should buy in stock. It takes a little bit of the emotion out of making those decisions. 

But on the flip side, the technology can be overwhelming, and the internet is not good out in regional Australia. From an infrastructure point of view, that’s hard. When you’re trying to get familiar with technology, you need it to be responsive and the lack of reliable, fast internet is a real challenge for people in the bush.

The need for businesses to become ‘nature positive’ has been brought into focus with the introduction of the Taskforce on Nature-related Financial Disclosures (TNFD) framework, but conversations about biodiversity tend to focus on the land. How does the Mulloon Institute’s work on water landscape rehydration fit into the discussion?

Landscape rehydration helps to even out the impact of dramatically shifting rainfall patterns and climatic fluctuations. Having restored functioning landscapes that are cycling and storing water is really important for managing [rising temperatures] and transforming and transferring increased energy coming from the sun.

If you want to have good soil health, you need water. If you want farm productivity, you need water. If you want biodiversity, you need to have water in your landscape. If you want to sequester carbon into your soil, you’re going to need water.

Australian agriculture is so broad scale that I think we can do that. But to do it at catchment scale, we need to bring a number of landholders together. This is a social process that requires support and capacity building. That also means trying to achieve regulatory approval, which requires a level of technical assistance. This is what we created the consulting arm of Mulloon Institute to do.

Considering the changing nature of agricultural supply chains, where do you see the opportunities emerging for Australian producers?

Australia can deliver the most sustainably produced food on the planet. This is a massive opportunity that can become our claim to fame. Certainly, there are challenges, but I see the opportunities far outweighing them.

To achieve that aim, we need education and capacity building to support farmers to make the change. There’s a lot of big talk coming from agribusiness and in the markets, but we need to figure out how to actually do what’s required on the ground. We should be looking at how to support farmers in their role as land stewards to produce this fantastic nutrient-dense food and how to look after their landscapes to build natural capital. They need support, particularly from organisations that don't have a financial interest in how they perform.

What do you think Australian agriculture needs to do to harness such a huge opportunity?

We know that 200 years of European land use has changed the way water moves through the Australian landscape. There will be times when you need to intervene to slow the water down and hold it in the landscape. That might be via leaky weirs, contours, tree planting, changing grazing management, changing a cropping regime or cropping footprint.

The first step is communication. We need to help people understand rehydration and the whole suite of co-benefits they can get from it at the landscape scale. We need to get them interested in taking this journey and thinking about how they manage their land. It includes thinking about how they manage their enterprise and make decisions that will contribute to helping the landscape function. We see a need for education and capacity building at a major scale by creating communities of practice around the country sharing on-ground examples.

We hear a lot about the development of a natural capital market. Will this likely be a positive or a negative for Australian agriculture?

I’ve been closely following the development of natural capital markets for a long time because we see the opportunity for the market to bring capital into the agricultural, water management and rehydration spaces. We're trying to deliver catchment-scale projects on the ground, and that requires engagement, technical, detailed design as well as regulatory approval, materials, earthmovers and tree planting. These upfront costs are expensive, so we need capital to deliver landscape-scale projects. 

We have got communities ready to go. We have the design technology that can be applied in any landscape. We can design and implement the solutions, but like many farmers, we are capital-poor. So I believe there is great promise in natural capital markets driving the opportunity we have to restore the function of our landscapes with rehydrating catchments across this whole country. Imagine greening landscapes and cooling them down across Australia. It would mean we’re increasing productivity, adapting to climate change and building natural capital, which farmers can turn into money.

What do you think will enable Australian farmers to contribute to and take advantage of the interest in a natural capital market?

It’s about developing and maintaining confidence in the market. We need to build natural capital using credible, rigorous methodologies that will deliver on the potential outcomes. It doesn't do us any favours to have less rigorous or less thorough methods. But, developing the methodology is the tricky bit. We've attempted to do a little bit of method development, but it's been expensive. 

The question is, how do we progress that to give the market confidence? We need to make sure the methods underpinning the credits developed here—whether they’re soil carbon, biodiversity, water, blue carbon, or, in our space, teal carbon credits—are the highest quality, most rigorously assessed, high-value credits on the market.

It sounds like there are compelling co-benefits to be gained from landscape rehydration projects in this context. How can these be realised in an agricultural business?

When we restore the function of our landscape, we can clip credits together on the one project. We can generate carbon credits as well as biodiversity and water quality and all the co-benefits coming from our landscapes being repaired and restored. Our farmers can benefit from that, and they absolutely should.

This is not just about emissions reduction in Australia to meet our Net Zero goals. This is recognising that emissions reduction is one side of adaptation to climate change. The other side is managing that increased energy coming from the sun, through improved landscape function. 

If Australia reduces our emissions, overall on a global scale, it's quite a small contribution. But if we're able to restore and repair our landscapes across the whole country in terms of managing the energy coming from the sun, we could have a really big global contribution. I find that very exciting.

* Some answers have been edited for length and clarity.