New Zealand farm businesses will need to incorporate the full cost of environmental risks into future investment decisions says Blake Holgate.

The Rabobank sustainability analyst spoke to The Country's Jamie Mackay about his recently released report Farm to your strengths: Investing to farm under new environmental reforms.

In the report, Holgate said increasingly tougher environmental reforms relating to water quality and climate change would progressively require farmers to account for a greater range of environmental impacts resulting from their farming operations.

This was despite significant investments already made by many New Zealand farmers over the past decade to improve performance of their farming operations.

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The focus of the report was not "what needs to be done" but more about highlighting some of the considerations to take into account when investing said Holgate.

The report says the regulatory framework established to limit agriculture's environmental
impact will heavily influence the overall costs to the sector, and how those costs are
proportioned between different farm types.

Rabobank sustainability analyst Blake Holgate. Photo / Supplied
Rabobank sustainability analyst Blake Holgate. Photo / Supplied

There were three key factors to be considered For individual farming businesses when assessing how they would potentially be impacted said Holgate.

"One is around land use intensity ... the natural characteristics of the land itself ... and the third area is around the 'receiving' environment, particularly if you're talking about water quality".

New governments could bring in a new reforms, but Holgate believed environmental concerns were here to stay.

Listen below:

"I think the strength and focus of these rules will ebb and flow over time given the different political climate but I think the general trend as we look forward is that New Zealand farmers will have to increasingly operate under greater environmental constraints - and that's why we're encouraging them to factor that in now".

Also in today's interview: Holgate talked about the risks and costs of environmental compliance around dairy and whether it was inevitable that more land would go into forestry or horticulture.