Farmers need more access to private sector finance, report says

The new report explores how private sector sources of finance can be unlocked at scale to support farmers
The new report explores how private sector sources of finance can be unlocked at scale to support farmers

More financial support from the private sector is needed to help farmers deliver environmental improvements alongside food production, a new report has said.

The report, published by Defra and the Green Finance Insititute (GFI), explores how private sector sources of finance can be unlocked at scale to support farmers with this transition.

It lays out four key opportunities to unlock private sector finance at scale and pace for farmers, as well as additional considerations.

In September 2022, the GFI brought together a cross-sector strategic working group of 15 members to identify barriers, address concerns and recommend solutions.

The group convened every three weeks over the course of six months, in addition to hosting four public workshops and conducting interviews with over 75 people from across the agricultural sector.

The group explored a common set of barriers that are preventing readily available private sector finance from flowing into the farming transition.

The NFU, which helped inform the recommendations of the report, said greater access to private sector finance would enable farm businesses to build business resilience.

However, the union's president Minette Batters said this "isn’t a silver bullet", adding: "We still need a domestic agriculture policy which works for all farm businesses.

"There are serious barriers which need to be overcome, such as access to data to inform decision making and building confidence in the market, if we are to fully grasp the opportunities with green finance.

“But with the right initiatives and a supportive market framework for a range of farm types and tenures, it does give us exciting options," she explained.

“As this market develops, it will be crucial for farmers, financiers, policy makers and the wider supply chain to work together to maximise the potential of private sector green finance.”

What does this report call for?

The report outlines four key enablers to help unlock private sector finance at scale and pace for farmers:

• Data access and availability: Making environmental and habitat data sets more easily accessible would help farmers, banks and the private sector in sourcing accurate data to integrate natural capital into their businesses and decision-making processes.

• Priority environmental outcomes metrics: A government-defined set of priority environmental outcome metrics and best-practice measurement guidance would clarify for farmers the environmental data they may want to collect, as well as spur on the banks, investors and supply chain actors to support farmers in data collection.

• Environmental markets guidance and principles: There is a need for greater clarity and formal guidance on how environmental markets will operate including the role of blended finance, the ability to stack or blend ecosystem services, over-arching standards for emerging codes, the inclusion of different forms of tenure in agreements and tax treatment of ecosystem services.

• Aggregation model support: An Aggregation Community of Practice, further funding and guidance and principles around aggregation would encourage widespread take up of aggregation models.