Farmers wanting to face climate change head-on and adapt their business sooner than later can leverage their way ahead with Westpac’s latest sustainable farm loan offering.
The bank used Mystery Creek Fieldays as the launch pad for two new sustainable farm lending packages, a sustainable farm loan and a sustainable business loan.
Bank agribusiness head Tim Henshaw said the sustainable farm loan offers a “whole of farm” opportunity to borrow, make changes to the property’s climate change resilience, and receive a discounted interest rate.
The farm client will receive a .2% discount off the existing loan interest margin across all term debt associated with the entire farm business.
“This is about the entire farm, not just for a specific project and the discounted interest rate which is effective from day one incentivises the farmer to move the farm to a more sustainable, resilient asset.”
The farm owner will have two years from signing on the loan to deliver on their adaptation proposals, where they must meet a Westpac sustainable farm standard.
“One aspect farmers are really liking is that we are using existing work done. If you already have an assurance report through your processor, you do not have to do that again.
“Farmers don’t like duplication, and we can take the quality plans they may already have in place from the likes of Fonterra or Synlait, for example, and then there is just a bit more on top of those to do mainly around climate adaptation, understanding climate change risk, and what to do to mitigate.”
Input for Westpac’s standards has come in part through the Sustainable Agricultural Finance Initiative (SAFI).
This initiative developed guidance for sustainable agriculture finance that takes note of emerging international frameworks as well as existing good farming practice standards used by New Zealand growers and farmers. Asure Quality will be undertaking the farm assessments.
Prior to launch the loans were trailled on drystock and dairy clients.
Westpac also used Fieldays to launch its sustainable business loans to support corporate and agribusiness customers to advance specific adaptation/mitigation projects on farm.
Henshaw said these could be as diverse as electric vehicle purchase, solar panels, waste reduction or biodiversity protection.
They also come with a .2% discount off the loan interest margin.
Henshaw said if a farmer client fails to meet the promised adaptation standards after the two-year period, there is no requirement for the discounted interest to be clawed back and there would be a period of remediation in a loan agreement that also involves a good level of trust between both parties.
The move to sustainable lending makes good business sense for the bank’s rural division.
Henshaw said the overseas pool of investor funds that must be committed to proven sustainable investment ventures continues to grow rapidly. Last year about 5% of all global bond issues comprised green social sustainably linked bonds in what was a tough year for all investment funds.
“This is a pool of funds that NZ Inc does not want to be shut out of, and by being able to offer these loans, it provides us with a means to tap into that vast area of funding that is only likely to continue to grow.”