October 17, 2022


Fonterra announces new sustainable finance framework



As part of Fonterra's commitment to sustainability and implementation of its strategy, the co-operative has released on October 17 its Sustainable Finance Framework (Framework).


The framework aligns Fonterra's funding strategy with its sustainability ambitions and reflects the evolving preferences of lenders and debt investors in this area. It outlines how the cooperative intends to issue and manage any sustainable debt, which could include Green Bonds and Sustainability-Linked Bonds and Loans.


The framework has been developed with Joint Sustainability Co-ordinators HSBC and Westpac NZ, and has been independently verified by ISS Corporate Solutions confirming alignment with globally agreed sustainable finance principles.


"This new framework is a step on our sustainable financing journey – aligning with our cooperative's broader sustainability ambitions," said Simon Till, Fonterra's director of capital markets. "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. By FY30, we intend to invest around NZ$1 billion (US$557 million) in reducing carbon emissions and improving water efficiency and treatment at our manufacturing sites. In doing so, we will be taking significant steps towards our aspiration to be net zero by 2050 and we plan to align our funding with this approach."


The framework's announcement comes off the back of strong annual sustainability performance reported in September 2022.


Fonterra's chief operating officer, Fraser Whineray, said that the cooperative is making solid progress towards its sustainability targets.


"In our sixth year of independently assured reporting, we are pleased with progress. Fonterra's GHG (greenhouse gas) emissions (Scope 1 and 2) are 11.2% lower than FY18 and well on their way to our goal of 30% by 2030," Whineray said. "With our supplier owners, we are ahead of target for delivery of Farm Environment Plans (FEP), with 71% of farmers now having plans, against a target of 67% for FY22 and on track for 100% by 2025."


This year, Fonterra has also seen close to double the number of farmers achieving the Co-operative Difference to last year, with more than 70% achieving it at some level.


From the 2021/22 season, farms became eligible for the Co-operative Difference payment of up to 10 cents per kg for milk solids, based on meeting specific criteria, covering milk quality and an on-farm demonstration of care for the environment, animals, people and community. 


The cooperative is also working with partners and other stakeholders on a wide range of potential solutions to help reduce biological emissions. Fonterra, along with other agribusiness leaders, recently entered into a joint venture with the New Zealand government, as part of the new Centre for Climate Action on Agricultural Emissions.


Under the memorandum of understanding, industry partners have already made an indicative commitment up to around $35 million. This could see around $172 million 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 $50 million through this joint venture.


"We know we can, with the government, achieve more by partnering with others and are looking forward to working together to find solutions that will benefit our farmer owners along with the rest of New Zealand," said Whineray.


Fonterra said it is committed to helping people reach their full potential.


Continued focus on training has seen New Zealand employees spend more than 500,000 hours upskilling, an average of 45 hours per learner. To date more than 1,000 employees have taken part in the Leadership Essentials Programme that develops current and future frontline leaders.


There has been a continued positive trend in regard to female representation in global senior leadership from 32.4% to 34.8% in FY2022, Fonterra added. The beginning of the cooperative's new financial year has seen two more women promoted to key roles on its management team with the appointment of Komal Mistry-Mehta to chief innovation and brand officer and Emma Parsons as managing director of strategy and optimisation.


This year, Fonterra has set a new goal of ‘40:40:20' (40% female, 40% male, 20% any gender).


Other progresses that Fonterra noted include:


    - Water use by the cooperative's manufacturing sites in water-constrained regions decreased by 4.2%, taking Fonterra to a 6.6% absolute reduction against its 2018 baseline. Going forward, Fonterra is broadening its water target with an aim to reduce water use across manufacturing sites by 15% by 2030 from a 2018 baseline. Further, all sites will have refreshed bespoke water improvement plans by the end of FY2024.


    - New Zealand's first electric tanker, Milk-E, was launched as part of its fleet decarbonisation plans. The percentage of e-vehicles continue to increase. There are now 693 electric vehicles (cars, forklifts, milk collection tanker) and the network of e-charging stations has expanded to 81;


    - On a total tonnage of packaging basis, 89% of Fonterra's packaging is now recycle-ready, up from 87% last year.


    - 87.7% of products meet Fonterra's independently endorsed nutritional guidelines through further improvements to the composition of everyday and advanced nutrition products;

    - 50 million KickStart breakfasts have been served since the programme began.

100% of Fonterra's manufacturing sites are certified to a leading food safety management system;


    - Fonterra has increased on-the-job training and reskilling hours, ahead of its plan to double on-the-job training and reskilling hours by 2025 from a 2020 baseline, in line with our Aotearoa New Zealand Skills Pledge.


    - Farmer insight reports have been extended to include key insights relating to animal wellbeing including somatic cell count, milking efficiency, mastitis rates, lameness and the potential impact of heat stress;


    - 76% of farms in New Zealand agreed an Animal Wellbeing Plan with their vet this year.

- Fonterra

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