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Standard Bank targets smart agricultural finance

Standard Bank targets smart agricultural finance
07-06-23 / Sisanda Ndlovu

Standard Bank targets smart agricultural finance

Johannesburg - With agriculture accounting for 75% of Africa’s trade, 70% of its employment and over 20% of the continent’s GDP, it is critical for Africa’s farmers to understand how climate change impacts agriculture and how agriculture influences climate change. 

Climate change is a material risk for Africa and the world. Agriculture has an especially impactful relationship with climate change as the sector is both a contributor of greenhouse gases (GHGs) as well as, potentially, one of the world’s greatest carbon sinks.

In short, “agriculture has a disproportionally large role to play in reducing carbon emissions and sequestering carbon. Understanding and introducing more climate smart farming practices will assist the industry in achieving a just transition to a more sustainable future,” explains Louis Van Ravesteyn, Group Head: Agribusiness, Business & Commercial Banking, Standard Bank.

In as much as agriculture releases carbon into the atmosphere, sustainable agriculture focuses on systems that conserve land, water, plant, and genetic resources in environmentally regenerative, technically appropriate, and economically and socially enhancing formats. Farming systems that are climate-smart can adapt to and help manage climate risk, countering global warming by reducing GHG emissions.

As a leading African financial institution, Standard Bank has developed a strategy to finance climate-smart agriculture on the continent. The aim is to increase food security, support livelihoods, strengthen resilience of food systems to climate change and variability, reduce emissions of GHGs and sequester carbon on farmland.

“By financing climate-smart agriculture, Standard Bank promotes the development of a sustainable agricultural sector in Africa, ensuring that the continent realises its potential as a global agricultural powerhouse,” says Tunde Macaulay, Head: Africa Regions, Business & Commercial Banking, Standard Bank.   

To enable African agriculture to play a more meaningful role in reducing its carbon footprint, “we need to measure GHG emissions - ideally at farm level - if we are to understand how the sector can improve production and operational practices that will also serve to sequester carbon,” explains Van Ravesteyn.

Any farmer seeking to sell produce on open, and especially, global markets is aware that off-takers are increasingly compelled to report on the carbon footprint of agricultural produce purchased or imported.

Quality aside, “the traceability of products, including reporting the impact of their production on the environment, is increasingly legislated by the European Union and other receivers of African agricultural produce,” reports Van Ravesteyn.  In time, as sustainability reporting becomes a reality globally, “being able to accurately report the carbon footprint of Africa’s agricultural products will become a pre-requisite for both domestic and global trade,” he adds. 

Many of Africa’s commercial farmers are aware of and - to some extent - are already practicing sustainable agriculture. While their intention might not be to deliberately reverse the impact of climate change, “farmers today understand that they are not simply farming with maize and cattle, for example, but rather with soils and water,” explains Van Ravesteyn.  In short, most commercial farmers understand that the quality, sustainability, and value of what they farm is dependent on the quality of the natural resource systems required to create their produce.

While many of Africa’s smallholder farmers operating under survivalist conditions are not always able to consider the longer-term impact of their farming methods, most are experiencing the impact of man-made environmental degradation driven by climate change.

Van Ravesteyn reports that, increasingly, farmers across Africa are seeking support on transitioning to more sustainable farming methods. This includes the measurement of GHG emissions so that they can professionally risk-manage their operations, access finance, and report their carbon footprint for off-taker and export purposes.  

To this end, Standard Bank has been consulting widely across the agricultural industry. Working with research associations, NGOs, development finance and tertiary institutions in Africa and globally, Standard Bank is developing a body of scientific evidence on which to assemble globally compliant guidance on sustainable agriculture in Africa. The aim is to contribute to “the development of a mechanism for individual African farmers to understand their GHG emissions balanced against their carbon sequestration practices,” says Van Ravesteyn. While farmers in Africa are not yet taxed on their emissions, as in many other jurisdictions, “the ability to measure and report carbon footprints – at individual farm level - is critical for African producers if they are to access global markets in the future,” he adds. 

By leading the collaboration to understand the carbon footprint of agricultural clients, Standard Bank is not seeking to reduce funding to the sector. Instead, “we are working to create the mechanisms to expand funding for sustainable, climate-smart, agriculture by assisting the sector transition to practices that will make African agriculture relevant, resilient and accessible to global markets,” says Macaulay.

In short, Standard Bank’s vision to build an ecosystem of scientific, technical, and academic ability capable of informing, measuring, and funding Africa’s transition to sustainable, climate smart agriculture will insure that “our continent assumes a much larger share of global agricultural investment, production and trade,” concludes Macaulay.

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