With BNZ having a target to reduce its financed dairy farming emissions through membership of the UN-convened Net Zero Banking Alliance, where are other key NZ rural lenders at?

With BNZ having set a specific target to reduce its financed emissions in the dairy sector, have any of the other major rural lenders done the same, and if not will they?

Last week Interest.co.nz's Of Interest podcast featured Rebekah Cain, BNZ's Chief Sustainability Officer, discussing the bank's membership of the Net-Zero Banking Alliance (NZBA). Whilst BNZ's the only New Zealand bank that's a member of the NZBA, the other key rural lenders' parent banks are members. 

The industry-led, United Nations convened NZBA is a group of banks aiming to transition their lending and investment portfolios to net-zero emissions by 2050. It has 133 bank members from 43 countries holding a combined US$74 trillion in total assets, which is estimated to be 41% of global banking assets. Membership of the NZBA comes with emissions reduction targets. 

One of BNZ's initial targets is a dairy farming sector emissions target of an 11% reduction in financed biological emissions intensity by 2030 against a 2022 baseline. This aligns to 2030 emissions intensity assumptions in the Climate Change Commission's recommendations to the Government for NZ's emissions budgets.

BNZ notes the dairy farming sector accounts for about 23% of NZ's annual export earnings, and contributes about 22% of the country's gross emissions.

Sector targets required

NZBA members are required to set sector level targets for agriculture, aluminium, cement, coal, commercial and residential real estate, iron and steel, oil and gas, power generation, and transport. They're meant to prioritise sectors based on greenhouse gas emissions, greenhouse gas emissions intensities and/or financial exposure in their portfolio in their first round of target setting within 18 months of signing. Subsequently the remaining sectors must be included in target setting within 36 months of signing. 

In the podcast Cain said one of the reasons why BNZ decided to individually sign up for the NZBA is because the emissions profile of NZ is significantly different from the emissions profile of Australia. This means the BNZ financial portfolio is significantly different from that of its parent National Australia Bank (NAB).

"Part of the Net-Zero Global Banking Alliance requires you to identify which portfolios are your most material to decarbonise. For NAB that is very much looking at fossil fuels. And while that is important for us to say that we are making commitments in the fossil fuel area, and are supporting our customers to decarbonise, the dairy sector is really where things hit the pointy end in New Zealand," Cain said.

Finance, she noted, is "a key lever to pull in order to shift the real economy."

"Part of the reason for this is because if something is funded it happens. And if it isn't funded it doesn't happen," Cain said.

So where are the other banks at?

So what of the other major rural lenders, - ANZ NZ, Rabobank, ASB and Westpac? As noted, all their parent banks have signed up to the NZBA.

A spokeswoman for ANZ NZ said the ANZ Group is initially focused on emissions reduction targets in the power generation, oil and gas, aluminium, steel, cement, and large commercial property sectors. ANZ NZ's lending exposure in these sectors is included in the group targets where relevant, the spokeswoman said.

"We have not set financed emissions targets in NZ for agri. The ANZ Group’s commitment to the Net Zero Banking Alliance includes examining the feasibility of setting a sectoral pathway for food, beverages and agribusiness, and we expect this will include New Zealand lending."

"One of our key focus areas this year in New Zealand has been to gain a deeper understanding of climate risk in our agriculture portfolio. Our immediate focus is to support our customers with decisions on managing and mitigating environmental risk, and to support the shift to more sustainable practices by removing some of the cost barriers businesses face," the ANZ NZ spokeswoman said.

The ANZ Group signed up to the NZBA in October 2021, meaning it's required to have emissions reduction targets in place for the agriculture sector by October 2024.

A Rabobank spokesman said the bank has "emissions intensity" rather than “absolute emissions” reduction targets for its global portfolio. In terms of its NZ dairy portfolio, Rabobank has set a preliminary 12% emissions intensity reduction target.

"This means that for the sector to achieve this it would need to become 12% more emissions efficient per kg of dairy production by 2030. The target for the sector is not to reduce absolute emissions by 12% or to reduce New Zealand dairy by 12%," the Rabobank spokesman said. 

He said the world needs to produce more food to feed a growing population, and Rabobank will continue supporting and encouraging the NZ primary sector to grow, as NZ is one of the most carbon efficient dairy producers in the world.

An ASB spokeswoman said the bank is committed to accelerating New Zealand’s transition to a low carbon economy and has started preliminary work to define emissions pathways and targets for key sectors in our lending portfolio, including dairy.

"This work is in its initial stages and we fully expect targets will evolve as climate models change and better quality data becomes available over time," the ASB spokeswoman said.

Commonwealth Bank of Australia, ASB's parent, signed up to the NZBA in January 2022. That means it must have targets in place for the agriculture sector by January 2025.

And a Westpac spokeswoman said the bank's proud to be a part of the NZBA and is working closely with rural customers to help them manage climate-related risk.

"We don’t have any targets to announce at this stage, however we expect to set targets in the future in-line with our NZBA commitments," the Westpac spokeswoman said.

The Westpac group signed up to the NZBA in July 2022, meaning it must have targets in place for the agriculture sector by July 2025.

BNZ signed up in October 2021, ahead of NAB in December 2021, and the Rabobank group signed in November 2021.

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