A radical new approach is needed by banks to help farm businesses adapt and achieve environmental targets, new research shows.
The Soil Association Exchange, with funding from the British Business Bank, carried out a study which showed that two-thirds of farmers find financial and business risks act as barriers to transitioning to more environmental farming systems.
More than 100 farmers were surveyed as part of the study, with 48% of respondents suggesting that preferential terms for financial support during transition would help cashflow.
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Three-quarters of farmers classed improving soil health as one of the major reasons for transitioning towards more sustainable farming practices.
Soil Association Exchange chief executive Joseph Gridley says that while farmers are ready and willing to make changes to address climate and nature, financial barriers remain a major obstacle.
“Farmers are not simply looking for new loans. What they told us is that they need the lending flexibility and business support from their bank to help them through the transition because they cannot burden the financial risk,” said Mr Gridley.
“Supporting farmers is not just a job for government.
“It is clear that banks and development finance institutions have a critical role to play in helping farmers manage the risks associated with transitioning to more sustainable systems, but they need to radically rethink how they are doing it today.”
Soil Association Exchange is hosting a roundtable discussion with representatives from all the major banks in December, to discuss how farm businesses can be best supported moving forward.
The report recommends farmers engage with banks and policymakers, and look at the long-term strategy for the farm businesses in relation to transition and “business model innovation” .
It also recommends that banks acknowledge the financial risks farm businesses will have to take to adapt for the future and the barriers to investment.
Tony Greenham, managing director of sustainability at the British Business Bank, added: “The findings underscore the importance of providing flexible and truly innovative financial solutions that align with the specific needs of farmers during this critical transition period.
“Supporting the agricultural sector’s move towards sustainability is not only necessary for climate resilience and nature restoration, but also for the long-term financial success of farming businesses.”
