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Farmers who meet their social and environmental performance targets during the loan term would pay less.
Bank of New Zealand launched the first sustainability-linked loan in New Zealand that will reward small-scale farmers who meet environmental and social goals.
Dana Muir from BNZ’s natural capital said the loan set key performance indicators around greenhouse gases reductions, ecosystem protection, improved staff care, protecting waterways and improving biodiversity, as well as animal welfare.
Muir stated that farmers who meet their social and environmental performance goals during the term of the loan would pay less to borrow the money.
The agriculture sector has a crucial role to play in sustainable finance. Muir stated that our farmers and growers work hard to achieve their environmental and social goals.
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Previous sustainability-focused loans would finance single environmental projects on farms or were for big commercial operations, but the new loan was different because it could be used to finance any farming operation and was tailored to the specific business, Muir said.
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Assure Quality, a verification agent, visited the farm to establish a baseline for environmental and social performance before a loan was approved.
The bank would require proof from the agency that a farmer has met their goals over the term. Muir said that if they did, it would result in an interest cost savings.
Muir said that there were many global sustainable financing models, but they were mostly targeted at corporate entities.
I believe that sustainable financing can have the greatest impact on mom and dad farmers as well as for aspirational farmers trying to improve their business’ environmental and social aspects. Muir said that this is exactly what we did.
Farmers could choose from up to five areas to improve their farms, but climate change mitigation was required as emission reductions are critical. Muir stated that farmers can only choose five.
Muir stated that sustainable financing is a key benefit because it allows consumers to show New Zealanders that environmental progress has been made beyond what is required by regulation.
Muir stated that the loan was in line to the direction of the industry and was consistent with initiatives like He Waka Eke Noa, which rewarded farmers for positive actions.
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Dana Muir believes farmers should be recognized for their environmental and social efforts.
Muir said that this was the first time that Sustainable Agriculture Finance Initiative (SAFI), guidance was used to support a primary sector sustainable finance product.
It would bring the bank in as a partner, and would align the sustainability ambitions with capital or debt financing. Muir said it’s a great way to be a leader and show other farmers how you are working to improve the environment and social targets.
