Rabobank's Global Food Revolution
Organising a global food revolution as a bank requires collaboration, a genuine understanding of each stakeholder’s interest and building solutions together that can satisfy these interests. Rabobank does not intend to build an ecosystem to realise a global food revolution, but they do aim to play an essential role in the ecosystem.
On September 15, we invited Roland Van der Vorst, Head of Innovation Wholesale and Rural. He is also a weekly columnist at Het Financieele Dagblad and partner in crime in Chris Skinner's Latest bestseller “Digital for Good: Stand for Something or You Will Fail”. Despite the focus on Rabobank’s innovation in agriculture, I quickly realised this hour was also a speed course on innovation in general.
I hope this 5-minute blog will sufficiently live up to this.
Rabobank’s Role in Agriculture as a Cooperative
As a cooperative bank, Rabobank was set up by farming families, to ease the life and reduce (financial) risks of its cooperative farming members. Still today, they are the biggest player in that segment in The Netherlands.
Also more globally, they play a prominent role, serving mainly big farmers in Australia, the USA and South America. Some of these farmers manage a million acres, equivalent to 25% of the size of The Netherlands.
In Africa, they also support agriculture, mainly through local partnerships like with banks.
Doing this in a cooperative structure matters. This was pretty clear to our audience. 75% answered in a poll because it forces the bank to think much more in terms of stakeholder management instead of shareholder management. Another 25% shared that it is mainly because purpose becomes more than a marketing slogan.
Roland explained that probably the biggest advantage is their cooperative thinking: “It is a way of groupthink, one that is not based on sentiment, but on interest.”
He explained this with the example of your neighbour. You could have completely different hobbies, interests and tastes, but there are common interests that are worth doing together, like a group purchase of solar panels at a discount.
Roland: “I think groupthink in terms of interest is highly undervalued and underestimated. In this world where we need to solve problems together, thinking in terms of interest can be extremely productive. In my innovation roadmap, almost all innovations are based on the basic idea of how can I really reconcile certain interests. For instance, the interest between a small farmer and a big corporate or between an investor and a startup community. I’m constantly looking at how I can align interests by ensuring that everyone is intrinsically motivated to work together.”
A good example is their platform to farmers the proposition to hedge their illiquid assets against price chocks. Roland: “We can play a part in the ecosystem like others cannot. We know the farmers, and at the same time, we have a big market organisation. We connect our big farmers in a new way to a market organisation.”
Sustainably Feeding the World
Roland: “100 years ago, there was an abundance of natural capital and a very limited amount of financial capital. And now it’s the other way around. So we have a huge amount of financial capital and a decreasing amount of natural capital, and we must restore that balance.”
The industry today must rethink the essence of its business.
Today, the world must be moving towards an increase in natural capital instead of a decrease of natural capital, he explained. This means banks need to shift fundamentally: “Traditionally, banks have collateral and look back to historical results to assess their long-term value. In the context of sustainability, however, we see that soil is degrading.”
“If you want to invest in farmland and restore natural capital, you only reap the benefits, probably only after three or four or five years”, he explained. “So, what you need to do there is actually do it the other way around. You need to translate future value into today’s benefits.”
The challenge for these farmers is overcoming this 4–5-year period, the Death Valley, as Roland explained it.
One of the answers of Rabobank is in carbon credits. Roland explained that they set up a remote sensing specialist team that uses satellite imaging to assess certain risks. With the polygons of their farming clients, they can evaluate their climate risk based on a set of parameters.
Acorn is one of the projects using this technology. They set up a business in agroforestry, where small farmers are rewarded for planting trees. These trees improve the quality of soil, capture water, improve biodiversity, and what’s more: they capture carbon. By monitoring the delta in biomass, they calculate the amount of carbon that is being captured and that is being sold to big companies who wish to be climate neutral. They overcome the Death Valley.
They are now helping 10,000 farmers with alternative revenues in 11 countries, with the ambition to reach 100,000 by the end of the year. They work with local intermediaries to achieve this.
Roland acknowledges that an increase in natural capital must is only possible with an increase in biodiversity and more circular practices focusing on local activities. According to him, the challenge is combining this with economic capital growth, which comes with economies of scale.
How can you make regenerative farming and diversity scalable?
Carbon Bank is another initiative focusing on the reduction of emissions in the value chain and sequestering carbon through the soil. Carbon Bank stimulates regenerative farming to enhance the soil’s ability to capture and store carbon, by providing these farmers with access to the carbon credits market.
“If you really want to accelerate the transition, you should not have just a point-to-point solution, but you have to be a connector in an ecosystem and make sure that all the parties, again, the all the interests of those parties are aligned and want to work for that ecosystem actively.”
My main conclusion is that we can’t bring fundamental change alone. That is a generalistic conclusion, I know. What was different in this session was the conclusion that playing an important role in making that change means staying humble.
Yes, banks can play a role in the global food revolution, and an important one, but that does not mean they should be building an ecosystem. The problems are too big and too complex to solve them alone. Work together, learn the interests of each stakeholder, build a common framework and make the change together.