Tim Henshaw is the Head of Agribusiness at Westpac New Zealand, whose headquarters are in Britomart. The bank recently introduced a new Sustainable Farm Loan product that helps farmers achieve greater (and measurable) sustainability targets. Here, Tim talks to Britomart’s Jeremy Hansen about the popularity of the loan and how on-farm sustainability practices are evolving.
JEREMY HANSEN Tim, how are sustainability requirements impacting your customers, and how are they adapting to them?
TIM HENSHAW We’re starting to see an increased level of requirement or scrutiny on farms to report on what they’re doing on the sustainability front. That’s coming from assurance programmes that operate in the sector, and primarily coming from meat and milk processors. We’re starting to see higher and higher ambition in the supply chain to ensure that the end customers are provided with goods that have very strong sustainability credentials. Most farmers and growers will now know their emissions number, and most of them are part of those assurance programs. In terms of specific adaptation to climate change, there is a plethora of really good work happening on farms and orchards to make those businesses more resilient. Unfortunately, we’ve recently seen so many examples of the need for that, which have highlighted that we have to keep focused on building resilience and building adaptation as well as doing what we can on mitigation.
JEREMY You’ve recently introduced a Sustainable Farm Loan product. Could you talk about what that is and why you decided to introduce it?
TIM We launched that in June. If I step back a bit, our intention is to provide a sustainability product or service to every part of our customer base. We already have a really strong position in our institutional customer base, as well as in the retail space with what was called our Westpac Warm Up loan and is now called Greater Choices for home loan customers. Agriculture is so reliant on the natural environment for its ongoing viability and sustainability; it also produces a large proportion of New Zealand’s greenhouse gas emissions. So, we thought being able to encourage the acceleration of on-farm sustainability practices and building that resilience and adaptation was absolutely where we want to be and how we want to partner with our customers. Our Sustainable Farm Loan effectively gives customers a two-year window where they commit to meeting a set of sustainable farm standards. They do a self-assessment at the start of that two years, then we work with AsureQuality to provide guidance on how farmers can get to that standard in that two-year period. Farmers commit at the outset then get the discount of 20 basis points off their lending associated with the farm from the time they do the self-assessment. We’re taking a whole-of-farm approach to this, which includes water management, soil management, nutrient management, waste, people, health and safety, climate change adaptation, climate change mitigation. It’s a set of the highest assurable standards in New Zealand. Farmers love that we are giving them recognition of the great work that they’ll be doing on farm in developing and supporting a sustainable asset.
JEREMY You’re giving farmers support and a discount. What’s the benefit for the bank in financial terms?
TIM A couple of ways, we hope. First and foremost, the more resilient and financially sustainable our customers are, the better it is for the bank, because we have capital at risk. We want to support them being successful because if they’re successful, we’re successful. The other aspect is we want to have this pool of assets that allows us to access those growing pools of capital offshore that are required to invest in green assets. For us to provide green New Zealand agri-assets is a massive win for the sector. It ensures New Zealand doesn’t deprive itself of access to those growing pools of capital offshore.
JEREMY How would you characterise the response to the Sustainable Farm Loans product you’re now offering?
TIM It’s absolutely blown us away. In five months, we have grown that portfolio to $1.6 billion. We’re really excited about some of the insights that we’re getting back: through the farmers’ self-assessment, we can see the things they’re doing on their farms to adapt to more rain, more floods, more sun, more heat. One of the things we’re looking at is how we share those insights to help others do great work on farms as well. We see that most of the actions they’re taking are good financial decisions as well: they’re reducing the risk of future liabilities or future costs on emissions, for instance. We’ve supported the Farm Loans with a couple of big pieces of research we’ve commissioned on climate change risks as they apply to the New Zealand agri sector. There’s a lot of information out there and aggregating it into one source of truth is very helpful.
JEREMY I ask almost everybody I talk to in the sustainability area this question: all of us have a sense now of the enormity of the challenge. How do you feel about that challenge, being immersed in the area you are in?
TIM I’m incredibly optimistic, but not delusional. New Zealand farming has proven to be incredibly resilient and innovative over decades and decades, and it’s one of our strengths. We’re seeing that happen at the moment. There’s also a rising amount of research and development spend that seems to be occurring that I’m pretty sure is going to assist with this. But we have to keep thinking about how we adopt our practices and farming models. We’re seeing a bit of diversification of farming systems to deal with droughts and floods in particular.
JEREMY It’s very clear that large markets such as the EU are moving quickly to greater environmental regulation and carbon accounting of the products that sell within that market. How is that change affecting export-led New Zealand farmers?
TIM It’s a really important narrative in this discussion. While we may have access to those key markets now, the future risk of not having access is absolutely there. That’s why we need to stay on the front foot by recording the great work that we’re doing on farm, learning the lessons we can within our New Zealand farming system and improving that system through data and assurance programmes.
