Thursday, March 28, 2024

Green dollar boost

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Farmers grappling with costs to meet environmental standards now have access to low-cost money to help finance farm greening projects.
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ASB has provided $100 million of funds through its rural sustainability loan programme to farmers for on-farm improvements that can span a wide range of suitable “green” projects.

ASB head of business banking Tim Deane says the Mystery Creek launch coincided with three other areas the bank was providing lower cost funds to, including business decarbonisation, infrastructural lending and low interest loans for new house builds. The initiatives make use of funding through the Reserve Bank’s funding for lending scheme.

The latest loan offering to farmers is not the bank’s first foray into lower cost green lending. Several years ago it offered dairy farmers lower cost loans on dairy effluent systems.

“That has been revamped to cover a far broader brief,” Deane said.

“When you see what the primary sector has to do, it requires extra capital investment. Different farms will face different needs for this funding, it could be sheep and beef farmers seeking some for riparian fencing, while dairy farmers who have done much of that may be looking at clean energy sources for farm dairies.”

Assessment of lending and ensuring it would be used in the places it was intended would all be part of loan conditions and lending.

Deane says the opportunities for farmers to apply the funds were broad, and could even include plans to upgrade a farm transport fleet to electric bikes and vehicles.

Banks are now required to release their exposure to climate change risk that applies to all financial institutions with portfolios over $1 billion.

“And we already have a requirement for farm environment plans (FEPs) and consideration of what needs to be done from a sustainability view in assessing any new loans, and in annual reviews,” he said.

“Already our farming customers have invested more than $120 million to plant native trees, install environmentally-friendly effluent systems and fence off waterways – and we know many want to do more.

“Our goal is for our new sustainability loans to back $100m in green upgrades over the next five years.”

The loans are on offer at a discounted interest rate of 2.25% per year as a variable rate and available for up to five years after the customer makes the first draw down on funds. Having a variable rate enables farmers to make lump sum payments or fix their rate at any time.

Deane says feedback to his banking team was that farmers were completely on board with environmental improvements required, but were simply seeking clarity on what exactly was required for them to meet those requirements.

“There is a lot of willingness to change,” he said.

“We’re proud of the work many farmers have already done and are excited to be offering this sharp rate to encourage more to get stuck into meaningful environmental improvements.

“From solar power for the milk shed, precision fertilisation or changing pasture or herd genetics to reduce methane emissions, there’s so much we can do to make a real difference for farmers while supporting a more sustainable rural sector in the longer-term.”

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