The creator utilized Distance Fields to make the grass interactive.
Check out this impressive 3D grass material, created by 3D Environment Artist Kerman Cordero using Unreal Engine 5, 3ds Max, and Megascans textures, which were used to make an Atlas. According to the author, the material is fully-custom and was made entirely by hand, including grass color and wind. In addition, the creator utilized Distance Fields to make the grass interactive.
Furthermore, Kerman also shared several breakdown images, revealing the production process behind the material. You can check out the full breakdown by visiting the author's ArtStation page.