BANKING SPECIAL DEALING U IL// U'ATER
40 ISSUE 24 JULY2010 RI WORLD
Bob Dingler
in improving water retention and water efficiency. Farmers
have been selling their water licences to the government
in return for funds to seal water channels, cap bores and
upgrade to overhead lateral spray lines," says Neil Dobbin,
Group Executive Country Banking at Rabobank Australia and
New Zealand. "Dry-land farmers responded with sustainable
farming practices that led to innovative improvements,
including storage of soil moisture by no-till farming, improved
plant genetics, sophisticated equipment and erop rotations
resulting in increased production."
Both in Australia and California, access to water is a part of the
yearly discussions with clients. Bob Dingler sees Rabobank's
role as a supportive one. "Agribusiness in California is huge
and our clients are very sophisticated; they are well aware of
the water issues and most of the time ahead of us in looking
at different options. As a bank, when we are supporting
our clients, we have to make sure that there is a stable and
reliable source of water before we can make any long-term
commitment. If they provide us with a budget that includes
the sources of water and the costs of that water, our role is
simply to fïnance that operation."
Farms have to adapt, but what can a bank do to assist? Water
is only one dimension in a set of issues that need to be
looked at, thinks Thomas Ursem, Flead of the Corporate Social
Responsibility team at Rl. "Carbon footprints, water problems
and other environmental matters are interlinked. We have a
system in place that helps local banks assess all our clients on
sustainability issues. With the online checklist GAIA we screen
clients on ten CSR facets, varying from involvement of child
labour in the industry to depletion of scarce natural resources.
The next step is to get our relationship managers involved
beyond a fïrst screening. The checklist is not just a tooi for
risk assessment; it can also be used to engage the cliënt
in a discussion on these topics and identify opportunities
together."
The trade in water entitlements seems a bit more advanced in
Australia, where over the years there has been talk of weather
derivatives as a risk management tooi, according to Neil
Dobbin. "But no one has been able to develop a suitable and
affordable product as yet." Bob Dingler, though, is reluctant for
the bank to get involved. "As an agricultural bank, we do not
want to find ourselves in the middle of conflicting interests.
For example, there is an area along the Colorado river where
the Metropolitan Water District for Los Angeles bought a lot of
water rights. Many farmers were involved, as they could make
more money on the water rights than they could have with
farming. Flowever, because of that deal, some equipment
dealers and related service industries were hit hard. Those are
our clients too."
Domenic Carratu has witnessed a similar situation. "Last
year we had too much rain in Brazil and a major drought in
India. To say that on average we had enough water does not
help. A market mechanism would not have solved the local
problems, and I don't think there will ever be a global market
in water trading rights. If there is a market opportunity, it will
be about buying and selling entitlements on a local basis. But
even within Australia, which has attempted to develop such a
market for fïfteen years, they have issues creating a common
system." Carratu has a lot of experience in trading carbon
Neil Dobbin
Thomas Ursem
