The agriculture sector sits at the heart of key 2025 UN Climate Change Conference (COP30) themes: driving climate resilience through agroecological practices like regenerative farming, improving soil health, harnessing technology and innovation, and mobilising finance to enable a sustainable transition.
Since agriculture impacts and depends on nature, it holds the key to achieving nature-positive outcomes.
Farmers manage the world’s soils, which store more than twice the volume of carbon found in the atmosphere. By adopting agroecological and regenerative practices, producers can enhance soil carbon storage, improve yields and biodiversity, and help stabilise the climate, turning farms into part of the climate solution rather than part of the problem.
Why sustainability matters more in South Africa
South Africa faces a harsher reality than many of its peers: only 12% of its land is arable, with most remaining land supporting only livestock production. In addition, as a water-scarce country, it receives about half of the global average rainfall. This reality is sharpened by several factors:
- Weather volatility: droughts, floods, and heatwaves are becoming more frequent and severe.
- Tight margins: farmers are price-takers with limited economies of scale, making cost management essential.
- Global competition: South Africa competes internationally with little state support; thus, sustainable, high-quality production is vital to remain competitive.
With limited natural resources, the agriculture sector must pursue climate-smart, resource-efficient, and technology-driven solutions. Encouragingly, many of these practices are already commonplace:
- Precision agriculture: drones, sensors, and artificial intelligence enable data-driven decision-making, early disease detection, and optimised irrigation, increasing efficiency while conserving water and energy.
- Agroecology and regenerative practices: managing grazing, planting cover crops, and improving animal nutrition help restore soil health, increase biodiversity, and boost resilience.
- Diversification of crops and livestock: this includes optimal livestock breed selection to suit a farm’s natural environment.
Importantly, these climate change mitigation strategies also reduce business risk. Producers should view sustainability not as a compliance obligation but as a tool to manage climate and business risks while gaining a competitive advantage.
Financial sustainability ultimately comes down to margin management, so any action taken to mitigate climate risk should also positively impact profitability without jeopardising cash flow.
Key strategies
- Ensuring economies of scale: by increasing production, the cost per unit decreases because fixed costs are spread over a larger output. But, be warned: scale on its own is not a silver bullet. If your core business is not efficient, growing for the sake of it merely turns a small problem into a bigger one.
- Maximising output quality: higher yields, better product quality, higher nutritional value, and sought-after produce translate into higher volumes and stronger margins.
- Reducing inputs: lowering energy, fertiliser, and antibiotic use improves profitability and reduces environmental impact.
A financier’s view on total risk
At Nedbank, we assess agricultural finance applications through a holistic lens of ‘total risk’ that considers financial and business risks. We evaluate assets and liabilities, as well as how clients manage external factors such as climate risks, market conditions, and operational challenges, as these influence repayment capacity and long-term resilience.
Risk management strategies
- Production risk: diversification, the use of optimised farming techniques, modern technology, and effective pest control all help to reduce production risk.
- Price and market risk: this involves reducing volatility in input and output prices, managing market shocks, and improving access to markets.
- Financial and credit risk: there must be sufficient cash flow, and the financing model should align with the specific needs of the farming operation. It is also important to plan for fluctuations in production and income. These factors are essential to support sustainable growth and ensure payment capacity.
- Business risk: farming practices must be adapted to changing climate conditions, and preventative measures should be in place to protect against theft of equipment and other assets. This type of risk management helps maintain operational stability and minimise losses.
It is also important to distinguish between good and bad debt. Good debt contributes to greater efficiency, encourages innovation, and strengthens resilience. Bad debt, on the other hand, limits growth and increases the risk of financial vulnerability. Excessive debt can undermine financial and environmental sustainability.
Environmental, social, and governance reporting and investment
Delivering on COP30’s goals will require mobilising finance towards sustainable, climate-aligned agriculture. This is where environmental, social, and governance (ESG) reporting and investing play a crucial role.
ESG reporting has become a cornerstone of modern business disclosure and represents a key area for improvement within South African agriculture. For Nedbank and other financial institutions, robust ESG reporting provides transparency and helps identify clients who are not only financially viable but also effectively managing environmental and social risks.
Similarly, ESG investing channels capital towards enterprises that reduce emissions, restore ecosystems, and support rural livelihoods – priorities that mirror COP30’s call to action.
From climate risk to competitive advantage
For South African agribusiness, the message is clear: sustainable agriculture is more than environmental stewardship; it is central to business strategy. Through regenerative farming, technology-driven insights, and ESG-aligned finance, South African agribusinesses can manage risk, improve margins, and position themselves as global leaders in a climate-conscious food system.
As COP30 will highlight, the path to a sustainable, climate-resilient future runs through the farm gate. Yes, agriculture is exposed to climate risk, but it’s also central to addressing it.
Daneel Rossouw – head of sales for agriculture at Nedbank Commercial Banking.
For more information email [email protected], or visit nedbank.co.za/agriculture.
