New Zealand is well known across the world for its competitive and innovative agricultural sector, with a well-earned reputation for producing clean and nutritious food. Less well known is what the sector is currently doing to respond to global challenges including climate change and long term sustainability. A short sabbatical to New Zealand provided Paul Silcock with an opportunity to find out more and what lessons there might be for the UK.
Free market farming
New Zealand has a unique history when it comes to farming. Most notably, in 1984 when the government, in response to a financial crisis, ended direct support payments to farmers. Now, almost three decades later, most would say that New Zealand’s agriculture is better for it; farmers have a much greater understanding of their market opportunities and have developed farming systems to exploit them effectively. These changes include more efficient beef and sheep systems and a significant shift into the more profitable dairy sector. There are environmental challenges however, including a deterioration in water quality and adverse impacts on endemic biodiversity. Reducing the sector’s Greenhouse Gas (GHG) emissions is an increasingly important focus.
Legislation, markets and other initiatives drive sustainability
With no direct support payments – including no equivalents to the EU/UK Basic Payment Scheme and no Agri-Environment-Climate payments – the New Zealand Government has relied on legislation and regulation to mitigate the environmental impacts. However, other ‘tools in the toolbox’ include research activity, regional partnership initiatives (e.g. Waikato River restoration and protection); supply chain initiatives (e.g. Fonterra dairy sustainability requirements and incentives); and increasingly stringent frameworks for private environmental markets (e.g. to address concerns about non-native forestry being encouraged through New Zealand’s Emissions Trading Scheme).
Banks and investors have a role too. This includes new forms of sustainable finance designed to help incentivise leading environmental and social practices on-farm, or offer cheaper rates to fund projects that help to ‘green’ farming practices. Banks are also encouraging the uptake of farm environment plans to: ensure compliance with regulations, farm assurance and supplier standards; reduce risks and earn potential incentives; and embed good management practices in areas such as freshwater management, biodiversity, and GHG management to ensure continual improvement of agribusinesses. Farmers and growers are asking for this support and it is good for banks too: developing relationships with more sustainable businesses; de-risking debt and lending; and enabling positive progress when reporting on climate and nature related disclosures (TFCD and TNFD).
Dana Muir, Head of Natural Capital at the Bank of New Zealand has said; “As the largest suppliers of capital to rural New Zealand, banks have a critical role to help farmers and growers as they work towards a more sustainable future”.
Five lessons from New Zealand for enhancing natural capital in the UK
So, what are the lessons from New Zealand for the UK when it comes to enhancing natural capital? There are probably too many to list (!), but here are some key ones:
- The Government is withdrawing direct support payments (BPS), and while environmental land management and other payments will remain, it can be expected to look to other policy levers (e.g. more/stronger legislation) to help achieve its environmental targets.
- Private environmental markets will play an increasingly important part in delivering carbon and biodiversity goals. However, a better regulatory framework for environmental markets can be expected to give confidence to increasingly savvy and concerned investors and avoid potentially adverse outcomes.
- Banks and other lenders can be expected to be more active and collaborative in supporting farmers and growers to transition to more sustainable systems and practices, through new forms of sustainable finance. This would have multiple benefits for both financial institutions and land-based businesses.
- Retailers, processors and others in the supply chain can also be expected to continue to ‘raise the bar’ via supplier requirements and incentive schemes to reduce GHG emissions and improve sustainability.
- More farmers and other land-based businesses can be expected to implement and benefit from farm environment plans or natural capital plans to enable them to navigate their way towards a more sustainable future.
Paul Silcock concludes: “In many ways, New Zealand is showing us how different actors in the land and environment sector in the UK may need to adapt going forward. At Cumulus, we recognise the value of good governance and regulation, collaborative approaches, innovative finance, support and incentives, and holistic, long-term planning at farm and estate level. We look forward to supporting our clients across the sector as they implement these positive changes, and continuing to exchange knowledge and experience with New Zealand and other countries tackling similar challenges.”
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