In your opinion, what role can banks play in the sustainable agriculture movement?
Our members and clients from the agricultural sector have been adopting more and more measures to support their sustainable capabilities. These often require significant investments that consume a growing share of farm revenues, a trend aggravated by the rising cost of farmland. From this viewpoint, sustainable agriculture should be seen not only through the lens of sustainable production but also in terms of the financial health of businesses; sustainable agriculture must have a solid economic foundation.
The adoption of new practices and new production models also depends on how dynamic the ecosystem is in terms of innovation, research, financial incentives, etc.
Taking all these perspectives into account, financial institutions can play several roles:
- Supporting sustainable development projects
- Encouraging and recognizing best environmental practices
- Supporting the development of innovative practices and technologies
Supporting sustainable development projects: Whether the project supports transitioning to organic farming, protecting waterways by establishing buffer strips or purchasing more efficient equipment to reduce waste, profitability gains for businesses often take some time to materialize. By incorporating ESG criteria in their practices, financial institutions can be more flexible when analyzing projects and offer advantageous financing arrangements. However, support from the financial institution should not be limited to financing, but could include assistance with project planning and implementation.
Encouraging and recognizing sustainable development best practices: Financial institutions have a vast array of tools they can use to help achieve this objective. For example, they can set aside funding to support innovative projects, provide an advantageous product offer when a business meets a sustainable performance target, or recognize sustainable projects through grants. For instance, Desjardins has partnered up with a regional foundation to offer a support and recognition program, including grants, aimed at finding effective and sustainable ways to encourage producers to better manage farmland along waterways in order to improve water quality, increase biodiversity and reduce greenhouse gas emissions.
Supporting research on innovative practices: As the last example shows, financial institutions, in addition to supporting best practices, can position themselves as ecosystem players that generate sustainable development solutions for businesses. At Desjardins, we have successfully positioned ourselves as stakeholders that can accelerate the development of this ecosystem, for example, by providing financial support to technological innovation hubs and research groups supporting the agricultural sector.