The SEC’s Climate Proposal Sets Table For Netherlands-Style Farm Crisis In The U.S.
Kenneth Rapoza, Senior Contributor, Forbes
Aug 1, 2022
Environmental policies to fight climate change are now being used to make life impossible for farmers, especially ranchers. This is increasingly looking like a coordinated effort against the Western world’s agricultural sector. The U.S. is the next target.
At a time when large multilateral institutions like the World Bank are talking about supply chain crises, and politicians are calling for reshoring critical supply chains from microchips to energy, radical environmental measures such as those being imposed in Europe will almost certainly lead to near-term food supply chain disruptions and the offshoring of native grown and raised food in favor of those grown and raised in countries that do not enforce similar restrictions on their agriculture. It will be too expensive to do so domestically. Farming becomes a quaint hobby instead. Because the regulatory burden and financial pressures to adhere to ever-more restrictive environmental policies will remove many players from the market, leading to market consolidation and greater import penetration.
It started in The Netherlands.
The Netherlands is home to the world's biggest agricultural export terminal, and to global financiers ABN Amro, ING Group, and Rabobank, as well as Uniliver, a conglomerate waiting for the “new foods” market to take hold. This includes high-tech, laboratory grown meats made from animal stem cells. These three banks, Unilever, and many others quietly push for stricter environmental rules on ranchers and farmers through associations like the Carbon Disclosure Project and the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD).
Dutch farmers protested their country’s policy to reduce emissions. Protests have now spread across Germany, Italy, and Poland. The Netherlands government is the tip of the spear. They say emissions of methane, nitrogen oxide, and ammonia, which livestock produce, must be drastically reduced.
Over the last week, the Trudeau administration said it wants to enforce a 30% reduction in “carbon emissions”, citing environmental harms caused by Canadian farmers. Now they are protesting, too.
Oddly enough, this policy decision will hurt smaller to midsized family farms much more than it will the corporate-controlled industrial farms that many environmentalists have long opposed.
Can such a policy take root in the U.S.?
Yes, it can.
In fact, the Securities and Exchange Commission (SEC), of all places, has released a proposed rule on climate change for publicly traded companies. The proposal is part of the investment world of Wall Street, London, and Frankfurt’s new favorite product line — Environmental, Social and Corporate Governance banking, known as ESG. ESG investing affects portfolio manager decisions and corporate lenders. “E” is the main one as it is easily sold to companies and the public as a means to rollback climate change.
The SEC’s ESG proposal creates a framework for lenders and investors, requiring publicly traded companies to list their prescribed environmental impacts along their supply chain. This would make gauging carbon footprinting more uniform so everyone knows what is required to be ESG investment eligible. That’s the SEC’s main goal, it says.
If enacted, the rule would require big food companies like Tyson and Smithfield Foods, owned by China, and JBS and Marfrig, both Brazilian, to report to the SEC how their farmers are impacting the environment.
In other words: didn’t reduce fertilizer by 30%, for example? Sorry, can’t buy your beef. Too many bovines releasing methane into the air? Need a smaller herd. No loans from Bank of America for you. And sorry, your beef is a climate risk according to ESG adherent Rabobank. That means Rabobank might not provide the big agriculture exporters with trade finance as punishment for not being ESG enough.
This is coming to the U.S. unless big food exporters successfully lobby to stop it. It is unclear if they are even against it. All of their lenders want it, so they may be forced to go along with it. Others are invested in alternatives to traditional means of food production and alternatives to animal protein. It is almost impossible to find an investment firm, lender, or asset manager against the SEC’s proposal.
Their comment period was loaded with investors praising the proposal.
If these protesting European and Canadian farmers are right, then this will be a disastrous policy for American ranchers. But it will be a win for large corporations who will likely buy up smaller ranch operations, or let them go broke and import what they need from Brazil, where ESG is merely a feel-good acronym for bankers and asset managers who want to sound like their friends in London and New York.
What the SEC has Proposed …
Who is in Favor?
The SEC admits where this idea comes from.
Several major institutional investors, which collectively have trillions of dollars in investments under management, have demanded climate-related information from the companies in which they invest because of their assessment of climate change as a risk to their portfolios and investments generally. They also got into this because they want to satisfy some of their investors’ interest in companies considered “sustainable.” The SEC says this in their proposal.
These primarily European, Canadian, and American investment firms have formed advocacy groups to urge companies to collectively provide better information about climate risk. They are also lobbying governments to do the same.
Who are these groups?
In 2019, more than 630 investors collectively managing more than $37 trillion created the Global Investor Statement to Governments on Climate Change urging governments to require climate-related financial reporting. It is run through the United Nations, but the U.N. is not the brainchild of this statement.
This investor initiative bred the Investor Agenda’s 2021 Global Investor Statement to Governments on the Climate Crisis, which was signed by 733 global institutional investors, including some of the largest investors, with more than $52 trillion in assets under management. (U.S. GDP in 2021 was around $23 trillion). They called for governments to implement a number of measures, including mandating climate risk disclosure. The SEC is listening to them. The Netherlands already has. Canada wants to. It is unclear if the Canadian Parliament will stop it.
The SEC said that unless companies follow these proposed guidelines they “may, in turn, create transition risks for companies that are seeking to raise capital.”
The SEC devised its rule based on the non-profits funded by these same banks and corporate food conglomerates.
The same backers of the SEC climate rule are the old globalization financiers and multinationals who prefer global supply chains which has led to the the hollowing out of U.S. production in favor of low regulation, low tax, and low labor cost countries. These policies threaten to force producers to exit the market. And it is unlikely poorer countries, including big food producers like Brazil, would go along with these policies, citing issues of sovereignty.
The organizations that support the SEC rule are largely unknown to the general public and to members of Capitol Hill. They include Amsterdam-based Global Reporting Initiative, CDP (once officially called the Carbon Disclosure Project), London-based Climate Disclosure Standards Board, San Francisco-based Value Reporting Foundation (formed through a merger of the Sustainability Accounting Standards Board and the International Integrated Reporting Council), and the TCFD.
The SEC said their climate-related disclosure framework was modeled in part on the TCFD’s recommendations. Michael Bloomberg, a former presidential candidate, New York City mayor, and best known for creating the Bloomberg investment terminal and newsgroup, is the chairman of TCFD. Their vice chairman is Graeme Pitkethly, CFO of Unilever UK.
Another banker and multinational corporation advocacy group behind the push for a 30% reduction in greenhouse gas emissions is the Global Roundtable for Sustainable Beef (GRSF). This group was on the receiving end of a two million euros grant by The Netherlands government to convince buyers of beef – like WalMart and McDonalds – to exert pressure on farmers in the name of ESG principles to reduce emissions.
This group counts ranchers and ex-ranchers on its board. Some are not happy with the SEC’s proposal, but they will not find allies there.
The GRSF’s president is from Tyson Foods. Tyson is investing heavily in the aforementioned high tech synthetic, lab made meat alternative to traditional animal protein production. China is becoming a big player in this space, so one can imagine where the work will be outsourced to eventually.
GRSF’s Treasury Secretary is from Rabobank. They’ve backed non-farm raised meat made from stem cells for years.
What Congress Says About the SEC Rule …
ESG Will Lead to More Imports
More than 100 agriculture groups have asked the SEC for more time to review the rule. In a letter to SEC Secretary Vanessa Countryman, the coalition of farmers said the rule's Scope 3 greenhouse gas emissions may create multiple new sources of substantial costs and liabilities for their members.
Cost is what usually drives production away from the U.S. and leads to greater import penetration. As one of the world’s biggest food producers, reliance on global corporations with little allegiance to home countries and new, high-tech, cultured meats would be a major headwind for American farmers. Worth noting, China made the “new foods” market part of its Five Year Plan this year.
Europe is worried. It may be too entrenched there to roll back.
“What this does is it tells ADM and Bunge how to purchase food and then the corporations will push that down to the cattle producers,” said Bill Bullard, CEO of R-CALF USA in Montana.
“They are gathering that information now, so what you have here is the first phase of government and/or corporate control of farmers and ranchers. And because there are so few companies you are selling to, these companies can limit what they buy and how they buy it. There is no rule now. But if there is a rule, the American rancher will be subject to what the packers say they need to do in order to be in compliance,” Bullard said.
R-CALF issued a statement in support of the Dutch farmers on July 21, saying U.S. ranchers were “on the cusp of suffering the same fate.” Three days later, the Trudeau government in Canada said it wanted a 30% reduction in fertilizer use.
It’s getting closer.
“What the SEC is trying to do now is allow the banks to blackmail publicly traded companies into this ESG framework and now they are going to require it by regulation at the SEC,” said Tracy Hunt, a rancher in Wyoming. “For me, that means (Brazilian owned meat packer) JBS will be able to say, ‘hey boys, it’s not us making the rules. You have to do this for us or we can’t buy your beef because I wouldn’t be compliant’,” Hunt said.
“We already have some of the most stringent environmental rules in the world,” said CEO of Atlas Tool outside of Chicago, and Chairman of the Coalition for a Prosperous America, a DC think tank advocating primarily for American manufacturing and domestic production. “Multiple indicators show that our environmental policies are working. America’s waterways, land and air have improved significantly since the 70’s and keep improving. This SEC proposal is nothing but hand waving and virtue signaling, and if implemented, it will only move production to the dirtiest places on earth where no one is looking.”
Comments to the SEC …