Seeking innovation in food and agricultural sustainability
BANGKOK, April 5, 2019 – The six-year running Responsible Business Forum on food and agriculture has turned into such a reunion that the event moderator of the most recent forum in Bangkok on March 26 and 27 advised the attendees to “not talk to the same people you always do.”
But it was a hard order to follow for most of the nearly 200 companies represented.
In a session that USAID Green Invest Asia moderated on agricultural financing, Robert Barker, BNP Paribas’ Chief Sustainable Business Officer for the Asia-Pacific region, highlighted the challenge of growing sustainable business: “One issue is, it is often the same people in the room. We need to have more aligned conversations with those involved in financial allocation and decision making, who are still largely missing [from the room].”
Despite the increase in the number of lending products tied to environmental, social and governance (ESG) impact criteria in recent years, sustainability-linked loans are still a relatively new concept, said Mark Tan, ING Bank’s head of commodities for food and agribusiness in Asia.
“It takes more explaining to clients,” Tan said. These loans reward borrowers with lower interest rates if they can prove meeting social and environmental criteria. But the vulnerability that comes with increased scrutinization and independent verification can be a hard sale for companies, said Tan. “The more transparent a company is, the more risk of judgment there is.”
There has been an uptick in such loans, nevertheless. There were some $36 billion in sustainability-linked loans in 2018, according to the credit rating agency, Moody’s. And the Asia Pacific Loan Mark Associate, a regional trade group for lenders, recently co-launched lending principles that listed, for the first time, “sustainable farming and food” as a category. “The pace of pick-up is rapid in Asia even by banks that you do not expect to be in this business,” said Nicholas Gandolfo, associate director of sustainable finance with Sustainanalytics, a global provider of environmental, social and governance (ESG) research and ratings.
But it will take more than finance to radically transform food production to keep apace with population and climate change. “The sheer magnitude of challenges [to food security and supply] makes it hard to respond cogently,” said Kundhavi Kadiresan, the UN Food and Agricultural Organization (FAO) representative for Asia. FAO is part of a non-profit consortium that created the Sustainable Rice Landscapes Initiative to increase rice climate-smart farming techniques and investments in Asia.
The U.S. Agency for International Development’s (USAID) Regional Development Mission for Asia deputy director, Jeffrey Spence, shared how the U.S. Government has helped de-risk land investments in the region, including launching USAID Green Invest Asia in late 2017 to connect sustainable agribusiness and forestry companies in Southeast Asia with green finance. A carbon assessment USAID Green Invest Asia conducted for a natural rubber plantation in Indonesia helped attract almost $24 million in investment last month.
Organizations discussed how they are deploying technology, including Artificial Intelligence, to boost production and transparency. Examples included the Thai conglomerate known as CP Group’s use of robots to monitor chickens’ health, the U.S. NGO Winrock’s experience scaling agricultural technology in frontier markets and the Canadian company, GeoTraceability’s design of a robot to connect end users to food producers. “When I founded this company to trace production back to smallholders, people said I was crazy,” said head of GeoTraceability, Pierre Courtemanche. “Now, we have competitors.”
More change is inevitable as food travels farther and value chains become more complex, said FAO’s Kadiresan. “Necessity is the mother of invention,” she said, highlighting the tension between short and long-term business goals, and the challenge for companies to become sustainable . The event moderator, Malcolm Preston, summed up the challenge participants face year after year. “How do we feed an increasingly wealthy population while protecting the poorest and mitigating climate change – all at once?”