Banks take major step to turn climate commitments into action for global agriculture sector
Today at COP26, the World Business Council for Sustainable Development announced the Banking for Impact on Climate in Agriculture (B4ICA) initiative in partnership with EDF, the United Nations Environment Programme Finance Initiative and the Partnership for Carbon Accounting Financials.
Banks representing over 40% of global banking assets have already committed to aligning their portfolios with net zero emissions by 2050.
A major theme of this COP — the international climate change conference — is the urgent need to transition from commitments to action.
Action is needed to protect the agriculture sector from climate change, as farmers around the world are exposed to increasingly volatile weather that threatens global food security and rural livelihoods. At the same time, the sector must reduce its own greenhouse gas emissions, particularly potent methane and nitrous oxide emissions.
Fortunately, farms have the potential to reduce emissions, sequester carbon and build resilience — but farmers need support to make change at the scale and pace required to avoid major losses.
The finance sector must invest in climate-smart agriculture
Agricultural banks provide the capital farmers need to innovate and grow.
Banks can also provide financial tools, programs and other resources to incentivize climate-smart agriculture and support the transition to sustainable food systems. To develop these investment strategies, they need strong scientific and economic information on climate-smart practices and land use changes.
EDF’s agricultural finance research shows several viable pathways to boost climate and economic resilience of farms, banks, supply chains and rural communities. The work of the B4ICA initiative will support the development of such strategies at a global scale.
Why banks are joining forces to understand climate impacts of agricultural portfolios
Quantifying the GHG emissions of agriculture — a globally diverse and land-based sector — is particularly challenging. And, as the adage goes, you can’t manage what you can’t measure.
The B4ICA initiative will enable banks to accurately account for agricultural sector GHG emissions, ultimately supporting banks to collaborate with their farming and agriculture clients to transition to climate-smart solutions.
Importantly, leading banks including Rabobank, Santander, Wells Fargo and Barclays are participating in the initiative, which also has support from the Wells Fargo Foundation.
This pre-competitive collaboration will ensure that the products of the initiative will be useful for the banks that must employ them.
Moving forward, the B4ICA partners are working to bring more agricultural banks into the initiative. This is essential to our success, as is a focused effort to serve a diverse array of banks and farmers.
For example, in the U.S., national or global banks serve a very small proportion of U.S. farmers — less than 10%. The vast majority of agricultural loans are provided by small regional or community banks and the Farm Credit System of lending cooperatives.
The launch of the B4ICA initiative is an opportunity to engage a broader suite of financial institutions and ensure that the information and tools generated are useful to agricultural lenders of all kinds around the world.
This work must also spur the development of financial tools and programs that are equitable, as many farmers face barriers to access appropriate finance. Climate-smart agricultural solutions must be tailored to the financial needs of individual farmers, with particular care to listen to and support farmers who have experienced discrimination in access to finance or predatory finance.
Banks must act swiftly to translate the work of B4ICA into financial solutions that help the global agriculture sector reduce emissions and build resilience.