Tesco, Sainsbury’s, and Waitrose have jointly committed $11m to a new ‘responsible commodities’ programme, which will offer financial incentives for farmers who commit to embracing more sustainable approaches to soy cultivation.
The Responsible Commodities Facility (RCF) will offer low-interest loans to farmers who comply with certain environmental eligibility criteria and commit to ensuring zero deforestation of natural vegetation, over and above their legal requirements.
It comes as retailers in the UK face growing pressure to curb the amount of deforestation and land use conversion caused by their supply chains, amidst reports that deforestation of climate-critical and biodiverse rich tropical forests driven by livestock and agricultural production are at an all- time high.
The RCF scheme would initially provide finance to 36 soy farms operating in areas at major risk of deforestation and biodiversity loss in the tropical savanna of the Cerrado region of Brazil.
The plan is to then scale up the program to include hundreds of farmers across Brazil, helping to protect vast tracts of native vegetation in the Cerrado, which is believed to be the world’s most biodiverse savanna.
Waitrose executive director, James Bailey, said the scale of the challenge to halt the loss of biodiverse ecosystems like the Cerrado demanded “innovative new approaches”.
“We hope this pilot fund will demonstrate the huge opportunity for green finance to incentivise responsible farming practices that ensure we protect our global forests,” he said. “Achieving this potential, however, will require a broader uptake, and I’d appeal to fellow food businesses and to financial investors to join us in supporting and investing in this extremely important initiative to help protect the Cerrado, before it’s too late. ”
The hope is that the initial 12-month trial will provide valuable insights into how the financing mechanism works in practice on farms and inspire other organizations and businesses to fund the programme.
Pedro Moura Costa, CEO of Sustainable Investment Management, the financial firm running the initiative, said there was a “huge appetite and market” for providing green finance across the soy market.
“The urgent need to reduce greenhouse gas emissions from deforestation requires a new flow of financial resources to those at the frontline of agricultural production,” he said. “At the same time, it is important to reconcile the objective of conservation with that of economic production, so that one complements the other. The RCF intends to solve these problems through its new financial model and to unlock these large flows of green investment to do good, by supporting sustainable agriculture and protecting forests in a financially sustainable way that, importantly, rewards farmers.”
The companies contributing financially to the first programme, which also include major soy buyers and US chocolate company Barry Callebaut, participated in the design of the RCF.
Ken Murphy, CEO at Tesco Group, said the initiative would help the retailer meet its target of only sourcing soy from areas verified as deforestation-free by 2025. “To help us meet this goal it’s vital we provide practical, financial support to farmers in Brazil committed to the production of zero deforestation soy and the conservation of native vegetation,” he said. “This initiative highlights the need for the whole food industry to come together and support the protection of critical ecosystems like the Cerrado.”
Sainsbury’s CEO, Simon Roberts, said it was vital to ramp up corporate efforts to protect tropical forests if the worst impacts of climate change were to be avoided. “To limit global warming to 1.5 degrees and achieve the goals set out in the Paris Climate Change Agreement, it is vital that we protect and restore forests and ecosystems such as the Cerrado in Brazil,” he said. “It’s why we are proud to join forces with others to help fund the Responsible Commodities Facility, investing in the sustainable production of soy, using green finance to reward farmers for protecting wildlife and biodiversity in the Cerrado.”
The initiative is funded through dollar-denominated green bonds registered in the Vienna Bourse, which RCF claimed was a “first-of-a-kind” approach.
An independent Environmental Committee counting representatives from the UN Environment Program (UNEP), The Nature Conservancy (TNC), BVRio, WWF, Conservation International (Brazil), Proforest and Instituto de Pesquisa Ambiental da Amazonia (IPAM) will be tasked with reviewing and provide input into the environmental management of the facility.
This article is part of the Net Zero Commodities Hub, hosted in partnership with Wood Mackenzie.