FBN launches $25m regenerative ag pilot fund

Date:01-18-2022

By Jack Ellis

Online ag marketplace Farmers Business Network (FBN) and nonprofit Environmental Defense Fund (EDF) have teamed up to launch a new credit facility to reward growers who implement sustainable farming practices.

The FBN Regenerative Agriculture Finance Fund will offer discounted operating loans to farmers who meet EDF standards for metrics like soil health and nitrogen use efficiency.

The $25 million pilot fund is extending one-year lines of credit of up to $5 million to about 40 corn, soybean, and wheat growers in the US.

Participating growers who successfully apply for these loans will effectively get a 0.5% rebate after they have met their sustainability targets, which will be tailored to each farm depending on local conditions, says FBN Finance general manager Daniel English.

“The process is very easy – it’s a digital application form for farmers to fill out, which takes 10 to 15 mins,” he tells AFN.

“For growers [borrowing] less than a million dollars, they receive instant approval. For those seeking between $1 million and $5 million, we follow up to get additional info from them and then approve them. The process works just like it would for any other operating loan; the difference is, once they’ve completed the sustainability requirement, they get a 0.5% reduction rate.”

‘What makes sense for their land’

FBN will customize sustainability standards for each farm based on data collected via its Gradable farm management platform.

To participate, growers will have to share production data for at least three crop years. As such, they won’t necessarily have to agree to implement new regenerative ag practices; those that have already been using methods such as no-till, cover cropping, or sustainable inputs in recent years may still be eligible for a line of credit under the scheme.

EDF says the fund’s sustainability criteria “are designed to be inclusive of farmers who grow corn, soy, and wheat in a variety of geographies and who implement a variety of regenerative practices, while establishing a clear system for monitoring those practices and environmental outcomes.”

Steele Lorenz, head of sustainable business at FBN, says that these criteria are mainly focused on things like “nitrogen and nitrogen use efficiency” while the scheme also “looks for at least one soil health practice to be deployed.”

“We accept a variety; the aim is not to be prescriptive, but to ensure that growers have adopted what makes sense for their land,” he tells AFN.

Biologicals, carbon

The company’s recent forays into biological inputs and carbon credits would appear to be well-matched with the new financial initiative.

It’s about “what works on their field, what works in their operation,” Lorenz says. “To substantially improve soil health, to begin to replace synthetic fertilizers through nitrogen fixers and biologicals – all of these components are [key].

“Our regen finance product is designed to be complementary with any other program a grower may be pursuing, [whether it’s] carbon credits or abatement credits through less nitrogen. None of these should operate in a vacuum.”

FBN says it will “connect” the environmental performance of participating farms and the financial performance of the fund, “creating insights into the relationship between regenerative practices and farm risk and creditworthiness” while “providing investors and agricultural lenders with a new investment opportunity that has the potential to scale across millions of acres.”

English says he expects the program to expand to cover around 100 farmers a year with the fund growing to $500 million within the next three years, as more and more investors seek out “liquid, environmentally friendly” assets.

“We have seen demand from growers, but also from the capital markets,” Lorenz adds. “The amount of clarity we can provide, that FBN and our growers can provide, for having this kind of ‘green loan’ is quite sizeable and substantial compared to other industries.”