UK’s largest grocer and bank step in to help farmers reduce costs and decarbonise

By Oliver Morrison

- Last updated on GMT

UK’s largest grocer and bank step in to help farmers reduce costs and decarbonise

Related tags Finance smart agriculture farmer adoption

Tesco, the UK’s leading supermarket and NatWest, the largest UK bank for business and one of the largest for the farming sector, have launched a new discounted climate and sustainable finance scheme for 1,500 of the retailer’s farmers.

The finance provides them with preferential rates on finance to help them switch to sustainable farming methods, including installing renewable energy sources, such as solar panels and wind turbines, and fossil fuel-free heating or cooling systems, such as heat pumps.

The voluntary programme, said to have been designed with farmers’ input, will see farmers who are part of Tesco’s Sustainable Farming Groups for beef, lamb and dairy able to take part in the scheme, and gain access to Tesco preferred suppliers, with potential volume discounts offered on renewable energy assets.

Research shows that more than 50% of Tesco farmers want to make changes​, but need help accessing finance to support them to make the investment. Moving to more sustainable farming practices often requires up-front investments in equipment which can create an obstacle.

Through Lombard, the UK’s largest asset funder and part of NatWest, Tesco farmers will have access to attractive funding solutions, and will also benefit from Lombard’s strong asset knowledge and sector expertise, to help support a move to decarbonising their farms. Assets which are included through the new partnership cover solar panels, wind turbines, biomass boilers, LED lighting, battery storage and combined heat and power systems.

Tesco has set up a series of Sustainable Farming Groups so far, including for milk, cheese, beef and lamb. The first group was set up in 2007 aiming to support dairy farmers during periods of economic uncertainty.

Led by its suppliers, farmers and Tesco colleagues, the groups hope to drive improvements in efficiency, environmental performance, including carbon foot-printing, and farm animal welfare. Should the scheme prove popular, there is potential for it to be made available to more of Tesco’s farmers in the future.  

Ashwin Prasad, Tesco Group Chief Commercial Officer, said: “We have long-term, trusted relationships with our farmers and suppliers and are proud supporters of British agriculture. We know a lot of our farmers are looking at ways to reduce costs on farm and move to renewable sources of energy at the same time, which is why we’re delighted to be partnering with NatWest in offering our green finance initiative.

 "The food industry has a clear role to play in ensuring we maintain food security while also helping to protect the environment, and we hope innovative programmes like this will play a crucial part in achieving this. 

“The initiative will provide our farmers with the confidence to invest in sustainable farming methods and infrastructure, while also helping us meet our target of reaching net zero across our supply chain by 2050.”

Access to finance is the biggest barrier for farmers installing green technology

The moves comes as UK farmers protest about a lack of support for UK food production. Farmers are complaining that the environmental focus of the government's farm payments scheme, which replaced EU subsidies, is coming at the expense of domestic food production while cheap imports are produced to lower standards.

NatWest said the announcement builds on its strong commitment to the UK agricultural sector. The bank has previously confirmed an additional £1.25 billion lending package for farmers, taking its total lending capacity to the agricultural sector to £6.7 billion. The news also builds on NatWest’s partnership with McCain which launched last year to help potato farmers transition to sustainable agricultural practices by reducing financial barriers.

Dave Jones, the Chairman of Tesco’s Sustainable Dairy Group, said access to finance is the biggest barrier when trying to install green technology. “As TSDG Chairman, it’s great to see so many fellow dairy farmers considering more sustainable production methods like installing renewable energy technology on farm. However, accessing financial support for significant projects like this remains a barrier for many farmers. 

“That’s why it’s great to see Tesco and NatWest joining forces to offer financial assistance that could help us install the new technology we need, and reduce farm emissions in the process.” 

Peter Huish, Head of Consumer Industries at NatWest Group, said: “At NatWest, we recognise the multiple challenges faced today by farmers, including the cost of transitioning to lower emissions practices. This is why we are excited to be launching Lombard’s partnership with Tesco and its farmers.

“This initiative further contributes to the UK’s climate goals and food security, as well as to NatWest’s pledge to provide £100 billion of climate and sustainable funding and financing by the end of 2025. We strongly believe that to deliver a more sustainable future, partnering with leading UK consumer companies such as Tesco, and their supply chains, will be critical.”

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