Banks step up pressure on Fonterra, farmers
Fonterra and its farmers risk not being able to access debt funding in the future if they don’t meet banks’ sustainability expectations.
‘‘We’re starting to see more and more pressure come from the banking sector,’’ Fonterra chief executive Miles Hurrell said in an interview at Fieldays near Hamilton on Wednesday.
Banks were wanting to set Scope 3 carbon emissions targets, which includes emissions they are indirectly responsible for, and not meeting their expectations could result in less favourable funding rates or ultimately not being able to access funding in the future, he said.
‘‘That’s something that we need to be aware of but it’s not a conversation we’re having with our banks at this moment,’’ Hurrell said.
Farmers would be facing similar risks with their businesses, he said.
‘‘I don’t want to speak on behalf of banks, but they are making very strong noises that they want to see farmers move as well in this direction,’’ he said.
‘‘Do we get debt funding for the co-operative, and even one step further, do our farmers get funding for their own mortgages is something that they need to be cognisant of.’’
At its annual meeting last month, Fonterra told farmer shareholders that the dairy cooperative was likely to set a target for its own Scope 3 carbon emissions, which would include its farmers as 91% of its emissions were behind the farm gate.
Fonterra also warned farmers that it risks losing customers and facing trade barriers in its overseas markets if it doesn’t meet sustainability expectations.
Hurrell said the co-operative’s customers were setting Scope 3 targets, and putting pressure on Fonterra to come up with its own targets.
‘‘We’ve done a lot of work on Scope 1 and 2 at our own supply chain and now the focus needs to shift to say, what do we need to do in Scope 3,’’ he said.
‘‘The risks from a customers and consumer perspective is that we may be in a situation where those customers don’t work with us, they purchase from other countries, and there are other countries that do have Scope 3 emissions targets in place in various sectors.’’