No more grants, farmers paid to manage the environment

NFF and KPMG report released into natural capital

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STEWARDSHIP PAYMENTS: National Farmers's Federation president Fiona Simson has called on government to implement a series of recommendations in relation to the stewardship of natural capital.

STEWARDSHIP PAYMENTS: National Farmers's Federation president Fiona Simson has called on government to implement a series of recommendations in relation to the stewardship of natural capital.

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NFF and KPMG have released a report calling for financial instruments to pay farmers for their work on natural capital

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Australia's peak farming body has called for a system where farmers are paid for the management of their natural resources, replacing Landcare style grants with a market-driven 'financial instrument' that pays on delivery.

In a report released today, the National Farmers' Federation and consultancy firm KPMG Australia claim there has been a significant market failure when it comes to managing 'natural capital' such as soil, water, native flora and fauna and the best way forward was to implement a stewardship program that rewarded farmers for their environmental work.

NFF president Fiona Simson said farmers manage 51 per cent of Australia's biomass and should be rewarded for working toward good environmental outcomes which benefit the community as a whole.

"The regulatory stick is the only tool we have now, and it overlooks the benefits and environmental service farmers provide," she said.

"The initiation of a market that can deliver income to farmers will be more effective, because it has been proven that carrots are more effective than sticks.

"In terms of our strategy, we talk about diverse income streams, environmental sustainability and ecosystems services, this initiative would tick off all three boxes."

Ms Simson said previous environmental mechanisms had been short-term, or ad-hoc, which limited their ability to deliver industry wide outcomes.

"We see farmers going above and beyond what they are required to do in terms of creating sustainable, healthy farms and environments, whether that is fencing off riparian zones, maintaining biodiversity or wildlife corridors," she said.

"But there is a cost to it, and in the past some of these initiatives have been funded by various government programs, which have been ad-hoc with fixed timelines and objectives.

"They have also been interfered with through complex and poorly understood regulatory requirements.

"We need a comprehensive approach that delivers the right incentives, and the right outcomes for farmers and the environment."

Ms Simson said key recommendations to government from the report included the implementation of a $30 million pilot agricultural stewardship program exploring financial instruments, the establishment of a $1 billion national biodiversity conservation trust and the development of a natural capital policy.

KPMG national food and agribusiness lead partner Robert Poole said the tools were available to make these recommendations happen.

"There is an increasing opportunity to provide enhanced and new investment vehicles to the market that deliver ongoing financial incentives and rewards to farmers for improving environmental outcomes," he said.

"Through newly constructed financial instruments, such as green bonds and pay for outcome funds, we can provide investable agricultural options for institutional investors, government, industry and philanthropists directed towards improving the environment and delivering social finance options for the market.

"These options provide a return for the community, environment, investors, farming sector and society at large."

Ms Simson said while she acknowledged preliminary moves by government in this area, more needed to be done.

"We've seen the Federal Government commit $30 million to pilot an agricultural stewardship program in the coming years. But in order to be transformational, this pilot must pave the way for the $1 billion fund as recommended by the recent Craik Review of the interactions between agriculture and Environment Protection and Biodiversity Conservation Act," she said.

"We look forward to working closely with government on the next phase of this important work."

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