The sustainability-linked loan provided to Rural Asset Finance was a ‘first-of-its-kind’ transaction between NatWest Bank, BCI Capital, and the British Business Bank, designed to help farmers access finance whilst also scaling up sustainable practices within their existing businesses.

The specialist structure has a dynamic loan margin linked to the success of sustainability key performance indicators (KPIs): expansion of renewable energy installations on farms and the adoption of sustainable land, water and environmental management practices.

It is expected that over the next four years, this will grow to a portfolio of up to £120 million ($162 million) of financing to UK farmers, as the facility continues to scale.

The transaction offers a scalable blueprint for sustainable capital instruments in fragmented markets. In addition, the structure enables Rural Asset Finance to help its customers implement more sustainable practices by aligning with the Sustainable Farming Initiative, a UK government programme aimed at rewarding farmers for more sustainable land management practices. 

Alongside sustainability benefits, the loan is also designed to help the UK agricultural sector access finance for upgrading equipment and technology, investing in farm growth and building resilience to economic volatility, which is a market that is traditionally underserved directly by mainstream lenders, according to Rural Asset Finance.