Starting session 2, Felipe Ortega Schlingmann, Head of Bioeconomy Division, Projects Directorate, European Investment Bank (EIB), described the EU bank’s role. “We are a promotional bank that provides loan finance to viable investments that align with EU policies and EU integration.” It has sizable investments in agriculture and Green Deal policies.

The EIB offers loans complementing public finance to tackle persistent investment gaps for activities able to fully or partially sustain themselves. Grants can also be used for activities unable to repay loans, but in a way that leverages private financing. In the agricultural sector, a one euro guarantee can mobilise a further five. Farmers need a market if they are to invest in sustainability. “This can come from conscious consumers able to pay more” or from policymakers using taxation and regulation. “We are in this business and we have quite some experience already.”

Jean-Marc Peterschmitt, Managing Director, Corporate Sector and Chief Operating Officer, Client Services Group, European Bank for Reconstruction and Development (EBRD), explained the bank focuses on the private sector, providing €2 billion a year. Food and agribusiness are a core area. It supports change towards more sustainability. “I think the direction is radical, but the steps are incremental,” he stressed. This transition must be accompanied by financial and economic sustainability. “That is what is going to make the private sector want to take on that change.” The EBRD and the EIB can play a key role through their unique ability to bring together finance and mobilise “the right mix of incentive, risk-sharing instruments to package that with technical assistance”. The challenge is to “bring scale in our joint ability to finance that transition”.

Morgan Després, Executive Director International Finance, Economy & Nature Programmes, ECF, emphasised the importance of the right financial incentives. These must reward behaviour aligned with desired outcomes and recognise the risks for farmers. He suggested the latter is currently lacking. With the CAP budget under pressure, he mused on the levers public finance could use to support the private sector in driving change. “It interesting to see what others have done elsewhere,” he said, citing the UK, which having left the CAP, is designing its own incentives. Financial innovation is essential as is the need for scale. This requires development of asset classes, standardisation of financial instruments and new tools, possibly around securitisation. “There is clearly some policy space for things to happen”. A carbon tax and biodiversity credits could be options worth exploring.

Jörg-Andreas Krüger, President NABU, described last year’s report on the Strategic Dialogue on the Future of EU Agriculture as the “North Star” for the transition ahead. “It gives us a lot of security and freedom for the next steps.” Transforming the agri-food system should not be limited to farming but include “changing food policy consumption patterns”. The EU must align its budget with its key policy objectives, with the CAP concentrating on effectiveness, productivity and competitiveness. Direct payments and subsidies will not achieve that.

What is required is innovation, entrepreneurship, digitalisation, fair pricing – including public payment for the ecosystem services farmers deliver – a suitable framework for private sector finance and fewer bureaucratic controls. “We are really happy the Commission has this now on its task list,” he concluded.

Jurgen Tack, Secretary General, European Landowners’ Organization, presented illustrative purchases of milk and wheat from six farms – half between 9 to 40 hectares and half 1,000 to 2,000 hectares. Two practised conventional farming, two organic and two regenerative. The two conventional farms had the highest profit margin. The others were much lower because economic and weather conditions made it difficult “to have a steady income on a year-by-year basis”. He drew two conclusions. Farmers seeking a profit should follow the conventional route. More importantly, CAP reform should “not be about those who need it the most, but about those who deserve it the most” and “are making a real difference”. Soil health could be used as an indicator of that contribution.

Jurgen insisted the debate was not about small or big farms, but “absolutely about those who want to implement sustainability”. The current subsidy system fails to take that sufficiently into account.