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Investing in #sustainability, its legitimacy, its reputation, is one of the next big corporate affairs challenges.  The trend is massive and also rife with ‘greenwashing’.

The Economist has reported that “Global flows into environmental social and governance funds, ESG funds topped $178bn in the first quarter of this year, up from $38bn in the same quarter last year”

The Commonwealth Bank has joined the rush by being first in Australia with a sustainability linked loan in agriculture, with incentivised interest rates to the reputable Stockyard, a very large privately owned Australian beef producer. Here we’re taking a closer look at this.

But, first, what about trust? “Greenwashing” is on a grand scale. The Economist investigated the worlds 12 largest #esgfunds: each of them, on average, holds “investments in 17 fossil-fuel producers”; and many, according to The Economist “invest in gambling, booze and tobacco.”

There is a lot to be done to build trust.

So, back CommBank. Tim Harvey is General Manager of its Agribusiness and is involved in the sustainability linked loan with Stockyard.

#crisiscommunications #leadership #corporateaffairs #publicrelations #ceos
(QuickTake is a niche publication that analyses communications issues for CEOs, directors, corporate affairs professionals and journalists.)

Video Transcript

Tim Harvey:

A sustainability-linked loan is really incentivising businesses that are already advanced on the environmental social governance, or more commonly known as ESG pathway but are really looking to stretch and go that extra step and do more. And we’re delighted to be able to partner with Stockyard Group in offering this sustainability-linked loan.

Peter Wilkinson:

This gets very quickly to the heart of the trust of the issue because as you know, this area is awash with green-washing.

Tim Harvey:

We’re very excited to be able to partner with Stockyard. Stockyard are already very well advanced on this pathway. But there’s really good auditing that goes with this as well. So, Ernst & Young, one of Australia’s leading accountancy and advisory firms, they’re really looking at this from an auditing point of view. Clearly, the bank has a sustainability team and the banks run its eye over it very closely as well. So, I think from a trust point of view, when you have the trust of the Commonwealth Bank, with Stockyard who have already strong credentials in this and independently audited by Ernst & Young, one of Australia’s leading accounting advisory firms. I think that really, really makes sure that this is standing up to the test.

Peter Wilkinson:

Yeah, well you’d know the degree to which CBA is trusted, but let’s talk about the EY auditing for the moment. So EY would be conflicted, wouldn’t they? Because they would do a lot of work for CBA, not in the sustainability area. So, the perception is that they’ll be giving you the kind of audit that you want, rather than the audit that you need.

Tim Harvey:

The audit that EY does is very much in conjunction with the customer and EY have a very credible at-arms-length sustainability team. And we’re very comfortable with the work that they’ve done in really testing what the client has already done.

Peter Wilkinson:

Did you consider using some of the global sustainability companies? There’s a Sustainalytics. I think there’s another world called MSCI. Did you think of using those that are completely arms-length?

Tim Harvey:

I think for us, one of the most important things was that we were looking at what Stockyard have done and really lining up with the Australian-based sustainability framework and the carbon-neutral plan that’s been set out by Meat & Livestock Australia. So, they are very much already advanced on that. EY has a very strong sustainability team here in Australia. So, we’re very comfortable with what one of Australia’s leading producers is already doing. And this is just putting the additional stretch around that, incentivising them on that additional stretch.

Peter Wilkinson:

So, let’s talk about the stretch then. What are you stretching them on?

Tim Harvey:

There’re three key areas, Peter. So, the first area is around animal welfare, greenhouse gas emissions. And then the third one is really around their own staff wellbeing and safety in the business. So, they’re the three key themes that they’re already doing in their business, but that’s where the stretch comes in around those three specific areas.

Peter Wilkinson:

So, Stockyard Group, amongst other things, is a large feedlot producer, which has its animal waste, has its greenhouse gas issues. So, what are you measuring on greenhouse gas emissions?

Tim Harvey:

The greenhouse gas emissions really capture scope 1 and scope 2 emissions. And scope 1 is obviously the emissions that are direct from the feedlot. So, it can be from their waste. It can be from their energy consumption. So, there’s a whole range of things that are captured under that. And I guess probably one of the things that we’ve really looked at it again, back to the Australian Beef Sustainability Framework, but specifically for Stockyards, it’s around scope 1 and 2 emissions.

Peter Wilkinson:

Yeah. But if they’re already doing that, what are you measuring their improvement specifically? What are you measuring or asking them to improve on in order to get a better deal with you?

Tim Harvey:

For Stockyard across those three key areas, animal welfare emissions-

Peter Wilkinson:

Just emissions for the moment. I’ll get to animal welfare.

Tim Harvey:

It’s really linked to a reduction across their emissions overall. So, scope 1 and 2. So without, sort of commercially in confidence, talking specific percentages for that business, what I would, point to is that there are really specific categories under the sustainability framework around waste management, around carbon sequestration. And what I would say, is that the beef industry has already reduced their emissions footprint significantly.

Peter Wilkinson:

Yeah. I know everyone’s working on it. So, you can’t go into detail because of client confidentiality, but public trust relies of course, on transparency. So, you’ve got a corporate affairs issue that you’re going to have to wrestle with there. So, what about animal welfare? So, in feedlots, what you want is, to use the vernacular, you want happy cattle from cradle to grave. Am I in the ballpark?

Tim Harvey:

For the animal welfare metrics, again, across the Australian Beef Sustainability Framework, there are absolute metrics that many farmers are already embracing today. So, some of the things, and again, not specific to Stockyard Group, but some of the things specific to animal welfare is around low-stress handling. So, some producers will have processes whereby when they’re moving livestock, cattle into yards, they’ve got ways of doing that to minimise the stress. So sometimes I’ve seen that they’re not forced, pushed hard with working dogs. So, I think that was one of the examples I’ve recently seen with a farmer.

Tim Harvey:

I guess one of the other examples I’ve seen is around transporting. So, when they’re moving from farms to different areas, to make sure that the carrier, in some cases, again, on the sustainability framework, that they have the TruckSafe code to really minimise stress.

Peter Wilkinson:

Yeah. Well, Stockyard Group have already been doing a lot of this, but have you got, for instance, an agreement that there’ll be no cattle prods. And there’ll be no dogs in yards. I mean, you need, again for the public to find this believable. Ultimately, you’re going to have to go public on this stuff and explain what you are actually measuring.

Tim Harvey:

We’re very happy. We’re very comfortable with what Stockyard already do. As I said, they are leaders, and people that they have-

Peter Wilkinson:

I know you are. I’m talking about the public and journalists who are a little more cynical than you folks who work inside the bank, who are excited about this deal. And if EY is doing an audit, won’t that audit need to be made public to gain public trust in what you’re doing?

Tim Harvey:

At this stage, the EY audit is not public. It’s commercial in confidence with the customer. But this is something that we’ve worked together with them, right at the inception. There’ll be regular checks along the way. So, this is not something sort of set up, set, and forget. So, it’s looking at what Stockyard are doing today. Where are the industry standards? What are we comfortable with our sustainability team? What are the independent experts in EY, who have independently looked at this, what are we comfortable with? And there’ll be sort of checkpoints along the way within that sort of three-year time horizon.

Peter Wilkinson:

Tim, thank you very much for this. I recognise this is a rapidly evolving space and what we’ll be doing in five years is entirely different to what we’re doing now. So, I appreciate your time today. Thank you very much.

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