Mid-Canterbury dairy farmers Greg and Rachel Roadley are producing good profits while keeping their nitrogen loss and greenhouse gas emissions to a minimum.
Mid-Canterbury dairy farmers Greg and Rachel Roadley are producing good profits while keeping their nitrogen loss and greenhouse gas emissions to a minimum.
We need to develop a practical framework and classification for sustainability that aligns with global standards, says Mark Hiddleston.
Mid-Canterbury dairy farmers Greg and Rachel Roadley are producing good profits while keeping their nitrogen loss and greenhouse gas emissions to a minimum.
Since the first frozen meat exports, ANZ has stood with our exporters as they develop new technologies and opportunities. Today, a new frontier has opened for exporters as New Zealand transitions to a low-carbon and more sustainably developed economy.
Consumers globally are increasingly making purchases based on their perception of a product's environmental sustainability.
We recognise the opportunity and understand this requires a significant shift not only by exporters in how they produce export goods, but also by the finance sector in how they can help businesses develop and embed Environmental, Social and Governance (ESG) principles.
Adopting these principles shows the world how committed New Zealand and New Zealand businesses are to sustainability.
Commitment requires innovative thinking, and we're supporting the rapid innovation in this area with Green Bond Principles, Climate Bond Principles and widely adopted sustainability metrics providing the framework for change.
The challenge for all of us is to take this through to grassroots businesses to ensure we have confidence to invest, can incentivise the right behaviour, make real change and most importantly deliver what consumers want, both on and off-shore.
We need to develop a practical framework and classification for sustainability that aligns with global standards to ensure New Zealand's definition of sustainable is internationally recognised. This will accelerate the investment of capital into sustainable projects.
A good example of how the finance sector is re-directing capital to support the transition to a sustainable economy is ANZ's recent partnering with Synlait to secure New Zealand's first sustainability-linked loan.
Mark Hiddleston. Photo / Supplied
This is important because consumers globally are increasingly making purchases based on their perception of a product's environmental sustainability — a trend recognised and welcomed by Synlait which has a stated purpose of "doing milk differently for a healthier world".
In 2018, Synlait released bold sustainability targets focused on reducing greenhouse gas emissions, avoiding the use of coal, improving water quality and supporting farmers and local communities.
Part of that commitment included a sustainability linked loan tied to ESG metrics.
Linking the cost of borrowings to sustainable outcomes took courage, but underlined their commitment to achieving those outcomes.
The $50 million four-year loan encourages Synlait to further improve its performance against a set of independent ESG criteria.
The new loan — which refinances an existing ANZ loan — is structured to provide a discount or premium applied to the base lending margin based on third-party assessor Sustainalytics' annual assessment of Synlait's exposure to financially material ESG risks.
For Synlait this "made perfect sense" reinforcing to shareholders and stakeholders its commitment to continuously improving performance and disclosure aligned to the company's purpose.
For ANZ, the partnership is an opportunity to jointly showcase that these types of initiatives can deliver material benefits.
We believe strong ESG planning and management is an indicator of strong future performance, and Synlait's strategy and commitment to sustainable business practices made it an ideal candidate for this type of financing. We also believe we can accelerate the transition to a lower carbon, more sustainable economy by incentivising customers to out-perform on their sustainability agendas.
Getting to grassroots
Synlait is also asking its farmers to voluntarily commit to delivering reductions in greenhouse gas emissions and water use, with incentives offered for doing so through its Lead With Pride programme.
The programme recognises farmers by rewarding them with a premium milk payout if they achieve dairy farming best practice in the areas of environment, animal welfare, social responsibility and milk quality.
Synlait has boldly committed to achieving on-farm reduction of greenhouse gas emissions by 35 per cent per kilogram of milk solids by 2028, including a reduction of methane by 30 per cent. By 2028 the company is also aiming to reduce greenhouse gas emissions by 50 per cent for its manufacturing sites and supply chains.
Providing these types of incentives to farmers who are preserving and growing the value of their land through investment in natural capital is important.
We are seeing more examples of farmers changing the way they farm to create much more environmentally, financially and socially sustainable business.
Mid-Canterbury dairy farmers Greg and Rachel Roadley are a great example. Together they have built a successful business able to withstand the challenges dairying will face in the next few years.
Mid-Canterbury dairy farmers Greg and Rachel Roadley are producing good profits while keeping their nitrogen loss and greenhouse gas emissions to a minimum.
The couple, who supply to Fonterra, milk 3100 cows across five farms in Mid Canterbury and North Otago. Their low-cost, grass-based system is producing good profits while keeping their nitrogen loss and greenhouse gas emissions to a minimum.
"We view ourselves as pasture farmers that happen to harvest the grass with milking cows," says Greg Roadley.
Viewing their farm as a system, the Roadleys scrutinise every input.
"We constantly challenge conventional wisdom and what we did the previous year, continually reviewing and tweaking our system to drive productivity."
An openness to adopting new technology is also a large part of the Roadley's approach. Soil probes are installed on the couple's farms, giving them up-to-date data on the moisture and temperature of the soil.
This means they only irrigate when necessary and only apply fertiliser when the ground is warm and the grass is growing and able to absorb the nutrients.
This approach ensures their pasture grows and provides the maximum food and nutrition to the cows.
It also means there is minimal loss of nutrients like nitrates and phosphates through leaching from the soil, benefiting the environment.
"Our objective is to have stability and repeatability, and that's what our system is set up to deliver."
Many of the changes the Roadleys have made to the running of their farm have been driven by their desire to be more efficient and profitable, but they also believe there's an important role for banks and other financial institutions to play in the years ahead.
"Farmers are having to move in a more sustainable direction," says Greg. "Support and signals from the marketplace, the financial institutions or industry will help that direction of travel."
The Roadleys are a great example of a couple who have challenged themselves to showcase good sustainability practises. This is the mindset our industry needs if it is to prosper, and showcasing best practice is important.
But as a finance sector we need to take best practice and benchmark it against recognised and consistent measures. In time, good benchmark performance should influence where capital goes.
A sustainable primary sector is vital to New Zealand's economic wellbeing, but achieving this goes beyond investing in environmental initiatives on the farm. It involves a significant system change at many levels, including the finance sector.
• Mark Hiddleston is Managing Director, ANZ Commercial & Agri
