Finance falling on good soil

The agricultural sector is at a crossroads. On the one hand, production must keep pace to feed a growing global population on an increasingly warming planet. On the other hand, the preservation of fertile land requires a dramatic shift in approach. This shift calls for a new vision of agriculture that balances ecological and economic considerations. The success of this transition hinges on the collective efforts of all stakeholders – from policymakers and banks to farmers and consumers alike.

Public energy

To maintain production in the long run, sustainability in agriculture must go beyond simply reducing CO2 emissions. International agreements like COP28, the Kunming-Montreal Global Biodiversity Framework, and European initiatives such as the Common Agricultural Policy and the Farm to Fork Strategy provide essential guidelines.

Innovations such as biomethane, biogas, and agrivoltaic systems illustrate how agriculture can become more sustainable. With the help of subsidies, farmers and cooperatives can restructure their energy use. Biomethane and biogas, produced from agricultural waste, are more sustainable alternatives to fossil fuels, reducing greenhouse gas emissions. Agrivoltaic systems allow farmland to be used for both agriculture and energy generation, helping farmers reduce their dependence on traditional energy sources. These technologies support the energy transition while enhancing the resilience of farms in a changing climate. Financing these innovations is not just a public responsibility, business and investors also have the duty to safeguard the food supply of tomorrow.

Banking on a sustainable future

Green financing frameworks encourage companies, including those in the food industry, to invest sustainably. For instance, a sustainability-linked framework ties a company’s bank financing to concrete sustainability goals. Simply put, a company pays more for financing if it fails to meet these goals. FrieslandCampina, for example, recently raised €300 million, linking its interest margin to achieving sustainability targets. The dairy cooperative is committed to reducing Scope 1, 2, and 3 greenhouse gas emissions and developing more sustainable packaging and healthier food products.

Another model is the use-of-proceeds framework, where the interest rate is reduced because the loan is used for sustainable investments such as purchasing electric vehicles or installing heat pumps. These financial frameworks help reduce the ecological footprint of companies and play a crucial role in the broader transition to a more sustainable economy.

Farming with care

At the same time, we must critically assess the immediate impact of our consumption on nature. The direct effects of food production are evident in soil and water quality – both are essential for the future productivity of farmland. Practices like regenerative agriculture improve soil fertility and reduce pollution, such as acidification and eutrophication. This is vital, as the Netherlands has the highest number of threatened animal and plant species in Europe, according to Naturalis. In its National Biodiversity Dashboard, Naturalis outlines the goals needed to protect biodiversity, such as reducing pesticides, lowering nitrogen deposition, and minimizing nutrient surplus from fertilizers.

“Multinational food companies like Danone and McCain have successfully implemented regenerative farming in parts of their supply chains. Danone is collaborating with over 60,000 farmers globally to improve soil health, while McCain has committed to fully transitioning to regenerative agriculture for potato production by 2030. McCain is incentivizing farmers to rotate crops more frequently by financing technological solutions that make this process easier. The investments by Danone and McCain demonstrate that the transition to sustainable agriculture is not only an ecological responsibility but also brings economic benefits. The long-term viability of the agricultural sector requires adaptations that alleviate pressure on the environment and climate.”

Rado Georgiev, Sustainability advisor at BNP PAribas The netherlands