The government and consumers of food and fibre products aren’t the only ones asking farmers about environmental and social sustainability. Increasingly, bankers and financers want to know too.
Dean Spicer, ANZ’s Head of Sustainable Finance, told farmers and growers at the Primary Industries NZ Summit that a paradigm shift is underway on the way business is done, and will be done in the future.
“That’s a shift from shareholder primacy to stakeholder primacy, where the broader stakeholder groups now have the power.”
More and more investors are focused on who is using their money, and for what. In terms of farming, that’s not just about water and emissions impacts, but also the way farmed animals and members of the workforce are treated.
A survey last year by the Responsible Investment Association Australasia, a network of 300 members together managing $9 trillion in assets, showed around 70% of Kiwisaver investors wanted their money managed ethically and responsibly – and would shift providers to achieve it.
Investment managers are on notice, Dean said.
New Zealand imports a lot of its capital, and ANZ is one of the biggest funders of business in the country.
“So when we go to the capital markets, what we’re finding – particularly out of the larger markets like Europe and the US – is that they want to understand that sustainability strategy, and proof that we’re actually delivering on it.
“Part of our role is to signal those trends [to borrowers],” he said.
Sustainability is also a hallmark of the food and fibre New Zealand is selling in scores of overseas markets, so this investor/finance pressure and where farmers, growers and processors want to be, can dovetail.
A flipside of the trend is matching government regulation. Our government is one of the first in the world to signal to corporates that climate change risk reporting will be compulsory.
The EU and USA have just announced proposals for a carbon border adjustment price for imported goods – i.e a tax on foreign goods that aren’t subject to carbon pricing in their home countries.
More indicators of financial markets paying attention to environment and social criteria is that since green bonds (debt instruments specially reserved to raise money for climate and environmental projects) were first issued in 2007, the global market has grown to around US$1 trillion (about 48% of all sustainable transactions).
Green loans now make up about 13 percent of the Australian market.
“Here, we’ve seen the first sustainability-linked loan done with Synlait. ANZ was pleased to be the lender and there’s a pricing adjustment depending on how well they’ve delivered on those targets around sustainability,” Dean said.
“What I’m trying to get across is that right across your overall purpose through to your sustainability strategy and setting up finance, and everything in between, there’s this lens around consistency of messaging and actions.”
Speaking at the same PINZ session was Vicki McColl, Silver Fern Farms chief financial officer. She described the 16,000 sheep, beef and deer farmer supplier company’s vision for becoming the most successful and sustainable grass-fed red meat company in the world.
“Inclusion of the word sustainable in there is very deliberate. We are a market focused company and the signals we get from the market are that our grass-fed, naturally raised products have the attributes the market values and will pay a premium for.”
Under Silver Ferns’ ‘sustainable chain of care’ programme, they have been reporting annually on social, environmental and financial sustainability goals since 2017. They’re certified through Toitū on their carbon footprint “and since we’ve been recording that we’ve seen a 20 per cent reduction in emissions”, Vicki said.
With funding from the Sustainable Food and Fibre Futures Fund, a Farm Carbon Pilot has been running, with the aim of getting those farms to certified carbon neutrality by 2030.
“The objective was to understand if we could find offsets within our own supply chain [not just buying outside offsets] and take that carbon neutral product to market, extract a premium from it and pass that premium back to the farmers to recognise the sustainability work they’d done.
“There’s been an enormous amount of work go into this; our farmers are very excited about it,” Vicki said.
Sustainable finance – what’s happening
ANZ’s Dean Spicer highlighted these four mega trends:
- Significant, ongoing momentum of ESG (environment, social and governance) factors – as ESG integration goes mainstream, investor approaches are evolving at a rapid pace.
- More standards, regulation, transparency and disclosure requirements are to come. In New Zealand, compulsory climate risk reporting by companies will become mandatory.
- Consumer trends are driving an increasing focus on the provenance of products and services consumed.
- Businesses need to consider wider stakeholder groups. Profit + purpose have become the joint mandate.