Climate Bonds commences work on Agri-Food transitions Criteria Development – Crop and livestock production

The criteria will outline the transition pathways and benchmarks required for agricultural production, specifically crops and livestock. The production must meet or align with net zero and other crucial agri-food system goals. 

Climate Bonds has kicked off the Agri-Food transitions Criteria Development. The proposed crop and livestock criteria will build upon existing Agriculture Criteria, which can already be used to certify assets and activities. The updated Criteria will include expanded scope allowing for the certification of entities and Sustainability Linked Bonds (SLBs) in the crop and livestock production sectors. The process will result in the development of two sets of sector criteria. 

This early stage of Criteria development involves the consultation of technical and industry experts in these subsectors. These experts, through Technical and Industry Working Groups (TWGs and IWGs), will ultimately determine the form and relevance of the Criteria. 

The first set of  Agriculture Transition Criteria will define and evaluate crop and livestock production companies by encompassing various components, including climate mitigation, climate adaptation and resilience, land use change, biodiversity, water use and quality, food loss and waste, circularity, and just transition. 

What’s in and out of scope? 

The Criteria aim to address the climate and environmental impacts of crop and livestock production.  

This is part of a wider programme to address the transition in agri-food systems, which will also develop standards for commodity procurement strategies and other key elements of the value chain. 

Protected agriculture is out of scope for the present criteria, as are forestry and biofuel crops. 

Why the agri-food sector for transition investment? 

Agri-food systems are responsible for 31% of global anthropogenic greenhouse gas (GHG) emissions(link is external). At the same time, it accounts for 70% of all water withdrawals(link is external) and is the main driver of global biodiversity loss(link is external).  

Meanwhile, it is projected that the global population will increase to 10 billion by 2050, resulting in a 50% increase in food demand, with global grain demand projected to double. Food security will have to be secured through climate adaptation of the sector, not only through improving current practices. Yet, this must not be detrimental to other environmental goals such as climate and biodiversity. 

There is a growing consensus that the agri-food sector must become ‘climate and nature positive’ to align with net zero fully. This means first finding a shared understanding of what a 1.5oC-aligned climate transition looks like for agriculture. Additionally, other agri-food system goals such as land use change, biodiversity, water use, quality, circular economy, and just transition must be safeguarded. 

For this, green definitions are needed to facilitate financial flows to companies that genuinely contribute to transition in the sector, which is where the criteria come in. 

It means encouraging sustainable farming practices, improving soil carbon, and maintaining productivity with less inorganic fertilisers, particularly tackling commodities that are responsible for high emissions. 

Climate adaptation will be needed through more resilient breeds, climate warning systems, and social safeguards. 

Natural land conversion, including deforestation, must also be eliminated for agriculture. Agriculture must increase and protect biodiversity rather than decrease it. 

Climate Bonds seeks technical and industry experts 

To develop the Criteria, the Climate Bonds is establishing an Agriculture Technical Working Group (TWG) of international experts drawn from universities, multilateral-development banks, and consultancies. The Agriculture Industry Working Group (IWG) – comprised of agriculture industry stakeholders, investors, and verifiers – is also being convened. It will provide feedback on usability throughout the process. 

*Further details on the existing Agriculture Criteria can be found here. This includes a previously established Agriculture TWG and IWG.* 

The current agricultural transition Criteria development represents a significant expansion of the existing criteria. Climate Bonds are therefore seeking new members for each Working Group. Voluntary participation in these groups provides an excellent opportunity to drive change in the financial market, which is crucial if the sector is to transition successfully.

The Climate Bonds team will lead the Criteria development process, working closely with a Technical Lead consultant. Applications for this role will be received via Workable, and anybody interested is encouraged to apply. 

New horizons for certifications 

Final publication of the crop and livestock production Criteria is expected by the end of 2023; at which point, they will be some of the first Climate Bonds Sector Criteria to be able to certify more than just Use-of-Proceeds bonds. 

The overarching Climate Bonds Standard is being updated to version 4.0 – to be launched in January 2023. This will allow certification of Sustainability Linked Bonds (SLBs) and entire entities. The crop and livestock production Criteria thus reflect that the Key Performance Indicators (KPIs) underpinning an SLB, or a crop and/or livestock production company’s transition strategy, could be certified. 

See here for further details on what this means.  

Why get certified? 

Certification indicates to investors that proper climate due diligence has been carried out on the assets or company they are investing in – a robust and credible way for that bond to enter the market, be it a transition bond or an SLB. 

The benefits of issuing a Certified Climate Bond include the following: 

  • investor diversification (crop and livestock producing issuers should find they attract new investors by certifying) 
  • greater investor engagement 
  • investor stickiness (investors buying Certified Climate Bonds tend to buy and hold) 
  • strengthened reputation (certifying shows commitment to delivering sustainable agriculture) 
  • freeing up balance sheets. 

The complete list of Certifications using the Climate Bonds Standard can be found here.  

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