Climate Bonds Initiative launch of a new set of criteria towards greener agriculture

Concerns about the agricultural and forestry sectors grow within the investment sphere as they are considered to account for approximately 25% of global greenhouse gas emissions, as well as a huge carbon sink that needs to be preserved.

These two sectors are made up of a broad scope of activities and productions, making agriculture and forestry hard to frame in a single set of criteria. The new criteria issued by Climate Bonds Initiative (CBI) provides a first definition and approach of the sector, opening to the certification of future green transactions.

It evaluates agricultural projects through two perspectives:

• Climate change mitigation
• climate change adaptation

With regards to the concrete fields of application, these new criteria can be applied to:

• Inputs (land, seeds, fertilizer, energy, information)
• Capital goods (land, equipment, housing)
• Crop based transformation processes (crop cultivation and planted trees)
• Agricultural outputs (grains, vegetables, fiber) and waste management (composting, manure, Crop residue processing, recycling)
• Primary processing or storage before point of sale.

Figure 1: Example of the structure of criteria for assessing Agricultural Production Unit

Source CBI, 2020

It complements existing criteria within the AFOLU sector (Agriculture, Forestry and Other Land Use) but also announces future ones. Indeed, livestock is not part of the scope although it remains an important issue within the sector.

This set of criteria also mirrors, with some differences, the EU taxonomy of sustainable activity when it comes to perennial and non-perennial crops. For instance, the dual structure that includes carbon intensity reduction thresholds as well as do no significant harm criteria is common to both frameworks. Then, thresholds and criteria vary slightly (as an example, emission reduction expected from CBI reach 24% by 2030 when they are established at 20% over the same period by the EU taxonomy.

By establishing a science-based and verifiable screening process for both issuers and investors, these new CBI criteria aim at catalyzing action towards sustainable agriculture, helping farmers and agro-industries access capital to invest in innovative technologies, techniques and infrastructure that can transform their ecosystem.