Just nature transition should be placed “at the heart” of UK agricultural, climate and nature policy engagement, academic report says.
Transition to a sustainable UK agriculture sector is being undermined by a failure to factor the social impacts of addressing the climate and biodiversity crises, according to authors of a new report.
Policy recommendations from the London School of Economics’ Grantham Research Institute (GRI) includes deeper engagement with local communities and the use of a bottom-up approach.
The ‘Sowing Seeds’ report said that despite being prominently mentioned in the Paris Agreement, the social implications of addressing climate change have rarely been taken into account to date by agricultural policy, business or financial sector responses.
It also noted that the fundamental success of the transition to a more sustainable agricultural industry requires trust in government from the sector, and public support from consumers. As one of its core recommendations, the GRI report underlined the need for meaningful social dialogue and co-production of transition plans to “ensure that the voices of people often excluded from decision- making are heard”.
The report called for the scaling up inclusive place-based solutions, noting that a successful just transition for the agricultural sector will “involve communities designing and driving strategies that best suit their social, economic and environmental context, while contributing to national objectives”.
Brendan Curran, Senior Policy Fellow for Sustainable Finance at the GRI, warned ESG Investor that if policy is not designed with a “social point of view” it is “doomed to deliver the transition inefficiently at best, and not at all at worst”.
The agricultural transition
Agriculture currently accounts for 11% of the UK’s territorial emissions, and while the sector’s emissions fell by a total of 12% between 1990 and 2021, but emissions from agricultural machinery and an increase in both direct and indirect soil emissions of nitrous oxide caused a 3% increase between 2020 and 2021.
The UK Climate Change Committee’s Advisory Group on Finance has previously estimated that the country would need an additional £50 billion (US$64.17 billion) of net zero investment annually across all sectors by 2030, including £1.5 billion in annual investment in agriculture by 2035.
Earlier this year, the UK government established a just transition working group within its Transition Plan Taskforce, which advises on the “social dimension of climate action”. This will include making recommendations on how businesses and financial institutions can best incorporate just transition principles into their net zero plans.
The government’s 2023 Green Finance Strategy also underscored the goal of directing £1 billion per year by 2030 of private finance to support ‘nature recovery’ in England. Last year, 8% of farm income came from government subsidies.
The GRI report stressed that agriculture will need to play a larger role in carbon sequestration, with England responding to these “evolving” requirements by introducing the Environmental Land Management (ELM) schemes from 2023 to replace EU payments.
These schemes tie public finance to the delivery of environmental services including hedgerow management, nutrient management and improving grasslands.
In addition to England’s ELM schemes, similar projects have been introduced across the UK, such as the Sustainable Farming Scheme in Wales, the Agricultural Reform Programme in Scotland, and the Future Agricultural Policy for Northern Ireland.
This devolution of schemes forms part of the place-based approach suggested by the ‘Sowing Seeds’ report. However, it notes that place-based investment needs policy guidance and funding for communities and local governments to build and market portfolios to have a “meaningful impact”.
The Place-based Climate Action Network has suggested the use of Climate Finance Hubs to coordinate between actors within a community, but private finance in the UK has “yet to develop financing structures in response”, according to the report.
However, private finance has attempted to assist in the sector’s transition, with HSBC UK’s annual SME fund allocating £1.2 billion of its £15 billion to agriculture and Barclays launching a £250 million fund to financially assist farmers in embedding sustainability through agri-tech. Further, NatWest has pledged £1.25 billion to help farmers fund climate and sustainability investments, taking its total agricultural sector lending capacity to £6.7 billion.
Community engagement
In attempting to reach net zero, the GRI has called for a ‘just nature transition’. This is defined as a transition that delivers decent work, social inclusion and the eradication of poverty in the shift to a net zero and climate- resilient economy that simultaneously delivers biodiversity goals.
Annabel Ross, Sustainable Finance Team Research Consultant at the GRI, told ESG Investor that “we need to be careful that the agricultural transition in the UK is not purely a top-down exercise”.
She said that the “momentum in this space has never been this front and centre”, with initiatives such as the Taskforce on Nature-related Financial Disclosures (TNFD) responsible for driving increased disclosure requirements for larger financial entities, including investors.
However, Ross cautioned against a system where policy, banks and the TNFD set “all these broad frameworks which then filter themselves down, noting that “every level of the farming sector has to be brought into play”.
Ross said that the GRI suggests collaboration from a “bottom-up perspective”, through which each place or catchment area receives the resources and support to be able to “develop what they need as a community, knowing the labour market, the land, what they can produce on it and the markets they can supply”.
These sentiments on engaging with local communities were echoed by David Craig, Co-Chair of the TNFD. Speaking at the recent New Global Financial Pact event, he said that “you can’t do nature-related dependencies and impacts without thinking about local communities”.
“We found in our approach that you really have to be very deliberate on involving local communities, and they’re going to have to be involved in transitions,” Craig added. “You can’t get farmers to change what they’re doing in England, Nigeria, Germany or France without involving them.”
Increasing investor involvement
In April, agriculture ministers from the Group of Seven (G7) committed to promote policies to support the growth of sustainable agriculture to strengthen food security, as well as further recognising the importance of facilitating private sector investment in achieving this.
Helena Wright, Policy Director at the FAIRR Initiative, told ESG Investor that a just transition for the agricultural sector is “not something that providers of capital alone can manage”, noting that governments must examine how agricultural subsidies and public finance can be “better aligned with climate and nature goals to support a just transition for farmers”.
Wright also noted that the low carbon transition in the agriculture sector “must not come at the expense of the views and livelihoods of farmers and agricultural workers”.
Curran said that like other UK sectors that are transitioning to low carbon technologies and new methods of production there “needs to be the right policy incentives and support”, as well as a “stable policy environment”. He added that the government must take on some of the transition risks for the agriculture sector “as they’re doing in other sectors”.
The ‘Sowing Seeds’ report also flagged that the global nature of the challenges facing the food system means that a “systemic response is needed to harness opportunities and mitigate risks for a just transition”, adding that institutional investors can signal the importance of such a transition in their stewardship activities with banks, food and drink companies, retailers and policymakers.
“Investors are increasingly recognising the importance of a ‘just transition’ that is both socially and environmentally sustainable,” Wright said.
“Investors can support this by engaging directly with governments and policymakers and grasp the opportunity to create millions of new, greener jobs in a more sustainable food system.”
Ross said that the “difference if people work together to find solutions is huge”, adding that “if investors don’t take part in these discussions, they’re going to miss out on building their own internal capacity as well as their participation in the market.
