New finance system a boost for sustainable agriculture.

Todd Charteris - CEO, Rabobank New Zealand

With climate change adversely affecting agriculture in many parts of the planet and a steady population increase, sustainable food production has become a critical issue.

Reducing the environmental impact of farm practices are vital to ensure the world’s population can be fed sustainably. There is increased pressure on producers to do their bit to reach this goal, but it’s also a challenge to the agricultural lending and investment sector to support them. There are plenty of investors prepared to plough money into agricultural businesses, but increasingly they want reassurances that those businesses meet sustainability and environmental criteria.

Rabobank is one of a group of banks in New Zealand – supported by the Ministry of Primary Industries and EY – that has taken up the challenge to develop a financial framework for sustainable agriculture. Developed as part of The Aotearoa Circle’s sustainability programme, the Sustainable Agriculture Finance Initiative (SAFI) will be a voluntary (open-source) definition and classification system he finance sector can use when considering primary sector lending and investment.

The aim of SAFI, the first draft of which came out last December, is to help Kiwi farmers improve their environmental performance and meet the ever-changing expectations of governments and communities around acting sustainably. SAFI investments – as the acronym hints – are designed to be safer for the environment, safe ethically and safe for future generations.

Equally importantly, SAFI takes note of emerging international frameworks and standards through the International Platform on Sustainable Finance (IPSF), so improvements and achievements gained here have recognition and credibility on the global stage. It also takes note of existing sustainability standards used by Aotearoa New Zealand growers and farmers.

Phase two of SAFI will explore formalisation of the guidance. This will include working with the Ministry for the Environment to seek IPSF recognition for the SAFI Guidance. IPSF has already sighted the first draft and commended the move to achieve a common definition of sustainable environmental resource management among banks and push for international alignment.

Having that clear definition will be very valuable. Investors need to know how “sustainable” is defined so they can be assured their funds really are being applied sustainably. Get that clarity and a major obstacle to the flow of funds is removed.

Heartening progress

Kiwi food producers are already aware of the need to move in this direction and it’s heartening to see the progress made within the beef, sheep, dairy, horticulture, arable, deer and wine industries to become more sustainable. That includes more attention to catchment protection where excellent work by New Zealand’s farmers and growers.

Naturally, those producers are keen to know where they sit – what their environmental footprint is, and what the benchmarks and pathways to improvement look like. There’s a strong general desire to do the right thing. The key to that understanding is new technology that can enable the sustainability footprint to be measured.

It’s a learning curve for us as bankers too. These are new funding concepts and mechanisms and at Rabobank we’ve been spending a lot of time upskilling our teams to have those informed conversations on how this works. It’s not just about lending money, long-term impacts and outcomes are now on the table too. SAFI investment clients will be managing non-financial risks as well as financial ones, and holding their place in an environmentally aware community.

I’m optimistic Kiwi farmers and food producers will make this transition. They’ve proven their ability to adapt with new technology in the past and their importance to the economy and fortitude through tough times has been strongly displayed during the COVID-19 pandemic. I’m picking that within the next decade sustainability will be hardwired into their practices, as they take high-quality food to the world.

Rabobank’s global ambition is to grow a better world together and support sustainable food production and better environmental performance. It’s great to be part of The Circle’s initiatives to help make that a reality.

Partner PerspectivesJune 1, 2021