I’m emailing to ask for your support on the next step for pushing banks out of emissions policy enforcement.
Banks treating farmers badly hurts everyone by pushing up food prices and their approach to emissions policy is much like the Farming Tax voters just rejected last year. We can’t let them bring in a Farming Tax through the back door.
To catch you up - with backing from supporters like you, we pushed the politicians to hold an inquiry into rural banking as part of the banking competition inquiry.
Then we asked for the inquiry to include how banks are dealing with emissions, especially agricultural emissions, so the inquiry would have the full story about how food producers are getting a bad deal from the banking system. We heard some of the MPs were reluctant to go there, but after thousands of Groundswell supporters emailed them, the politicians finally included emissions in the inquiry’s terms of reference.
Now we can take the fight to the banks using Parliament’s inquiry to get some real action and a fair go for farmers. Will you back our petition?
We’ll be going to Parliament to make the case for fixing the banking system and getting rid of the rules that make the banks focus on the emissions of the people they lend to.
Your support for our petition will mean the politicians know how much backing there is for creating a fairer banking system by telling the banks to back off on agricultural emissions.
We go into some detail below about the different rules in the banking system and that’s not everyone’s idea of an enjoyable reading experience. So, if you want the short version, we’re calling for:
• Getting rid of the rules, laws, and regulations that make banks treat farmers more harshly than other kinds of borrowers.
• Stopping banks from bringing in a de facto Farming Tax through the back door after we just voted against it.
• Ending the use of unfair emissions metrics, like GWP100, that massively overstate the emissions impact of agriculture.
Click here to head to our campaign website backoffbanks.nz and sign the petition.
As we said, this isn’t just a story of greedy banks, there are some counterproductive rules in the banking system that make banks worried about the emissions attached to their lending. Without getting deep into financial jargon, these are the key problems and what we’re telling MPs to change.
The first is the Mandatory Climate Related Disclosures regulations, which require banks to disclose the emissions in their lending portfolios. Regardless of whether some emissions should be declared like this, it doesn’t work for agricultural emissions for all the same reasons that agriculture shouldn’t be in the Emissions Trading Scheme.
The actual impact of agricultural emissions is a topic of hot debate and constant scientific inquiry. The banks just don’t know what the emissions of their farming clients are and banks hate lending out money any time there's uncertainty from their reports failing to line up nicely.
The second is the Reserve Bank’s unfair capital holding requirement for rural lending. The simple version of this is that when banks lend out money, they have to keep a portion of that in their cash reserves in case of a financial crisis. The Reserve Bank decides different percentages for different kinds of lending based on how risky they think those industries are and they think farming is a riskier business by quite a margin.
That means when a bank goes to decide who to lend to, they have to keep more money aside if the borrower is a farmer. Then, naturally, they prefer to lend to others and farmers are near the bottom of the heap paying higher interest and sometimes not even getting loans in the first place.
Why does the Reserve Bank think farming is so risky? Well, that’s still a little unclear and we’re telling MPs on the parliamentary inquiry to take the Reserve Bank to task on it, but it looks like they’re pricing in a catastrophic 1-in-200-year crisis. That drives up the cost of rural borrowing, while farmers are dealing with a series of real crises right now, from the general cost-of-living crisis, the spike in input costs, and these problems with credit availability and interest rates.
The third is the banking system using unfair, outdated emissions metrics to calculate agricultural emissions. As we’ve been pointing out, the science on agricultural emissions is still a strong debate and it increasingly looks like New Zealand agriculture may already be at net-zero warming effect and could even be having a cooling effect over time from the reducing herd sizes.
But all that doesn’t stop the non-scientist bureaucrats and consultants from clinging to their simple explanations and using old, discredited measurement systems to measure agricultural emissions like GWP100. (You might remember how GWP* much more accurately describes agricultural emissions, but many groups are stuck using the old approaches). Maybe those metrics can tell you what’s coming out the back of a car, but they don’t tell you much about the net effect of the agricultural methane cycle.
We think banks need to get out of tracking emissions all together, but if they’re going to keep on at this, they need to move with the times and get it right.
If you got through all of that, you’re now across some of the detail on the fight for a fairer banking system and what we’re calling for in our petition.
This inquiry at Parliament is a key opportunity for us to get banks out of emissions and get a fairer deal for farmers out of the financial system. That would be good for family farms, but also for the rural communities that rely on credit flowing through the agricultural sector and also mean cheaper, more reliable food for everyone.
If we get a report from this inquiry that recommends the changes we need, we can campaign on that for law changes. Governments and political parties often base policy on these kinds of reports, as the findings of parliamentary committees provide an authority to rely on when debates get messy and noisy.
Thank you again for your support.
Kind regards,
Bryce, Laurie, Mel and the Team at Groundswell NZ
