With an ambitious target set by the Australian red meat industry to be carbon neutral by 2030, the ability of producers to demonstrate sustainability credentials is becoming more and more of an imperative to future proof customer relationships, market access and access to capital. The Commonwealth Banks’ recent announcement of a sustainability linked loan with Queensland’s Stockland Group is testament to the global focus on sustainable agriculture and the role of ESG investment.
Australian agricultures’ “first” sustainability linked loan
In July this year, the Commonwealth Bank announced a new funding agreement it had undertaken with the premium Queensland beef producer Stockyard Group (Commonwealth bank, 2021).
Specifically, Stockyard Group has entered a sustainability linked loan (SLL) with the Commonwealth Bank, with the deal tying the facility pricing to five metrics grouped into three sustainability performance targets (Commonwealth bank, 2021).
These sustainability performance targets include:
- Reducing Scope 1 and 2 greenhouse gas emissions
- Improved animal welfare outcomes
- Workplace health and safety innovations
The deal serves as a point of leverage for Stockyard Group to secure capital and customers in the future, allowing for opportunities to access internationally recognisable ESG credentials (Commonwealth Bank, 2021).
Key metrics behind the move
Greenhouse gas (GHG) emissions from the livestock sector is a key metrics driving industry scrutiny and pushes to enhance sustainability across the red meat value chain.
There is growing interest from governments and communities to stop GHG induced climate change and Australia’s Red Meat industry has risen to the challenge, setting the ambitious target of reaching carbon neutrality by 2030.
As seen in the table below, enteric methane emission from livestock represents the largest source of GHG emissions from the industry, but it is not the only emissions source (Meat and Livestock Australia, 2020)
With global protein consumption expected to increase by 14% over the next decade and global beef production expected to increase by 5.8% to 75Mt by 2030 (OECD/FAO, 2021), reduced herd numbers is off the cards as a sole emissions reduction strategy.
Addressing the entire GHG balance sheet on farm
Development of methane reducing feed supplements will play a major role in mitigating enteric methane emissions, with Meat and Livestock Australia supporting R&D efforts in this space (Meat and Livestock Australia, 2020).
However, supplements are not the silver bullet to enhancing the green credentials of individual livestock farms.
Additional projects and strategies for addressing the “GHG balance sheet” of a farm business will be dictated by the context of the property.
Use of renewables and managing animal effluent for methane capture are some examples of the types of projects that can be undertaken by farmers to increase their emission reductions efforts.
Stockyard Group have undertaken several projects as part of a “multifaceted” approach to achieve sustainability targets (Condon, 2021), including:
- Replacing electricity with renewable energy- for example, providing approximately 60pc of the site’s electricity needs with an onsite solar energy array (Condon, 2021)
- Plans to launch a project to capture methane gas off covered sediment ponds
- Rainwater capture, recycling of wastewater projects and expansion of irrigation to “utilise effluent more efficiently” (Condon, 2021),
- Applying for a government grant to support a large-scale commercial trial of asparagopsis seaweed as ration additive to reduce enteric methane emissions from livestock.
What do Australian farmers think about sustainability linked loans?
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Commonwealth Bank. (2021, July 22). Australia’s first sustainability-linked loan for Agriculture. Retrieved 15 August, 2021 https://www.commbank.com.au/articles/newsroom/2021/07/sustainability-linked-loan-for-agriculture.html
Condon, C. (2021, July 22). Lotfeeder Stockyard secures Australian agriculture’s first sustainability-linked loan. Grain Central. Retrieved 15 August, 2021 https://www.graincentral.com/news/lotfeeder-stockyard-secures-australian-agricultures-first-sustainability-linked-loan/
Meat and Livestock Australia (2020). The Australian Red Meat Industry’s Carbon Neutral by 2030 Roadmap. Retrieved 15 August, 2021 from https://www.mla.com.au/research-and-development/Environment-sustainability/carbon-neutral-2030-rd/cn30/#
OECD/FAO. (2021). OECD-FAO Agricultural Outlook 2021-2030.OECD Publishing, Paris. https://doi.org/10.1787/19428846-en.