Investors Join Calls for Greener European Agriculture Policy

Climate risks and biodiversity need greater priority says coalition, calling for redirection of subsidies toward sustainable practices.

Planned reforms to the European Common Agriculture Policy (CAP) must fully align with the European Commission’s commitment to net-zero greenhouse gas emissions, according to a coalition of investors, policy experts and business groups.

The call is backed by investors worth €2 trillion, including Legal & General Investment Management, Brunel Pension Partnership, Robeco and BMO Global Asset Management, as well as investor network FAIRR.

Released to coincide with today’s meeting of the Agriculture and Fisheries Policy, a new paper outlines a series of proposals which would go further than existing reforms to minimise climate change and protect biodiversity.

The report acknowledges that reform proposals to CAP from 2021-2027 are “a step in the right direction”, but says they so not go far enough in directing subsidies toward sustainable practices and low-emission production, moving away from the current system of incentives and support, primarily focused on yield and production targets.

Authors from LGIM and Chatham House also call for the existing Just Transition Mechanism to be applied to agriculture “to support farmers’ social and economic well-being, where impacted by CAP reforms”.

CAP reform proposals would allow member states greater control over national-level budgets, allowing for greater flexibility of implementing reforms to fit local circumstances. But the paper calls for these budgets to include clear targets in line with the CAP’s overall support for a sustainable agriculture transition, including targets for funding of innovation to support local decarbonisation.

“Agricultural subsidies can support transition”

EU agricultural emissions have fallen steadily over the last three decades to approximately 10% of the bloc’s overall total, but progress has slowed over the past ten years. The CAP accounts for approximately one third of the national EU budget. A restructuring of subsidies could not only help to reduce emissions from beef farming, but could also support use of land as carbon sinks, accumulating and storing carbon.

The LGIM/Chatham House report notes that investors have only limited capacity to influence ‘upstream’ land use beyond engagement with food manufacturers and distributors. “Reform of agricultural subsidy packages to help achieve a sector-wide low-carbon transition would help,” it states.

“We at LGIM view the reform of the EU CAP as an opportunity for the EC to once again be bold and ambitious; and we should demonstrate to the world how agricultural subsidies can support – and not undermine – the transition,” said Alexander Burr, report co-author and ESG Policy Lead.

FAIRR also launched a white paper highlighting how investors in the land-use sector can manage challenges and opportunities associated with aligning their finance flows to the goals of the Paris Agreement.

“Governments have committed under Article 2.1c of the Paris Agreement to make finance flows consistent with a pathway towards low greenhouse gas emissions, and there is no way to achieve that without transformation of the animal agriculture sector. Current EU agricultural subsidies are not aligned with climate or biodiversity objectives. Investors recognize that CAP reform is critical for the agriculture and food sector itself which faces hugely increased costs of water, feed, and infrastructure damage due to more extreme weather events,” said Helena Wright, Policy Director, FAIRR.

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