Fonterra will consider reducing the environmental risk from dairying, cutting carbon emissions and improving water efficiency while weighing up borrowing funds. Photo: RNZ / Rebekah Parsons-King
The country's biggest company, Fonterra, is aligning its funding strategy to meet its sustainability goals as well as those of an increasing number of funders.
The dairy cooperative said future borrowing would be used to help meet sustainability targets such as reducing the environmental risk from dairying, cutting carbon emissions and improving water efficiency.
Fonterra capital markets director Simon Till said sustainable debt financing would become an increasing part of its overall debt portfolio as more projects and operations meet the targets set out in its Sustainable Finance Framework.
The dairy company initially expected to spend up to $1 billion on sustainability projects over the rest of the decade.
"Over the next decade we intend to significantly increase our investment in sustainability-related activities and assets throughout our supply chain to both mitigate environmental risks and continue to differentiate our New Zealand milk."
However, Till said any part of Fonterra's business that meets the framework's goals could qualify for sustainable funding, which would create more funding options for the business.
"If we meet the criteria, then we can effectively convert [debt] to sustainable debt which has a much broader audience," he said.
"The more interest you have, normally the better rates you get on that debt."
Joint venture plans underway
Fonterra chief operating officer Fraser Whineray said the co-operative was making solid progress towards its sustainability targets and being aligned with the nation's net zero target by 2050.
For example, Fonterra had recently entered into a joint venture with the government and other agribusiness leaders to establish the Centre for Climate Action on Agricultural Emissions.
Under the agreement, industry partners had made an indicative commitment of up to $35 million.
Whineray said the joint venture could see around $172m invested over the next four years to develop and commercialise practical tools and technologies for farmers.
"Over the next four years we're looking to scale up an investment in methane reduction of around $50m through this joint venture," he said.