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Aligning CAP with the Paris Agreement

22nd March 2021

In a paper published today, the Aldersgate Group joins an alliance of investors to call on the European Union to align reforms to the Common Agricultural Policy (CAP) with European Climate Law and the Paris Agreement.

Representing €2 trillion of assets, the alliance highlights four recommendations to promote enhanced carbon mitigation and negative emissions. It will also enhance resilience for climate adaption, biodiversity and global food security. These recommendations are:

  1. Encourage use of enforceable performance-based targets which link support to member states and farmers, commensurate with the cost of delivering public good or environmental services;
  2. Shift away from incentives that prioritise yields at the expense of the climate and environment, and balance this with new monetary incentives that put a value on sustainable agriculture;
  3. Decouple support from production metrics for single commodity transfers with high associated greenhouse gas emissions (e.g. beef and dairy);
  4. Apply the Just Transition Mechanism to support farmers’ social and economic well-being, where impacted by CAP reforms.

If implemented, these recommendations would unlock the potential for private finance to have a transformative impact on the sector by supporting the decarbonisation agricultural and land-use practices. The recommendations are derived from the paper, which was authored by Legal & General Investment Management and experts at Chatham House.

In publishing the paper, Nick Molho, Executive Director at the Aldersgate Group, said:
“The Common Agricultural Policy could be used as a powerful tool to drive a thriving European agricultural sector, whilst also delivering significant environmental improvements. Business and investors are today coming together to call for an ambitious programme that will not only support sustainable food production but also promote public goods such as nature restoration, biodiversity net gain and a reduction in greenhouse gas emissions. The EU’s commitment to climate neutrality by 2050, its ambitious commitments on biodiversity restoration by 2030 and the overall ambition of the European Green Deal all provide a unique – and long awaited - opportunity to align agricultural and land use policy with the EU’s climate and environmental goals.”

Alexander Burr, ESG Policy Lead at Legal & General Investment Management, said: "We are all becoming increasingly alert to the size and scale of risk that climate change poses to sustainable economic growth. As long-term investors, and stewards of our clients’ assets, we engage with businesses across the food and agriculture sector to help them transition towards a net-zero economy. However, to truly effect change we seek stronger action from policymakers. Working with this alliance, 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."

Tim Benton, Director of Energy, Environment and Resources Programme at Chatham House: "The EU is taking steps to align the land-use sector with the Paris Agreement through the Green Deal and the updated Bioeconomy Strategy. By encouraging climate to be at the heart of its subsidy packages, alongside food security, farmer wellbeing and dietary health, the Common Agricultural Policy could work in tandem with these other strategies if ambitiously applied. The EU can support a land-based economy that works for people and planet and create a system that prioritizes not just output but food quality."

Helena Wright, Policy Director at FAIRR said: "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."

Faith Ward, Chief Responsible Investment Officer at Brunel Pension Partnership, said: "For the EU to meet its own climate targets and move in line with the Paris Agreement targets, it urgently needs to reform the Common Agricultural Policy, agreeing stronger enforcement measures, removing misaligned incentives and ending support for high-emission commodities. I support the recommendations of this letter to bring meaningful reform to the CAP based on our shared climate goals"

Peter van der Werf, Senior Engagement Specialist at Robeco, said: "Robeco has been engaging with large-scale agricultural producers for many years in our program to improve sustainability in the meat and fish supply chain. We can’t solve these issues alone, and some of the main barriers for further improvements in sustainability have to be resolved by policy makers. We have started engaging with the Brazilian government to ensure environmental protection is enforced. At the same time it’s equally important is to achieve subsidy reform of the Common Agricultural Policy (CAP) in Europe to ensure that any subsidies provide the right incentives for farmers to align with the Paris Agreement. Ultimately the CAP should achieve a circular business model for farmers that provides a sound economic basis for their farming operation."

Nina Roth, Director for Responsible Investment at BMO Global Asset Management, said: "BMO Global Asset Management is engaging companies along the food and agriculture value chain, including its financiers, on improving sustainable practices to combat climate change and biodiversity loss. Strong incentives in the CAP are vital for transforming the industry."

Ben McCarron, Managing Director at Asia Research & Engagement, said: "We support these recommendations as a stronger approach to environmental management in the agricultural sector is needed to meet global targets for climate and create a stronger food industry. There needs to be stronger incentives to improve the way land is treated, not to degrade it."


The European Green Deal: an ambitious roadmap that needs to be rapidly followed by clear legislation

11th December 2019

Responding to the European Green Deal unveiled today by new Commission President Ursula Von der Leyen, Nick Molho, Executive Director of the Aldersgate Group, said “As a cross-economy organisation with business members eager to invest in the EU’s climate resilient and low carbon infrastructure, we welcome today’s European Green Deal. Launching a flagship policy on climate change and environmental standards on the 11th day of the new Commission sends a powerful signal to the business community about the EU’s intention to transition to a net zero emissions economy. However, the Commission and other EU institutions now need to rapidly legislate for a net zero emissions target and an intermediate 2030 target to halve current EU emissions. These institutions should also ensure that the governance arrangements and policy goals for the Green Deal are mainstreamed across all areas of EU and member states’ policy decision making.”

Nick Molho added: “For the European Green Deal to be effective, it will need to be supplemented by ambitious near-term measures to accelerate emission cuts in the buildings, transport and energy sectors, as well as greening the financial system. These near-term priorities must be urgently accompanied by an ambitious EU-wide innovation programme to test critical solutions like carbon capture and storage, hydrogen and new land use management techniques. These will be key to cutting emissions in hard to treat sectors, such as heavy industry, and long-distance transport. Lastly, the EU institutions need to think ambitiously about a strategy on agriculture which ensures that the European Green Deal principles are placed at the heart of the Common Agricultural Policy.”

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European Commission shows welcome ambition to achieve net zero emissions

28th November 2018

Reacting to the publication today of the European Commission’s proposal for a strategy for long-term EU greenhouse gas emissions reductions, Nick Molho, Executive Director at the Aldersgate Group said: “We welcome the publication of the European Commission’s proposal for a long-term climate strategy and the clear vision put forward by Commissioners Maroš Šefčovič, Miguel Arias Cañete and Violeta Bulc of building a climate neutral, competitive and socially cohesive European economy by 2050. This intervention comes at a key time ahead of the Katowice summit and can play an important role in ramping up ambition amongst other key emitters. To deliver the Paris Agreement and act on the key messages from last month's IPCC report, the Commission, European Parliament and national governments must focus their attention on the highest ambition pathways in the proposal, aim to over-achieve Europe’s 2030 climate targets and introduce appropriate policy in the immediate term to put Europe on a cost-effective and economically beneficial pathway towards net zero emissions.”

Nick Molho added: “It is by setting ambitious science-based goals and supporting these with credible innovation, deployment and transition support policies that the EU and its member states can play their part in delivering the ambition of the Paris Agreement, influence international partners and ensure European businesses are well placed to compete in the global low carbon economy.”

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