Skip to main contentSkip to navigationSkip to navigation
Calves run into an inclosure a property near St George, Queensland.
A survey of 5,000 rural NAB clients showed almost three-quarters were changing their businesses as a result of sustainability concerns. Photograph: Dan Peled/AAP
A survey of 5,000 rural NAB clients showed almost three-quarters were changing their businesses as a result of sustainability concerns. Photograph: Dan Peled/AAP

NAB considers rewarding eco-friendly farmers with lower interest rates

This article is more than 9 years old

National Australia Bank could charge less in interest for borrowers who have good environmental practices, in drive to ‘price natural capital risk appropriately’

Farmers who undertake good environmental management could be rewarded with lower interest rates under a policy being considered by Australia’s biggest rural lender, the National Australia Bank.

The NAB is currently reviewing best environmental practice in industries and regions to determine a formula for lending which is expected to be implemented over the next three to five years.

It comes after the bank became one of the first to sign the United Nations Natural Capital Declaration, which holds signatory financial institutions to integrate natural capital assessments into their loans.

The declaration also calls on governments to use penalties or “enforceable fiscal measures to discourage business from eroding natural capital”. Signatories include Rabobank and Standard Chartered.

Natural capital is defined through the declaration as “natural assets (soil, air, water, flora and fauna), and the ecosystem services resulting from them, which make human life possible”.

Sacha Courville, head of corporate responsibility strategy for NAB, said a survey of 5,000 rural clients showed almost three-quarters were changing their businesses as a result of sustainability concerns such as water scarcity or soil health.

“The goal is to price natural capital risk appropriately,” said Courville. “Customers managing well would be a lower risk and all things being equal … could translate into a lower interest rate. Our customers are already ahead of us on this as the survey showed.”

The bank added: “This is not about penalising customers. As our solar product demonstrates, lower interest rates is one potential outcome from our Natural Value strategy. But, we’re only at the beginning of this process.”

Courville told Guardian Australia the bank was in the process of defining sustainable practice for particular industries and regions through discussions with industry bodies and their customers.

“We’re also starting to engage in conversations with our customers about the risks and opportunities that natural value considerations pose for them, and how we may be able to support them in taking advantage of opportunities as they arise,” Courville said.

Brent Finlay of the National Farmers Federation said he supported a financial approach which factored in environmental practices when assessing loan values but called for a transparent approach which allowed farmers to understand how they would be assessed.

“We are environmental managers already because if you are not looking after property, not only will you see it in the paddock but also in the financials,” said Finlay.

“Obviously banks assess on a case by case basis and everyone is not the same margin. Most landholders talk to their banks.

“Any approach should be based on a sound way of measuring sustainability. Simplistic indicators may not necessarily reflect good environmental outcomes that are being achieved on farm.”

Charlie Wood, campaigns director of 350.org, welcomed NAB’s move to include natural capital management when assessing loans but said Australia’s big four banks should move further by withdrawing loans for fossil fuel projects, particularly the $16.5bn Adani coal mine in Queensland. Australian bank finance for Adani has yet to be announced.

“It’s great to see this is in place as part of a thrust to internally assess the external (environmental) cost of projects – it’s a really good thing,” Wood said.

“But I am concerned about the time frame. Globally emissions will peak yet NAB is still lending to fossil fuel. The big four banks have loaned $20bn to fossil fuels since 2008.”

Courville said NAB’s exposure to mining was “quite small” compared with agribusiness and the bank was looking at the natural capital policy as “a commercial decision as much as an environmental decision”.

She said the NAB policy was starting with the agricultural industry because of its most obvious links to the environment but would eventually move into other lending areas.

“We understand people on the land see changes going on quicker than others do. Natural capital issues are economic issues, we need to understand energy risk and have good sustainable interests,” Courville said.

Since the bank signed the declaration, she said it had developed discounted loan products for renewable energy for landholders such as low-interest solar finance loans to encourage farmers into renewable energy.

The bank is also seeking feedback and sentiment from the agribusiness community on land usage issues such as mining and coal seam gas.

“We are monitoring the sentiment of agribusiness community and take that into account when lending as mining, including coal seam gas, are sensitive industries and require an increased level of due diligence.”

  • This article was amended on 6 March 2015. The original suggested NAB was considering a plan to raise interest rates for farmers with poor environmental management. This has been corrected.

Comments (…)

Sign in or create your Guardian account to join the discussion

Most viewed

Most viewed