Financial sector can play an important role in reducing greenhouse gas emission

The study was commissioned by Rabobank and executed by Wageningen University & Research and Blonk consultants. The results of the study are meant as input for the initiative Banking for impact on climate in agriculture (B4ICA). In this initiative financial institutions will work on the development of solutions to support them and their clients to align towards Net Zero and Paris Agreement goals.

Financial sector wants to contribute

Climate change and the reduction of GHG emissions is one of the most important challenges for companies in the agro supply chains. Agro-chains produce a significant amount of total GHG emissions in the world but could also play an important role in reducing emissions.

Luke Disney (SVP Sustainability & Climate, Rabobank): “In most agro supply chains a large share of the emissions takes place at farm level, but this does not mean that it is just up to the farmers to solve the problem. The financial sector can and wants to play an important role in contributing to the solution of this problem. This study of WUR gives us very useful insights to build on in our B4ICA initiative that we started with other global (agricultural) banks”.

Dairy sector as case

The goal of the feasibility study was to assess the possibilities and challenges for what is seen as three key elements of a joint approach for the financial sector: methodologies for GHG emission target setting, estimating current emissions and identifying mitigation options.  We studied the dairy sector in four countries (Netherlands, New Zealand, Australia and USA) as a pilot for a global approach for all sectors

Target setting

A general approach for science-based target setting is available. This approach is however still lacking globally harmonized standards for some elements that are very relevant to agro-sectors like land use change and carbon sequestration.

For the studied countries national or sectoral targets have been set. The recommendation to the financial sector is where possible to align with national or sectoral targets. This is more efficient and working together with other stakeholders is a prerequisite to create impact

Monitoring emissions of farms

Monitoring on portfolio level can be organised in different ways. It can be realised by using (regional) averages for groups of farms but if you also want to incentivize individual farms  the totals should be aggregated GHG emissions from individual farms. Overall, many different tools are available to calculate GHG emissions on farm level. The tools differ in scope, in inclusion of other environmental themes, in methodology, in resolution/precision, in connection to (digitally) available data and finally in outreach in use by farmers. If there are no (national) tools available, the alternative is to work with samples of farms either by asking clients to use a farm level tool or to extract information from existing samples like national Farm Accountancy Data Networks for monitoring purposes.

The financial sector is advised to align with existing tools and programmes when they are available and widely used or are expected to be widely used in the near future. This offers a great possibility to raise awareness and to organise (joint) incentives from the dairy processors, the financial sector and governments.

Mitigation options

Related to greenhouse gas emissions the dairy sector (and more in general agriculture) is more complicated than many other sectors. For the dairy sector many mitigation options are available. The report offers an overview of a large number of mitigation options, their GHG reduction potential and their requirements (skills, investment, time).

Alignment with  relevant stakeholders is critical to achieve impact. Therefore, the report proposes to work with a growth model. Align with the tools that already are in use and with the goals that already have been set.