Dairy prices are showing little sign of a rebound, says BNZ senior economist Doug Steel.
Last month the bank launched an Agribusiness Sustainability Linked Loan (SLL) product available to all New Zealand farmers and growers.
The term loan, a SLL available to all farmers no matter the size of their farm or industry, offers interest cost savings for achieving environmental and social targets including: greenhouse gas reductions; eco-system protection; improved care for staff; protecting waterways; improving biodiversity; and animal welfare.
The launch follows a pilot with corporate dairy farmers, Southern Pastures Ltd.
Dana Muir, BNZ head of natural capital, told Dairy News that the bank is keen to align with leading farmers and growers.
"BNZ is aiming for $10b sustainability financing by 2025 and we are talking to all farmers and growers; agriculture will be part of this," she says.
Muir says the new loan will be another tool in the toolbox for farmers to improve sustainability on-farm.
The loan will complement work done by major milk processors with their own farmers around sustainability.
Fonterra has 'The Co-operative Difference' where 10c/kgMS of the milk payment is linked to milk quality and sustainable practices on farm.
Canterbury processor Synlait has the 'Lead with Pride' scheme where it rewards suppliers who achieve dairy farming best practice.
Muir says this is the first time a SLL has been available as a loan product to all New Zealand farmers. Environmental and social targets are set and agreed with BNZ and progress independently verified annually.
"New Zealand farmers are working hard to achieve environmental and social goals and we want to support and incentivise their efforts," says Muir.
Muir says this is the first time lending that rewards both environmental and social ambition has been available to all New Zealand farmers.
"Reduced loan costs incentivise farmers to go harder and faster on environmental and social improvements while independent audits ensure the work is meaningful and contributes to a better future for New Zealand," she says.
BNZ's Agri SLL Product was developed off the back of individual SLLs with large primary sector customers. It is designed to be complementary to work underway across leading assurance programmes in the primary sector that also incentivise improved environmental and social outcomes on-farm.
Unlike previous versions which have supported farmers with one off environmental projects, an SLL can be used for any purpose on a farm. It is designed to work like regular term debt with cost savings only realised when environmental and social targets are achieved.
"Farmers can choose from a range of environmental and social measures which they want to tackle, but emissions reduction is a non-negotiable. It is crucial we reduce greenhouse gas emissions and the structure of our SLL reflects that," says Muir.