Rabobank has launched a standardised “SDG 12.3” sustainability-linked loan template for financing that aims to tackle food loss and waste and drive investment towards achieving the third target of the UN’s Sustainable Development Goal number 12.
The goal covers responsible consumption and production, and the third target seeks to halve global food waste per capita at the retail and consumer level and reduce food losses in production and supply chains by 2030.
“We only have 10 years left to achieve SDG 12.3, and therefore we need to encourage our clients to adapt to food loss and waste reduction,” Rabobank said.
The use of a template, with set term sheet and loan conditions that include standard provisions specifying what customers have to do to combat food loss and waste, shows how banks are taking a more proactive role in sustainable finance and are pushing harder to meet the UN’s SDGs.
The template is the first of its kind, and more are expected to be linked to other SDGs and targets in an effort to increase the pace of change and meet tight timeframes and ambitious goals.
“We are moving away from a bespoke approach to sustainable finance. There is an opportunity and a need for a more standardised methodology and framework. To drive change, we need a more standardised approach," said Maarten Biermans, head of sustainable capital markets at Rabobank.
Rabobank is one of the biggest lenders to the food and agriculture sector and the initiative is also designed to highlight the financial sector’s role in changing food production and consumption ahead of the UN's Food Systems Summit, which is expected to take place in September or October.
It also shows the growing emphasis on the circular economy and eliminating waste. A third of food is never eaten, and 17% is dumped, according to the recent Food Waste Index Report 2021 by the UN Environment Programme and sustainability charity WRAP.
Uneaten food accounts for up to 10% of greenhouse gases. Reducing waste will slow emissions, improve the use of natural resources and help tackle world hunger. In 2019, 690 million people were affected by hunger and 3 billion were unable to afford a healthy diet, according to the report.
Large supermarkets and food retailers are making commitments on food waste and are looking for similar pledges from smaller firms in their supply chains as change starts to ripple through the sector.
Dutch supermarket operator Ahold Delhaize included a key performance indicator target on its €600m nine-year sustainability-linked bond last week to reduce food waste per food sales by 32% by 2025, from a 2016 baseline.
UK supermarket chain Tesco also completed a £2.5bn sustainability-linked loan in October and added a third KPI – to waste no food safe for human consumption in its UK retail operations – in addition to two other KPIs that covered scope 1 and 2 CO2 emissions and renewable energy.
Template approach
Rabobank will use the template on SLLs to its corporate clients, which will primarily be bilateral loans for larger SMEs, many of which are taking their first steps in sustainable finance and are looking for guidance.
Loans are being offered to companies that already have sustainability ambitions around food waste and preferably also measure it. Ekoplaza, the largest organic supermarket chain in the Netherlands, is the first company to receive one of the SDG 12.3 loans, which it says will help it to better monitor food waste.
The KPI in the template measures the number of tonnes of food produced or sold and compares it with food waste and loss. Companies that hit the targets will get a lower interest rate, and underperformance will be sanctioned.
“This really will become the new normal for all financing within five years,” Biermans said.
The strategy was based on the Food Loss and Waste protocol created by the World Resources Institution, which was developed with other organisations including the UN’s Food and Agriculture Organisation.
The SDG 12.3 template is based on the protocol and Rabobank also collaborated with the Champions 12.3 coalition, WRI, FAO and WUR and Dutch initiative "United against food waste" on the measurement framework and methodology to calculate food loss and waste.
It also helps Rabobank meet its own lending and SDG targets, as sustainable corporate clients are lower risk and also fits with Rabobank’s “Growing a Better World Together” mission.
That includes “Banking for Food”, the bank’s view of global food security and its role in helping to feed more than 9 billion people by 2050, and a collaboration with the Foundation Against Food Waste.