New Zealand's foreign owned rural lenders are "acting as pseudo-regulators" of New Zealand farmers through their "pre-competitive" commitment to the Net-Zero Banking Alliance, Federated Farmers says.
The farmer lobby group argues this in a submission to Parliament's Primary Production Committee calling for a full select committee inquiry into rural bank lending. The Committee initiated a briefing to investigate practices in rural bank lending in late March.
The Net-Zero Banking Alliance (NZBA) is an industry-led, United Nations convened group. Its members aim to transition their lending and investment portfolios to net-zero emissions by 2050. BNZ is a member, while the parent banks of NZ's other key rural lenders, ANZ, ASB, Rabobank and Westpac, are all members. Given the rural sector is NZ's biggest greenhouse gas emitter, the banks have, or are expected to have, targets aimed at reducing dairy, sheep and beef emissions intensity as they move to reduce their financed emissions.
Federated Farmers complains, however, that via the NZBA "banks have collaborated and agreed a strategy together," making the commitment "pre-competitive."
"When such an approach is applied in any other area of competition between banks it is called collusion and is expressly disallowed," Federated Farmers says.
"The banks involved are all also foreign owned and effectively cooperating to take actions to effectively regulate the actions of New Zealand farmers. From a farmer’s perspective, rather than have access to a variety of bank strategies, they are faced with a situation where all banks will adopt the same mitigation strategy. This means they are forced to reduce emissions along the lines demanded by the bank, regardless of customer opinion or government policy."
"From a national perspective, we have assumed that our greenhouse gas mitigation policies would be developed by Parliament, with a democratic mandate. The Net-Zero Banking Alliance risks a situation where policies are developed by overseas banks acting as pseudo-regulators," Federated Farmers says.
"Finally, while our focus is on the Net Zero Banking Alliance, the impact of the Net Zero Asset Owners Alliance and Net Zero Asset Managers Alliance may also be considered. These alliances include the funds that loan money to banks (and businesses), so can also have a pseudo regulatory impact if they agree to impose policy requirements."
'Federated Farmers completely incorrect'
A spokeswoman for ANZ NZ, the country's biggest rural lender with loans of just under $15 billion at March 31, says Federated Farmers is wrong.
"Federated Farmers is completely incorrect in its unsubstantiated submission that the banks collaborated and agreed on a strategy together to join the Alliance. ANZ Group made a unilateral and independent decision to join the Alliance in 2021," she says.
"ANZ NZ determines its own strategy, risk settings and approach to customer engagement on climate issues. We, like all the other NZ banks, are currently working on our mandatory climate related disclosures," the ANZ NZ spokeswoman adds.
Federated Farmers is asking the Primary Production Select Committee to consider whether the actions and NZBA membership of the five key rural lenders is compliant with NZ competition law.
Interest.co.nz last year spoke with BNZ's Chief Sustainability Officer Rebekah Cain about BNZ's NZBA membership in an episode of our Of Interest Podcast. We also wrote about the five banks' stances on NZBA's aims here.
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