The Use of Sustainable Finance for Promoting Agricultural Sustainability.
Sustainability has gained attention in several industries across the world. This is, in a way, due to the fact that there are unlimited opportunities associated with the state of being “sustainable”.
The financial sector is increasingly intrigued by how sustainability can be used to create positive social and environmental impacts in the wider society. Also, it is now vitally important for financial investments to demonstrate sustainability credentials, and means to demonstrate such credentials are being unveiled from time to time, One viable way to do this is through sustainable finance practice.
The general idea of sustainable finance is financing that incorporates and considers a wide range of social, economic and environmental issues in capital deployment processes. Sustainable finance practice is now increasingly used in decision-making processes for financial investments and to also support the transition to a low-carbon economy.
This concept is also quickly gaining momentum in the agriculture sector. The concept has been found useful to players in the sector in many ways. For example, a lot of farmers who experiencing financial hardship are unable to grow their businesses. However, such indebted farmers can be offered some forms of financial support to keep going under sustainable finance measures, thereby saving them from going into administration.
Often times, new farmers are mostly deterred from venturing into farming due to the lack of resources. What’s more, conventional agricultural lenders are often reluctant to provide loans to new farmers because they (new farmers) have little or no financial history. However, under sustainable finance measures, new farmers are able to borrow money based on social and environmental criteria, providing them with opportunities to access funds for growth and development. Not only are they able to access financial support, they are also able to borrow money at affordable or low rates, thereby helping to alleviate their financial burdens.
It is noteworthy that sustainable production and farming methods such as organic farming and grass-based livestock operations are generally regarded as clean farming practices. To qualify for sustainable finance, farmers are required to demonstrate that their proposed or ongoing farming operations meet certain green credentials. As a result, sustainable finance can be used to promote and improve environmental sustainability in the wider society.
Given the fact that social issues are also considered under sustainable finance, it does seem as a suitable tool for the creation of positive social impacts. And this tool can be used to empower people living in rural areas who are interested in farming.
It is also imperative to note that risks and opportunities are experienced in farming operations. These often manifest in social, economic and environmental forms. Some of these are hidden and given zero attention in farming supply chains.
In other words, significant risks are left unmitigated while opportunities are left untapped. However, sustainable finance practice can be used as a tool to make farmers more aware of the risks and opportunities within their supply chains, thereby helping them to improve productivity and profitability as well as satisfy stakeholder’s concerns.