Nation’s banks ramp pressure on farmers to hit net-zero targets

Farmers that fail to take on-farm carbon action could risk being shunned by lenders in the future.

Farmers not working towards net-zero by 2050 carbon targets risk losing access to loans and finance, as Australia’s big banks increasingly tie lending to emissions reduction.

An Australian Banking Association spokeswoman confirmed that information concerning the “physical and transition risks of agricultural customers” was being included in a lending shift by banks when making loan decisions.

“It is prudent business practice for banks and businesses, including agricultural businesses, to be aware of the … risks of their business and to put in place plans to mitigate or adapt,” she said.

Global capital markets are also placing greater scrutiny on agriculture emissions and linking lending to environmental and social governance standards on-farm and across supply chains.

Director of the University of Melbourne’s primary industries climate challenges centre Richard Eckard.

Australia’s ‘big four’ banks are signatories to the United Nations Net-Zero Banking Alliance that represents 40 per cent of global banking assets. Signatories have committed to reaching net-zero financed emissions by 2050.

University of Melbourne primary industries climate challenges centre director Richard Eckard has been contracted by Rabobank, National Australia Bank, ANZ, Rural Bank and the Commonwealth Bank to train their customers in carbon farming techniques.

The roughly 5000 farmers who will participate must audit their on-farm emissions as part of the course, with that data then being used by banks to calculate exposure risks.

Professor Eckard said all banks were now aiming for “no exposure” to greenhouse gas emissions in their lending portfolios.

“I see banks sitting there struggling to find a way forward as well as farmers, they are as nervous as farmers are about net-zero. It is a difficult road, but that is the trajectory we are on,” he said.

“The next big tranche of capital coming out of Europe will be tied to environmental performance.

“So the banks know, before they can spend it in loans, they have to have some metrics up their sleeve as to why they are investing in farms with high greenhouse gas profiles.”

He warned that farmers who demonstrate robust and credible sustainability plans will be seen as a less risky investment for financiers than those that cannot.

Most Australasian-based banks secure varying amounts of capital from, and sell bonds into, global financial markets, particularly those based in the United States, Europe and the Middle East.

This means the lending criteria for some Australian farmers is guided, for example, by EU environmental regulations.

The Weekly Times cartoonist Chris Rule’s take.

The news comes as the National Farmers’ Federation confirmed it was in discussions with the federal treasury to help producers make “an efficient and careful” transition to sustainable farming.

National Farmers’ Federation president Fiona Simson said while the NFF was not aware of banks refusing or intending to refuse to lend to farmers, they “need to understand the complexity of farm emissions and balancing that with food and fibre production”.

“Farms are not single source emission points that can be measured by a meter on a smokestack, they are diverse and complex landscapes that emit and sequester simultaneously,” she said.

“Measuring emissions and sequestration on farms comes at a huge cost that has the potential to make farm businesses unviable and jeopardise food security.”