New ABN AMRO guidelines for meat and dairy industry

Few sectors involve sustainability issues in as many areas as the animal protein industry (i.e. producers of meat, eggs and dairy products). These issues range from animal welfare concerns to human rights and from environmental pollution to public health. Given the sheer scale of many of the international players in the industry and ABN AMRO’s growing international client base in this sector, the bank recently decided to draw up a new policy, which was finalised in May 2020. 

Based on discussions which Myrthe and Marieke held with clients, relationship managers and civil society organisations, the policy also incorporates field research the two did in Brazil. “You discover very quickly that it’s unfair to judge Brazilian farmers and the local context through a Dutch lens,” says Myrthe. “Brazil is such a vast and diverse country that you can end up missing the mark altogether if you’re relying exclusively on a Dutch frame of reference.”

Methane emissions

Operational scale is one major difference. “Brazilian farms can easily have up to 10,000 cows, while a Dutch farmer probably only has about one hundred or so. This poses other sustainability risks, though,” explains Marieke. “Our policy is aimed primarily at these large international companies. We also want to be very clear that ‘big’ doesn’t equal ‘bad’. Indeed, the organisational structures of large companies are often more professional, which opens doors to greater opportunities and resources to devote to sustainability.

“In doing our research, we did come to see where the bank draws the line: we don’t finance farms with 500,000 or more ruminants (i.e. cows, sheep and goats) because of their impact on the climate. That’s a big deal, particularly in North and South America, where lots of farms have over 500,000 animals. As far as I know, we’re the first major bank to rule out large-scale ruminant farming because of the environment.”

“Farms with so many animals have little leeway to reduce methane emissions because there are significant practical drawbacks to capturing the methane. The best way to reduce methane emissions is simply to reduce the number of animals. But that’s directly at odds with these companies’ business models, which is obviously very large-scale.”

Awareness

Conversations with clients and relationship managers have proved fruitful. “We’ve had very meaningful discussions about sustainability,” says Marieke. “Many in the sector take animal welfare issues very seriously, for example. Some are intrinsically motivated, while others are compelled by their clients or by public opinion. In any event, we’re convinced there’s a growing sense of awareness out there, and we’re seeing positive development as a result.”

Sustainability: a work in progress

The new policy imposes strict requirements on things like antibiotics, which should be kept to a minimum and administered only if no alternative is available. The guidelines will be incorporated in the Global Sustainability Risk Indicator (GSRI) tool, which ABN AMRO uses to assess how well new and existing clients’ positions reflect the bank’s ambitions to accelerate the transition to sustainability.

Myrthe and Marieke are pleased with the results of their work, but are already looking to the future. The next step is to review climate requirements across the bank’s entire sustainability policy. Sustainability, both say, will always be a work in progress. “The norm today could well be obsolete in a few years’ time. By its very nature, sustainability policy has a limited shelf life. It’s never ‘finished’. It’s by continuing to evaluate and hone our policy that we’re promoting the transition to sustainability. That’s what we’re committed to.”

“We help our clients accelerate their transition to sustainability”

Paula Zanzotti Kuroda of Corporate & Institutional Banking at ABN AMRO Brazil says, “Since it has such a favourable climate and is home to the world’s largest freshwater reserves, Brazil has a thriving animal protein industry. It is the world’s largest exporter of beef and poultry and the fourth-largest exporter of pork.

“Brazilian companies with a global footprint already have policies and procedures in place and are very transparent about their sustainability performance and challenges. This is because their end consumers demand it. The main challenge facing the animal protein industry relates to the traceability of the supply chain. Large companies implement sourcing policies, but they still run the risk of their indirect suppliers violating human rights, flouting animal welfare rules or being involved in illegal logging.

“This new animal protein policy was needed because important issues like animal welfare, the use of antibiotics and monitoring greenhouse gas emissions are not addressed in ABN AMRO’s general agri-policy. “Even if companies do not meet all the criteria, our inclusive approach enables us to engage with, rather than exclude, clients as a way to help develop better practices and accelerate their transition to sustainability.”