“As we face ongoing climate risks with deepening drought in southeastern Australia and more floods in northeastern New South Wales the market demand for agricultural production to become more efficient and sustainable continues.” – Dr Nicola Thomas | Lecturer in Economics and Finance | School of Business
Green finance is an emerging industry, with investors, financiers, and governments increasingly participating in the market to offer premiums for ‘green’ loans, bonds, and leases. Australian farmers, who are part of global supply chains, are being confronted by growing environmental, social, and governance (ESG) reporting requirements while also dealing with increased climate and market risks (Acil Allen, 2019). Although green finance is being utilised across various sectors, the benefits to Australian farmers are not well understood.
Farmers play a vital role in many supply chains, yet they risk being overlooked (OECD, 2020). Charles Sturt University is collaborating with the OneBasin Cooperative Research Centre on a project aimed at exploring how green finance can assist farmers in adopting sustainable land management practices. This initiative seeks to help farmers meet ESG reporting requirements, reduce exposure to climate risks, and enhance profitability in land use.
Green finance is lending, investment, and insurance products that support environmentally sustainable practices aimed at fostering ecological sustainability, reducing greenhouse gas emissions, and promoting biodiversity (OECD, 2020). Globally, on average USD 1.3 trillion is invested in green financial products; however only 11% is in the agricultural, forestry and land use sector (Buchner et al., 2023). The agricultural green finance sector is expanding to support farmers in transitioning towards climate-smart farming, carbon reduction, and more resource-efficient food systems.
Developing sustainable resource efficient agricultural systems is a priority for Australian farmers. In 2022-23 Australia exported $80.4 billion of agricultural produce to China, Japan, ASEAN countries, the US and EU (DAFF, 2024). As part of policies to reduce emissions to net zero by 2050 China has developed an Action Plan to reduce carbon dioxide emissions, including increased sustainable agricultural practices (NDRC, 2021), whilst Japan has set a target of carbon neutrality in agriculture by 2050 (Kazuya, 2023). To maintain long-term export market access Australian farmers need to reduce carbon emissions from food production through more sustainable land management practices.
Supporting Australian farmers to develop sustainable land management practices is the Clean Energy Finance Corporation (CEFC), through delivery partners such as NAB and CBA, provides government-backed concessional loans to agribusinesses. These loans support various initiatives, including planting shelterbelts, installing solar energy systems, improving soil quality, managing waste, utilising precision fertilisers, and implementing regenerative farming practices (CEFC, 2025; CBA, 2025; NAB, 2025). Internationally under the European Union Green Deal and the Common Agricultural Policy (CAP), financial institutions are aligning their products with biodiversity and soil health targets. For instance, Rabobank in the Netherlands offers sustainable loans to farmers worldwide through its Agri13 project (Rabobank, 2025). Globally governments are implementing partnerships with finance corporations to provide discount loans to support capital investment in activities that can improve resource use efficiency and sustainability.
The growth of green finance in agriculture is driven by investor expectations for environmental, social, and governance (ESG) factors, regulatory pressures, climate risks, and market incentives. Farmers benefit from access to cheaper capital, increased land value, and enhanced resilience to climate impacts. Meanwhile, financiers utilise green instruments to showcase sustainability leadership and manage climate risks within their portfolios. Green finance products often require certification, with many governments and companies adopting the Green Bond Principles established by the International Capital Market Association (ICMA, 2021) or the sustainability-linked loans standards set by the Loan Market Association (LMA, 2025). However, challenges persist in validating these products, including inconsistent methodologies, a lack of standardisation across markets, and concerns about greenwashing (ICMA, 2022). This can reduce confidence and uptake of green finance products across the agricultural sector.
Other challenges in this domain include high verification costs, limited awareness among farmers, and uncertainty in carbon and biodiversity markets. However, there are opportunities arising from digital tools for monitoring outcomes, emerging certification platforms, and the growing demand for sustainable food supply chains. Green finance presents Australian farmers with an opportunity to undertake land management and practice improvements, retain key market access and align profitability with Australia’s commitments to the United Nations Paris Agreement Goals (Acil Allen, 2019).
As we face ongoing climate risks with deepening drought in southeastern Australia and more floods in northeastern New South Wales the market demand for agricultural production to become more efficient and sustainable continues. The CSU-led research team in conjunction with Wine Australia, the Australian Wine Research Institute, the Western Murray Land Improvement Group and the University of Sydney, is currently talking with farmers and financiers to identify the most effective ways to enable sustainable changes on the land. Further work is needed to review the green finance regulatory environment to differentiate between different green products. The regulatory environment must establish a framework that rewards land stewardship activities over less impactful actions like changing office light bulbs.
References
Acil Allen (2019). Supporting Agriculture to Adapt to Climate Change. For the Department of Jobs, Precincts and Regions, Australian Government. Acil Allen Report
CBA (2025). Sustainable Solutions for Agribusiness. Commonwealth Bank of Australia. Agribusiness Banking – CommBank
Clean Energy Finance Corporation. (2025). Asset finance – Clean Energy Finance Corporation. Clean Energy Finance Corporation, Australian Government. https://www.cefc.com.au/where-we-invest/investment-focus-areas/asset-finance/
Buchner, B., Naran, B., Padmanabhi, R., Stout, A., Strinati, C., Wignarajah, D., Miao, G., Connolly, J. and Marini, N. (2023). Global Landscape of Climate Finance 2023. Climate Policy Initiative. https://www.climatepolicyinitiative.org/publication/global-landscape-of-climate-finance-2023/
Department of Agriculture, Fisheries and Forestry. (2024, January 28). Overview – Agriculture, fisheries, and forestry exports in 2022–23. Department of Agriculture, Fisheries and Forestry, Australian Government. https://www.agriculture.gov.au/about/news/overview-aff-exports-2022-23
Department of Resource Conservation and Environmental Protection. (2021, October 24). 【Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy】-National Development and Reform Commission (NDRC) People’s Republic of China. https://en.ndrc.gov.cn/policies/202110/t20211024_1300725.html
International Capital Market Association (ICMA). (2021, June). Green Bond Principles. Www.icmagroup.org. https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/green-bond-principles-gbp/
LMA. (2025). Sustainability Linked Loan Principles (SLLP). LSTA. https://www.lsta.org/content/sustainability-linked-loan-principles-sllp/
NAB (2025). NAB Agribusiness Emissions Reduction Incentive Program. National Australia Bank. NAB Green Finance for Agribusiness | Sustainability – NAB
OECD (2020). Green Finance and Investment. Organisation for Economic Co-operation and Development. Green Finance and Investment | OECD
RaboBank. (2024). Our Impact in 2023. https://media.rabobank.com/m/19112654db5377a3/original/Our-Impact-in-2023.pdf
Takeda Kazuya. (2023, March 12). Japan’s Agriculture Sector Contributed .47% of Global Agricultural Emissions in 2021 – Climate Scorecard. Climate Scorecard. https://www.climatescorecard.org/2023/03/japans-agriculture-sector-contributed-47-of-global-agricultural-emissions-in-2021/
World bank. (n.d.). Making Climate Finance Work in Agriculture. https://documents1.worldbank.org/curated/en/986961467721999165/pdf/ACS19080-REVISED-OUO-9-Making-Climate-Finance-Work-in-Agriculture-Final-Version.pdf