Expect more scrutiny of farm climate plans

Expect more scrutiny of farm climate plans

Agribusiness
National Australia Bank natural value associate director James Bentley joined the WAFarmers AgZERO 2030 meeting by Zoom.

National Australia Bank natural value associate director James Bentley joined the WAFarmers AgZERO 2030 meeting by Zoom.

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"The innovation of Australian farmers & their ability to keep managing risks will be very important."

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AUSTRALIAN farmers' ability to communicate how they are managing emerging risks of climate change and degradation of the natural environment will play a key role in how successful they are in engaging with financiers, private enterprise and their consumers.

Speaking at the recent WAFarmers' AgZERO 2030 meeting, National Australia Bank (NAB) natural value associate director James Bentley said the level of scrutiny around the world's big and small businesses in how they managed climate change risk would continue to grow, as more investors and financial institutions become interested in these themes at a macro level.

"In the 2020 version of the Top 10 risks judged by the World Economic Forum to the global economy - the majority are related to the degradation of our natural environment," Mr Bentley said.

"Things like growing water scarcity, loss of biodiversity and ecosystem services, failure of climate risk and adaptation.

"For our larger customers that have interest from international investors in their businesses, they are getting more and more questions around these topics.

"There's a market and opportunities for cheaper finance coming from investors where their assets can be read as green."

Mr Bentley said even Australia's smaller farm enterprises would be affected by the growing interest in how businesses managed their climate change risk and carbon emissions.

"While farmers may be a smaller scale enterprise, at some level, they will engage with a large entity, either through their resources and finance or their supply chains," Mr Bentley said.

"The innovation of Australian farmers and their ability to keep managing risks will be very important.

"There will be an increasing expectation around the communication of not just carbon emissions but how key risks are managed.

"The ability to manage emerging risks for your business will become a much more sophisticated processing component to accessing finance into the future."

With international corporations such as Nestle among a host of large-scale companies that have committed to improving the biodiversity of their supply chains, Mr Bentley said he expected the number of corporations committing to similar themes to continue to grow.

He said how financial institutions accounted for climate risk, which was a continually evolving area, would be "an interesting challenge".

"When a bank thinks about climate risk, it isn't just about carbon emissions, it's more about the exposure of our customers to the physical impacts of climate change," Mr Bentley said

"I can see a future where financiers will start working with large customers to begin with and then they will scale back through the system to gain far more granular information from their customers about their exposure to climate and other related risks."

Numerous speakers at the AgZERO 2030 meeting agreed that there was a need for consistent metrics to understand natural capital risk across supply chains, so that apples are compared with apples.

"We are seeing trade regulatory drivers coming out of the EU (European Union) and we're also seeing regulatory drivers, particularly for financiers, domestically," Mr Bentley said.

"ASIC (Australian Securities and Investments Commission) have said that directors in Australia need to account for climate risk in their decisions.

"APRA (Australian Prudential Regulation Authority) have just employed a climate specialist to work with banks on their disclosures related to climate risk.

"Climate risk management has been the flavour of what we've seen previously, but biodiversity risk is also rapidly growing as a key driver for businesses."

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