As the leading producer of seeds and agrochemicals globally, climate change is a crucial concern for agricultural giant Monsanto. First, reductions in the volume of arable land and the available water supply are projected to depress global food production, reducing the potential market for Monsanto’s products. In the U.S., crop yields and farm profits are expected to decline by the mid-twenty-first century due to heat and precipitation extremes1,2,3 and in India every one degree Celsius increase is expected to decrease yields of wheat by 5-10%.3 Second, fluctuating weather patterns – including droughts, floods, extreme heat, and severe weather events – are causing variability in crop yields and agricultural commodity prices for farmers using Monsanto products worldwide. In the U.S., recent evidence indicates that climate change increases volatility in year-to-year corn prices.5 This could drive uncertainty in customers’ demand for Monsanto’s seeds and agrochemicals.
Monsanto, which earned USD $13.5B in revenues in 2016,6 has attempted to help farmers adapt to decreasing water resources by introducing drought resistant seeds. Building on their capability to genetically modify plants to withstand pests, Monsanto introduced DroughtGuard seeds to farmers in the U.S. and China in 2013.7,8 However, although there may be long term potential for this biotechnology, scientists find that the seeds provide only modest improvement, if any, over classical breeding – a potential one percent increase in corn productivity in the U.S. – and do not provide benefits during severe or extreme droughts.9 Potentially more interesting is Monsanto’s 2013 acquisition of Climate Corp for $930M. Founded by an ex-Google employee to help farmers adapt to extreme weather patterns caused by climate change, Climate Corp uses analytics to predict acre-by-acre weather and its effects on crop yields across the U.S. Additionally, it offers direct-to-farmer, automated weather insurance policies: when the weather exceeds the policy guardrails, farmers get a check.
Longer term, Monsanto has committed to leading the way in corporate efforts to mitigate and adapt to climate change, publicly committing to becoming a carbon neutral corporation. However, the company cannot seem to shake doubts from the public about the sincerity of its motivations for profit vs. purpose. It remains to be seen how much the firm’s brand is tied up in ongoing scandals over glyosphate fertilizer and possible carcinogenic properites, and illegal pesticide spraying by farmers on fields planted with Monsanto soybeans.
A savvy move for Monsanto would be to shift their business efforts, which are focused mainly on climate change adaptation, to higher profile and impactful projects on mitigation, while phasing out less environmentally friendly business lines. For example, research indicates that chemicals intended to be used alongside Monsanto’s genetically modified seeds reduce soil sequestration – in other words, reduce the ability of soil to act as a carbon sink, and result in emitting carbon into the atmosphere. Marketing these chemical products undermines Monsanto’s policy and regulatory credibility to fast-track approvals for environmentally friendly seeds.10,11 The Series B investment by Monsanto Ventures into Blue River, which focuses on using data to reduce the use of chemical pesticides by targeting them to limited areas, was a move in the right direction.12 Another way to further this effort would be R&D on new ways to grow or produce food with lower carbon output, or target crops to areas with highest yield globally based on analytics and sell this data to farmers. A further investment area could involve monetizing some of their work in CSR to increase global carbon sinks, e.g. conservation of trees and increased carbon sequestration in soil. However, hanging over Monsanto’s head for the past year has been a pending deal by pesticides and pharma firm Bayer to acquire Monsanto for $66B.13 To the public, this results in a “mixed signals” that Monsanto is hedging on their future.
Key questions to evaluation going forward will be:
- How will the potential acquisition by Bayer affect Monsanto’s ability to help the agriculture industry respond to climate change?
- Is Monsanto serious about their carbon neutral commitment and mitigation of climate change? Will they be able to overcome their reputational damage from from previous businesses (now divested) in petrochemicals, and herbicides used with their GMO seeds (Battle Over Monsanto’s Potent New Weedkiller, WSJ 11/8/2017), in order to pursue their strategy?
- Did David Friedberg make the right decision to sell Climate Corp to Monsanto? (Further reading: https://www.newyorker.com/tech/elements/why-the-climate-corporation-sold-itself-to-monsanto)
 IPCC (2007) Climate Change 2007: The Physical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Solomon S, Qin D, Manning M, Chen Z, Marquis M, Averyt KB, Tignor M, and Miller HL, Eds. Cambridge University Press. https://www.ipcc.ch/publications_and_data/publications_ipcc_fourth_assessment_report_wg1_report_the_physical_science_basis.htm. Accessed November 15 2017.
 Ortiz R, Sayre KD, Govaerts B, Gupta R, Subbarao GV, Ban T, Hodson D, Dixon JM, Ortiz-Monasterio IJ, Reynolds M (2008). Climate change: Can wheat beat the heat? Agriculture, Ecosystems & Environment, 126(1):46-58. http://www.sciencedirect.com/science/article/pii/S0167880908000194. Accessed November 15 2017.
 Schlenker W, Hanemann WM, Fisher AC (2005). Will U.S. agriculture really benefit from global warming? Accounting for irrigation in the hedonic approach. The American Economic Review, 95:395-406. https://asu.pure.elsevier.com/en/publications/will-us-agriculture-really-benefit-from-global-warming-accounting. Accessed November 15 2017.
 IPCC (2001) Climate Change 2001: Impacts, Adaptation and Vulnerability: Contribution of Working Group II to the Third Assessment Report of the IPCC. McCarthy JJ, Canziani OF, Leary NA, Dokken DJ, White KS. Cambridge University Press. http://hcl.harvard.edu/collections/ipcc/docs/27_WGIITAR_FINAL.pdf. Accessed November 15, 2017.
 Diffenbaugh NS, Hertel TW, Scherer M, Verma M (2012). Response of corn markets to climate volatility under alternative energy futures. Nature Climate Change 2:514–518. https://www.nature.com/articles/nclimate1491. Accessed November 15 2017.
 Monsanto Corp. Annual Report, 2016. https://monsanto.com/investors/reports/annual-reports/financial-highlights. Accessed November 15, 2017.
 Monsanto News Release (2012), Monsanto to Introduce Genuity Droughtgard Hybrids in Western Great Plains In 2013. https://monsanto.com/news-releases/monsanto-to-introduce-genuity-droughtgard-hybrids-in-western-great-plains-in-2013/. Accessed November 15, 2017.
 Monsanto News Release (2013), Monsanto’s Drought Tolerance Trait In Genuity® DroughtGard® Hybrids Receives Final Major Import Approval From China. https://monsanto.com/news-releases/monsantos-drought-tolerance-trait-in-genuity-droughtgard-hybrids-receives-final-major-import-approval-from-china/. Accessed November 15, 2017.
 Sherman DG. High and Dry: Why Genetic Energy is not Solving the Drought Problem in a Thirsty World. Union of Concerned Scientists, 2012. http://www.ucsusa.org/sites/default/files/legacy/assets/documents/food_and_agriculture/high-and-dry-report.pdf. Accessed November 15 2017.
 New York Times (2013). Misgivings about how a weed killer affects the soil. http://www.nytimes.com/2013/09/20/business/misgivings-about-how-a-weed-killer-affects-the-soil.html. Accessed November 15 2017.
 Fortune Magazine (2016). Can Monsanto save the planet? http://fortune.com/monsanto-fortune-500-gmo-foods/. Accessed November 15 2017.
 Blue River Technology Raises $17 Million in Series B Funding. http://www.businesswire.com/news/home/20151216005360/en/Blue-River-Technology-Raises-17-Million-Series. Accessed November 15, 2017.
Bloomberg News (2017). Bayer Monsanto Deal Stares Down Hurdles at One Year. https://www.bna.com/bayermonsanto-deal-stares-n57982087845/ Accessed November 15 2017.