Cheaper CBA loans for farms with real sustainability agenda

Stockyard feedlot gets CBA's first cheap sustainability-linked loan

News
Stockyard Group managing director Lachie Hart, with Brisbane-based Commonwealth Bank of Australia director for specialised agribusiness solutions, Andrew Quinn.

Stockyard Group managing director Lachie Hart, with Brisbane-based Commonwealth Bank of Australia director for specialised agribusiness solutions, Andrew Quinn.

Aa

Family-owned feedlot business Stockyard is set to make big savings on bank interest costs after promising to achieve key sustainable business goals

Aa

One of Australia's largest family-owned feedlots is on track to make big savings on bank interest costs after setting itself a list of sustainable business goals, including solar powering all its electricity needs, slashing beef herd methane emissions and investing in electric vehicles.

Meeting the new sustainability targets across three key categories will save "tens of thousands of dollars" in annual loan costs.

However, if it fails to meet the benchmarks, southern Queensland beef producer and exporter, Stockyard Group, will pay penalty costs on its multi-million dollar borrowings from the Commonwealth Bank of Australia.

CBA's sustainability-linked loan is potentially a game changer for farm lending at a time when bankers Australia-wide face increasing community and shareholder pressure to support greenhouse emission reduction initiatives in business.

Aside from locking in longer term farm sustainability and animal welfare commitments, the new lending deal - a first for agriculture - will encourage Stockyard to take advantage of emerging market price premium opportunities, while also pruning its operating costs.

Interestingly, if Stockyard fails to achieve its lower emissions targets or other goals, CBA will not be pocketing the penalty costs it imposes.

Instead, the bank has committed to directing the funds into sustainability research to assist the wider beef industry.

The Hart family's 63-year-old Stockyard business exports about 85 per cent of the beef produced from its 20,000 head Jondaryan feedlot.

A further 4000 cattle are fed at other feedlots.

Performance parameters

The new loan arrangement for "several million dollars" is tied to performance parameters which require Stockyard to meet emission neutrality targets, achieve animal wellbeing benchmarks and focus on opportunities to improve the work environment for the company's 65 staff.

Although the specific goals agreed by CBA and Stockyard have not been revealed, the agribusiness' performance will be audited by an independent third party, financial giant EY (Ernst and Young).

Already a strong performer in the sustainability stakes and a keen supporter of the beef industry's 2030 carbon neutral target, Stockyard currently generates 60pc of its Kerwee feedlot's electricity needs from a sizeable on-farm solar array which is now likely to increase to 100pc, if possible.

Research has also started looking at capturing methane emissions to generate more power from feedlot waste water, which is also used for irrigation.

Another commercial scale research project will evaluate the value of mixing asparagopsis seaweed in livestock rations to suppress bovine methane production.

Stockyard, one of Australia's top 20 feedlot operators, also wants to install special methane monitoring chambers from the US to gauge individual animal emissions in their penned environment.

Driverless and electric feedlot vehicles and robotic mobile feed monitoring units are also on the drawing board.

Extra cost is worth it

"There are certainly upfront costs involved in achieving higher sustainability and efficiency goals," said Stockyard managing director Lachie Hart.

"But in the long term we do get a benefit to our bottom line, plus better environmental and community outcomes from our business footprint," said Stockyard managing director Lachie Hart.

"I think sustainability-linked lending to promote those outcomes will become a pretty normal part of agriculture in the future."

RELATED READING

Mr Hart strongly believed long term commercial gains were achievable, even from modest agricultural supply chain sustainability improvements.

He noted other Australian feedlot businesses had similar strategies to reduce energy costs and to achieve faster weight gains by adopting better livestock genetics, which, in turn, cut the time cattle spent on feed and overall methane emissions.

"They've already added millions in bottom line profits, yet only made a 2pc improvement to their environmental footprint," he said.

"I think it's important for our industry to get the message out about the sustainability gains which are achievable and how we have to protect our profits in the long term."

International credibility

He said CBA's sustainability-linked loan deal should give the company access to internationally recognised environment, social and governance (ESG) credentials, which would assist Stockyard to secure future capital and customers.

"We are putting our own business reputation at some considerable risk by sticking our heads up and making these commitments, but we want to be very clear to our customers and the community that we're aiming for carbon neutrality by 2030 (in the scope one and two categories)."

Scope one emissions are generated by farm production, while scope two relates to emissions from energy generated off-farm, such as electricity.

CBA's specialised agribusiness solutions general manager Adrian Parker said while the bank did not feel there was necessarily any specific advantage in being the lender behind sustainability-linked loans, as a major Australian corporate entity it had community responsibilities, just like its customers and shareholders.

"We're all stewards responsible for the global environment .... we're keen to do our part and champion sustainability in agriculture," he said.

"Here's a private third generation family company which intends to go further when it comes to adopting best practice for their business.

"We certainly want to partner with agribusinesses like Stockyard to help them innovate and accelerate those transition opportunities."

Start the day with all the big news in agriculture! Sign up below to receive our daily Farmonline newsletter.

Aa

From the front page

Sponsored by