Is there fertile ground for sustainability to grow in food and agriculture?

Just as in the energy sector, the global demand for food is growing at a time when the urgency to decarbonise is at its highest. At the same time there is a need to halt and reverse nature loss putting further constraints on the amount of land used for food production. The European Environment Agency estimates that 11% of all carbon emissions and 52% of all methane emissions in the EU stem from agriculture. With the EU’s 2030 climate target looming on the horizon,  agriculture  will have to up its pace of sustainable value chain transformation and reducing emissions, which currently stands at -25% since 1990.

This transformation is not just about the environment; it's also about people and consumer habits. Sustainable practices in food and agriculture are crucial for ensuring long-term food security, improving public health, and creating resilient communities. Reducing emissions can lower the probability of extreme weather events, protect our ecosystems, and ensure a healthier, more sustainable future for generations to come.

At ING, our Food and Agriculture team consists of professionals with in-depth expertise in sustainability in this sector and in specific segments such as grains & oilseeds, fruits & vegetables, beverage, sugar, dairy and proteins, and we service the primary producers and processors in these segments across EMEA, Americas and Asia Pacific. Through our financing, we support clients’ initiatives to lower their carbon footprint, and work with them to understand how we can make further improvements together.

At the same time, we know that sustainability doesn’t end at decarbonisation. We also consider connected issues, such as deforestation, biodiversity, regenerative agriculture, and climate adaptation.

In our wider Food and Agriculture Wholesale Banking portfolio, we mostly work together with large corporates who act as off-takers of farm products or food processing companies. They all share similar challenges around sustainability. These involve striking a balance between decarbonising, protecting nature and providing healthier food to consumers.

Mayke Geradts,  Sustainable Solutions Group lead for Commodities, Food & Agri, says:
One of the greatest challenges for our clients is how they’re dependent on other parties in the value chain for lowering their carbon footprint. While they can reduce their own (scope 1 and 2) emissions with relative ease, most emissions are produced further in the supply chain, with farmers. As a result, it takes a lot of cooperation between value chain partners to achieve their respective net-zero goals, and those of the industry as a whole.

It’s in recognition of this interdependency between up- and downstream players that ING has a Sustainable Value Chains team, whose role is to connect different key stakeholders and encourage the design of solutions that are mutually beneficial. Accelerating the transition to sustainable value chains, including financing nature-based solutions, are key focus points of this team.

The global nature of food and agriculture supply chains means there are clients in markets with less developed reporting environments or subject to weaker regulations. Data gathering can therefore become complex, to the extent that the agriculture sector was removed from the EU Taxonomy as it was too difficult for companies to set an emissions baseline or develop an accurate trajectory.

Also affecting progress is the prioritisation of availability and affordability over sustainability. Demand for food is growing as population sizes increase, which means the focus for food processors is often related to how they can increase sales and capacity, make acquisitions and investments, build more factories etc. And  there’s a reluctance over passing on costs to consumers (especially for retailers), who already face higher grocery prices. Consumers at their end seem to be less willing to pay a premium for sustainable products.

Kiran Sanchit, Head of Food & Agri, says:

Despite all the challenges, we still see more and more companies introducing sustainability targets, aiming to not only make their production more efficient yet also more environmentally friendly. When those two ambitions go hand-in-hand, sustainability really can become an economically viable business case.

Ever since the arrival of a global biodiversity framework at COP15, companies have had a UN-backed target for halting biodiversity loss. Three years on from that landmark moment, we see it’s a topic that’s top of mind for investors. The 2030 timeline on protecting 30% of land and water considered important for biodiversity is approaching, and investors are responding to this urgency, also in the knowledge that nature-based projects have a more visible or tangible impact.

Yet unlike carbon emissions, it’s difficult to quantify improvements related to nature. At ING, we’re currently developing a nature framework to better understand the impact of our financing, and where we can direct it to make further gains. Our current transition-focused client engagement is being expanded based on our ‘no deforestation’ stance with nature-based engagement. From here, we aim to expand our nature engagement further. For some of our sectors, like metals or mining, we have an extensive due diligence process which includes accounting for a project’s potential impact on nature. We aim to have the same standard of analysis for food and agriculture. For example, we want to know how dairy factories or breweries are managing their intensive water use and mitigating against waste.

Kiran says:

For example, one client in Spain used the funding that we and other banks provided to install better water irrigation systems, as the region they were in experienced severe draughts during the year. This was a company that was prepared to make the right investments to cope with climate change, now and into the future.

We also see a role for us as a bank in the regenerative agriculture space. It’s a topic that’s less mature than decarbonisation and our level of funding in this area is currently low, but with our experience in enabling cooperation across the value chain, we’re well suited to help scale regenerative agriculture initiatives. These (mostly) farm-level initiatives require buy-in from downstream parties, who would be much more likely to invest if there was a sound business case. A ‘nature credit’ model, where companies could offset their activities as they do with their carbon emissions, would be a good incentive for departing with their capital.

Currently, most EU grants go to traditional farmers and not to those with alternative and more sustainable approaches. Also there is a lack of cooperation across the value chain and standardizing across countries. At ING, we encourage companies to work together in addressing these challenges across the entire value chain and to engage with stakeholders responsible for policy changes. We organize roundtables to foster these discussions and decided to be founding partner for the Food Transformation Forum where the c-suite and other senior stakeholders of the food industry in the Netherlands come together once a year to speak about these topics. Next to this we have strong engagement with our clients - as also expected by our supervisory bodies - of which we encourage to have a transition plan in place to cope with the environmental challenges they are facing, including to an increasing extent nature-aspects.

We recognize that the transition of the agricultural sector is essential for a healthy planet and healthy people. At ING, we see it as our duty to play an active part in supporting this transition. Through our financing, knowledge, and extensive network, we are committed to supporting our clients in successfully navigating these changes. By fostering collaboration across the value chain and seeking partnerships to advocate for policy changes, we aim to help our clients create a more sustainable and resilient food system for the future.

Society is transitioning to a low-carbon economy. So are our clients, and so is ING. We finance a lot of sustainable activities, but we still finance more that’s not. See how we’re progressing on Opens in a new tabour climate approach.

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