Agriculture and forestry-related projects could start issuing climate bonds as early as the autumn, according to Justine Leigh-Bell, manager of the standards programme at the Climate Bonds Initiative (CBI).
The CBI, a not-for-profit organisation focused on mobilising the bond market for climate change solutions, is getting closer to establishing criteria for climate bonds in the agriculture and forestry sectors after an industry working group met for the first time earlier this month.
A Climate Bonds Standard is a FairTrade-like labeling scheme for bonds that allows investors to easily prioritise ‘climate-smart’ investments.
The industry working group, made up of professionals from large agribusinesses, agri asset management firms, banks’ sustainability departments and development finance institutions, is now working with the technical committee, which launched in November.
That committee has produced a first draft of the eligibility criteria for projects to be certified under the Climate Bonds Agriculture & Forestry Standard and a public consultation will take place in July, according to Leigh-Bell.
While some bonds could be issued as early as the autumn, the process of developing standards will continue for another year.
“It is likely that green bond issuance in the agri space will target the low hanging fruit to start with such as technological innovation in the sector especially around climate-smart agriculture, and these are likely to come out of Europe and the US mostly,” she told Agri Investor.
“But the scope for emerging markets is also huge,” she added. “Companies could potentially raise green bonds to fund better ways of managing their supply chains that could benefit smallholder farmers, for example. The standard is there to provide assurance on the impact of the investments and ideally act as a discoverability tool for investors on new areas of investment in the sector.”
Ensuring the standards provide adequate guidelines for projects to follow, and designing a system that will incentivise the right behaviour is essential, according to Tim McGavin, chief executive of Australian agriculture asset management firm Laguna Bay and a member of the industry working group.
“For me it’s very important that we design really robust guidelines that avoid any perverse consequences; there’s got to be a lot of thoughts about the consequences of the consequences of this sort of thing,” he told Agri Investor.
Climate bonds are usually issued around $100 million in size which could limit the availability of this source of funding for some agricultural production projects, according to Leigh-Bell.
“The challenge is size,” she said. “Typically institutional investors are not looking at anything less than $100 million – being able to aggregate agri projects into a sizable portfolio attractive to investors will require credible standards.”
The UNFCCC has estimated that globally, about$14 billion will be required in 2030 to cope with the adverse impacts of climate change in the Agriculture, Food and Forestry sectors
Sean Kidney, chief executive of the Climate Bonds Initiative said: “The end-goal of this initiative is to catalyse increased investment, by both private and public bodies, in mitigation, adaptation and resilience interventions in agriculture and forestry. Looking for ways of doing that in a commercially viable way that will support bond issuance is one of the things we’d like to tackle through this particular committee.”
The members of the industry working group are:
- Ali bin Mohamed, Hassad Food Company
- Brian Kernohan, Director of Policy & Environmental Advocacy, Hancock Natural Resource Group
- Chris Brown, General Manager for Environmental Sustainability, Olam
- Cristiano Oliveira, Sustainability Consultant, Fibria
- Esben Brandi, Head of Timberland, Quantum Global
- Fabian Huwyler, Vice President, Sustainability Affairs, Credit Suisse
- Hans Biemans, Head Sustainability, Markets, Rabobank
- Jason Green from ECOM
- John Simpson, Vice President, Duxton Asset Management
- John Tobin, Global Head of Sustainability, Credit Suisse
- Justin Sherrard, Global Stretegist, Rabobank
- Karla Carnavan, Commercial Director, Bunge
- Katalin Solymosi, Sustainable Land Use Associate, Inter-American Development Bank
- Lara Yacob, Director of Corporate Engagement, TNC
- Mads Asprem, CEO, Green Resources
- Marc Sadler, Adviser, Agricultural Risk and Markets, Agriculture Global Practice, World Bank
- Marcos Mancini, Director, Sustainable Banking, Banorte
- Michiel Hendriksz, Director of Sustainability, ADM
- Olli Haltia, Dasos
- Robert-Carl van Koppen, Director, Form Valuations
- Tim McGavin, CEO, Laguna Bay
- Timm Tennigkeit, Managing Director, UNIQUE Forestry and land use