WEBVTT - A Growing Appetite for Food Security 0:00:00.320 --> 0:00:04.479 Financial markets can no longer ignore the impacts of climate change, 0:00:04.620 --> 0:00:10.600 shifting consumer expectations and increasing regulatory scrutiny. These forces are 0:00:10.680 --> 0:00:16.730 reshaping industries, redefining risk and creating new opportunities for long-term 0:00:16.810 --> 0:00:22.810 value creation. Through conversations with industry leaders, investors and subject 0:00:22.850 --> 0:00:28.430 matter experts, we explore where sustainability is translating into measurable 0:00:28.690 --> 0:00:34.740 financial outcomes. Welcome to Sustainability Currents, brought to you by 0:00:34.780 --> 0:00:36.360 Bloomberg Intelligence. 0:00:39.460 --> 0:00:42.250 Europe is the fastest warming continent on the planet, and 0:00:42.370 --> 0:00:46.470 agriculture is particularly exposed to the impacts. June's heatwave alone 0:00:46.490 --> 0:00:50.970 knocked an estimated € 2 billion off European grain revenues. And 0:00:50.990 --> 0:00:54.780 for banks financing the sector, resilience is becoming an increasingly 0:00:54.800 --> 0:00:59.280 important question. To unpack this, I'm joined by Ben Makowiecki. 0:00:59.910 --> 0:01:04.780 Agricultural Sustainability Director at Lloyds Banking Group. Ben has spent 0:01:04.819 --> 0:01:08.160 more than 25 years across agricultural banking and farming business 0:01:08.200 --> 0:01:14.120 consultancy and today leads Lloyds' work on agricultural sustainability. Lloyds 0:01:14.180 --> 0:01:17.619 is the UK's largest financial partner to agriculture, serving more 0:01:17.640 --> 0:01:22.209 than 46,000 farming businesses, giving it a significant role in 0:01:22.270 --> 0:01:25.660 how the sector adapts. So what does a more resilient 0:01:25.680 --> 0:01:28.600 farm look like? How do farmers finance the transition to 0:01:28.640 --> 0:01:32.170 more regenerative practices? And what role can banks play in 0:01:32.200 --> 0:01:35.850 making sustainable farming commercially viable? I am Grace Osborne, a 0:01:35.890 --> 0:01:39.860 mere sustainable finance analyst and your host for today's episode. Ben, 0:01:40.160 --> 0:01:44.400 welcome to Sustainability Currents. Let's get into it. So, food 0:01:44.459 --> 0:01:49.060 and farming can sometimes sit slightly outside the mainstream sustainable 0:01:49.100 --> 0:01:53.100 finance conversation, which has historically focused heavily on things like 0:01:53.240 --> 0:01:57.870 energy and the built environment. Why has food, farming and 0:01:57.930 --> 0:02:01.310 nature become such an important part of the agenda for Lloyd's? 0:02:01.710 --> 0:02:02.330 Hi, Grace. 0:02:02.470 --> 0:02:06.010 Thank you. Well, you've already mentioned the fact that we 0:02:06.070 --> 0:02:10.810 have over 46,000 farming customers across our three brands of Lloyd's, 0:02:10.889 --> 0:02:14.359 Bank of Scotland and AMC. So, Because of that, farm 0:02:14.400 --> 0:02:17.900 resilience is a long-term commercial issue for us. It's not 0:02:17.940 --> 0:02:23.680 just about sustainability and isolation. Food production depends on healthy soils, 0:02:23.960 --> 0:02:28.799 reliable water, functioning natural systems. Weather, water, and input shocks 0:02:29.340 --> 0:02:32.540 quickly become yield, cash flow, and investment pressures for farmers. 0:02:33.480 --> 0:02:36.780 So the goal for us is resilient farmers, healthy soils, 0:02:36.880 --> 0:02:42.359 profitable farm businesses, and farmers customers that can keep producing food, 0:02:42.500 --> 0:02:44.680 investing for the next generation over the next 10, 20, 0:02:44.660 --> 0:02:45.370 30 years. 0:02:45.410 --> 0:02:48.430 Yeah, I think it's interesting there's so many moving parts 0:02:48.570 --> 0:02:51.870 to what builds in kind of resilient agriculture. And I'm 0:02:51.910 --> 0:02:56.350 curious where agriculture kind of sits within Lloyd's broader sustainability 0:02:56.400 --> 0:02:57.840 and sustainable finance strategy. 0:02:58.360 --> 0:03:01.700 Yeah, it's a hugely important part for us. So since 2024, 0:03:01.700 --> 0:03:06.180 the group's delivered more than £ 30 billion of sustainable finance 0:03:06.780 --> 0:03:11.310 across commercial banking. We recently announced our Accelerate 2030 strategy 0:03:12.389 --> 0:03:16.570 and a target of facilitating over £ 100 billion of sustainable 0:03:16.610 --> 0:03:22.109 transition finance between 2027 and 2030. But agriculture is a 0:03:22.130 --> 0:03:24.870 key area for us because it accounts for around a 0:03:24.930 --> 0:03:28.720 third of the group's financed emissions. So the easy thing 0:03:28.919 --> 0:03:30.380 for us to do would be to say that we're 0:03:30.400 --> 0:03:32.880 going to withdraw from the sector. We're not going to 0:03:32.919 --> 0:03:34.360 do that. We've been very clear that we won't be 0:03:34.380 --> 0:03:37.140 doing that. We want to work with farmers and the 0:03:37.160 --> 0:03:42.260 industry to support them through the transition and have a 0:03:42.420 --> 0:03:46.620 more sustainable and resilient future. So we've done that through 0:03:46.640 --> 0:03:49.820 a number of propositions. We've got something called the Agriculture 0:03:49.860 --> 0:03:53.860 Transition Finance, Clean Growth Finance Initiative, which I'm sure we'll 0:03:54.120 --> 0:03:58.620 come on to. We do thought leadership reports, such as 0:03:58.640 --> 0:04:01.800 a recent Farming with Nature report. And we've got lots 0:04:01.820 --> 0:04:07.330 of partnerships. So Woodland Trust, the Soil Association Exchange, Nature-Friendly 0:04:07.350 --> 0:04:10.010 Farming Network, and we announced one in the summer with 0:04:10.050 --> 0:04:17.690 Wild Farmed. So, yeah, our approach is about combining finance, data, partnerships, 0:04:18.270 --> 0:04:22.270 about lending for transition and green investment, better farm-level data. 0:04:22.290 --> 0:04:26.150 Data is hugely important to the sector. And more collaboration. 0:04:26.190 --> 0:04:29.469 We need collaboration within the industry to bring in more capital, 0:04:30.010 --> 0:04:31.710 more finance, more support for farmers. 0:04:32.500 --> 0:04:36.580 Yeah, I think it's very interesting because agriculture can be 0:04:36.620 --> 0:04:40.180 such a substantial part of banks' finance submissions. And there's 0:04:40.220 --> 0:04:43.200 that focus on kind of, there has been very strong 0:04:43.240 --> 0:04:48.140 focus on the 2030 targets, meeting those, but actually helping 0:04:48.190 --> 0:04:51.890 the sector transition and decarbonise rather than just kind of 0:04:51.970 --> 0:04:54.990 backing away from financing the sector, given how integral it 0:04:55.070 --> 0:04:58.570 is as a sector. What fundamentally makes the transition in 0:04:58.630 --> 0:05:02.710 agriculture different from financing transition in sectors such as energy 0:05:02.770 --> 0:05:05.780 and transport? I know you've mentioned things around data. I 0:05:05.839 --> 0:05:08.740 think really there's a lot of expertise on the ground. 0:05:09.200 --> 0:05:14.420 That bridge needs gapping between finance and realities on the 0:05:14.460 --> 0:05:15.920 ground and data on the ground as well. 0:05:17.120 --> 0:05:19.700 It probably starts with the fact that agriculture is fundamentally 0:05:19.740 --> 0:05:23.849 different to any other sector. It's based around family businesses 0:05:24.430 --> 0:05:27.730 that live... and work on their main asset 24 hours 0:05:27.750 --> 0:05:30.250 a day, seven days a week. And it's probably a 0:05:30.250 --> 0:05:32.950 bit of a cliche, but farming really is a vocation, 0:05:33.240 --> 0:05:36.560 not a job. So there's also the point that agriculture 0:05:36.710 --> 0:05:39.360 covers 70% of all the land in the UK. So 0:05:39.580 --> 0:05:42.860 what happens to that land and on that land has 0:05:42.900 --> 0:05:48.120 a fundamental impact for everyone through nature, biodiversity, water management, 0:05:48.540 --> 0:05:52.440 and importantly, food production. So there really is no one-size-fits-all 0:05:52.480 --> 0:06:00.010 transition for farming. Outcome's vary wildly. There are so many variables, soil, weather, geography, 0:06:00.930 --> 0:06:03.940 the farming system, the subsector they're working in, and of 0:06:03.980 --> 0:06:07.160 course markets, which farmers don't generally have any control over. 0:06:07.420 --> 0:06:11.140 But those changes, that transition, can involve a lot of 0:06:11.180 --> 0:06:16.900 upfront cost, operational changes, practice changes, equipment changes, and potentially 0:06:17.100 --> 0:06:22.260 short-term yield, cash flow impacts. And it takes time. A 0:06:22.300 --> 0:06:26.190 normal arable farming system Rotation is five to seven years. 0:06:26.310 --> 0:06:29.409 So to go through that rotation to make these practice 0:06:29.430 --> 0:06:32.450 changes and embed them into farming practices takes a lot 0:06:32.470 --> 0:06:36.770 of time. So we really need flexible finance, long term 0:06:36.810 --> 0:06:42.000 relationships and strategies, much better data, as I've already mentioned, 0:06:42.260 --> 0:06:46.120 and ensuring that that risk sharing of that transition is 0:06:46.180 --> 0:06:48.500 spread across the sector, not all put on the farmers. 0:06:49.450 --> 0:06:51.550 Super interesting. I think we look at other sectors and 0:06:51.589 --> 0:06:54.250 there's kind of techno fixes, but here we're working with nature. 0:06:54.310 --> 0:06:58.040 So it's nature's time scales that we're having to operate with. 0:06:58.640 --> 0:07:01.760 And I think so interesting to me that farming or 0:07:01.820 --> 0:07:04.400 agriculture covers 70% of the UK's land. I wasn't aware 0:07:04.440 --> 0:07:07.560 it was such a high percentage. And I think that 0:07:07.600 --> 0:07:10.620 does play into this question, how we're seeing kind of 0:07:11.000 --> 0:07:15.000 food security being increasingly discussed in the national security discourse. 0:07:15.700 --> 0:07:19.540 How closely linked are things like food security, economic security 0:07:19.660 --> 0:07:21.740 and national resilience? 0:07:22.460 --> 0:07:24.590 Yeah, as you say, we're hearing more and more about 0:07:24.650 --> 0:07:28.010 it now. Food security is national security. As I said, 0:07:28.150 --> 0:07:31.990 it touches everybody in the UK, whether that's through flood 0:07:32.010 --> 0:07:36.210 risk mitigation, through food production, through nation biodiversity, but But 0:07:36.230 --> 0:07:40.540 that food security really starts with having commercially viable farm businesses. 0:07:41.130 --> 0:07:47.240 Farms have really struggled over the last few years. Droughts, floods, markets, 0:07:47.280 --> 0:07:52.420 as I've mentioned, raising input costs. And to get that 0:07:52.440 --> 0:07:56.770 food security, we need those resilient supply chains. Farms cannot 0:07:57.010 --> 0:08:01.710 continue to absorb repeated shocks, productivity capacity and investment. They 0:08:01.730 --> 0:08:03.790 will suffer. So, as I said, we've got to share 0:08:03.830 --> 0:08:07.720 that risk across the sector. Climate, water, input, cost, pressure, 0:08:07.980 --> 0:08:11.320 all hit production and farm finances at the same time. 0:08:11.360 --> 0:08:13.880 So the flooding that we've seen over the last few years, 0:08:13.920 --> 0:08:16.980 the droughts that we've seen this year, reinforce the climate 0:08:17.000 --> 0:08:21.880 risk really is business and financial risk. So that nature 0:08:22.180 --> 0:08:24.810 recovery and profitable farming have to go hand in hand. 0:08:24.970 --> 0:08:28.210 The aim is to protect the ability to produce food 0:08:28.490 --> 0:08:31.430 over the long term, but also to improve natural systems 0:08:31.450 --> 0:08:34.150 that production and those value chains depend on. 0:08:35.530 --> 0:08:37.850 I think it's so interesting. We've seen agriculture come under 0:08:38.030 --> 0:08:40.420 huge amounts of pressure from, as you say, from climate, 0:08:40.440 --> 0:08:43.400 from flooding, from drought. We've also seen the squeeze around 0:08:43.480 --> 0:08:46.939 fertilizer and shocks around fertilizer input costs. So there's a 0:08:46.980 --> 0:08:51.060 lot of moving parts. It pressures their yields, obviously their 0:08:51.100 --> 0:08:54.329 cash flows, impacts kind of, I guess, broader kind of 0:08:54.390 --> 0:08:57.890 collateral value. And I think it's helping them also get 0:08:57.929 --> 0:09:00.510 back on their feet after these shocks, as well as 0:09:00.570 --> 0:09:03.430 building in that long-term resilience as well. And I'm just 0:09:03.470 --> 0:09:06.950 kind of curious how we can better build resilience into 0:09:07.010 --> 0:09:10.770 agriculture to cope with those vulnerabilities we're currently seeing in 0:09:10.830 --> 0:09:15.190 terms of those volatile input costs, such as fertiliser and, 0:09:15.330 --> 0:09:16.530 of course, more extreme weather. 0:09:16.790 --> 0:09:19.080 Yeah, well, profitability has to come first. That's the most 0:09:19.100 --> 0:09:23.600 important thing. Environmental transition only scales if it works commercially 0:09:23.630 --> 0:09:28.640 for farms. Emissions, nature outcomes, they need to sit alongside 0:09:29.260 --> 0:09:30.760 financial and business resilience. 0:09:31.920 --> 0:09:32.460 That said. 0:09:33.230 --> 0:09:36.670 A lot of farmers use the phrase, I can't be 0:09:36.720 --> 0:09:39.780 green if I'm in the red. I would counter that with, 0:09:40.300 --> 0:09:41.480 you're going to be in the red if you don't 0:09:41.520 --> 0:09:45.980 go green. So they have to work together. Reducing that 0:09:46.040 --> 0:09:49.300 exposure to those climate risks can mean better soil and 0:09:49.340 --> 0:09:55.050 water management, more efficient input use, particularly from fossil fuel fertilisers, 0:09:55.510 --> 0:10:02.850 utilising diversification opportunities, renewables, antibiotics, other farm-specific changes. So our 0:10:03.090 --> 0:10:06.110 Farming with Nature report that was released earlier this year 0:10:06.809 --> 0:10:12.660 identified around 700,000 hectares of drought-prone farming regions where better 0:10:12.700 --> 0:10:16.900 soil and water management can strengthen resilience. Healthy soils with 0:10:16.960 --> 0:10:20.589 good organic matter content are critical areas to allow water 0:10:20.610 --> 0:10:23.429 to be absorbed and stored, which mitigates risk for the 0:10:23.450 --> 0:10:27.150 whole country. We commissioned some research from Savills last year 0:10:27.170 --> 0:10:31.220 while we were looking at producing our agricultural transition finance proposition. 0:10:31.280 --> 0:10:37.640 And they modelled a 400 hectare arable system. And that 0:10:37.679 --> 0:10:42.140 found that using practices such as cover crops, legume fallows, 0:10:42.179 --> 0:10:47.090 herbal leys, diverse rotations can save more than £ 60, 000 a year, 0:10:47.110 --> 0:10:51.690 around £ 150 a hectare, by lowering those inputs. So through 0:10:51.910 --> 0:10:57.770 lower fossil fuel fertilisers, lower pesticide and fuel use can 0:10:58.030 --> 0:10:59.750 really make huge savings for those farms. 0:11:00.960 --> 0:11:05.340 It's incredible how those kind of translate into such significant 0:11:05.520 --> 0:11:09.260 cost savings. Obviously, we often focus on the high upfront costs, 0:11:09.620 --> 0:11:13.150 making those transitions, but actually looking at those costs individually. savings. 0:11:13.190 --> 0:11:15.690 And I guess I might just throw in the question, 0:11:15.750 --> 0:11:18.860 because we see the term regenerative agriculture thrown around quite 0:11:18.880 --> 0:11:21.280 a lot. And I think it does mean slightly different 0:11:21.300 --> 0:11:24.220 things to different people. Could you give us just maybe 0:11:24.320 --> 0:11:27.850 a very high level kind of definition of what regenerative 0:11:27.870 --> 0:11:28.730 agriculture is? 0:11:29.000 --> 0:11:32.410 Yeah, yeah, you're right. I mean, regen can mean different 0:11:32.429 --> 0:11:35.030 things to different people. And I think that's probably because 0:11:35.190 --> 0:11:37.050 we don't have a certification body, we don't have a 0:11:37.490 --> 0:11:41.300 definitive definition of it. But we tend to look at 0:11:41.380 --> 0:11:45.410 the the six principles of Regen, rather than practices, we 0:11:45.450 --> 0:11:48.480 look at the principles. So this came out of, or 0:11:48.670 --> 0:11:52.820 is widely used by the Groundswell team. So those six principles, 0:11:52.880 --> 0:11:55.980 if I can remember them all now, are minimizing soil disturbance, 0:11:56.280 --> 0:12:02.100 so less invasive, less deep soil cultivations, keeping living roots 0:12:02.140 --> 0:12:05.280 in the ground, keeping the ground covered as much as possible, 0:12:05.780 --> 0:12:10.360 building diversity by using different crops, integrating animals into crops, 0:12:10.960 --> 0:12:14.120 arable systems to make the most of their organic fertilizer. 0:12:14.900 --> 0:12:17.940 And critically, perhaps the most important one is context. And 0:12:17.960 --> 0:12:20.650 it comes back to what I said earlier. Not everything 0:12:20.690 --> 0:12:22.449 is going to work for everybody. You've got to see 0:12:22.510 --> 0:12:25.770 what works on your farm in your context, in your business. 0:12:26.910 --> 0:12:32.230 So that's really the key principle. And I think there's 0:12:32.250 --> 0:12:36.290 a bit of a tendency to hide behind this argument of, well, 0:12:36.320 --> 0:12:40.510 there's no definition for regen. We can't let perfection be 0:12:40.550 --> 0:12:42.949 the enemy of the good we're looking for is everybody 0:12:42.990 --> 0:12:46.460 to make small changes uh or as big changes they 0:12:46.480 --> 0:12:48.000 can on their farm but but a bit at a 0:12:48.040 --> 0:12:51.840 time so let's not waste time arguing about what it 0:12:52.000 --> 0:12:54.700 is we know where we're trying to get to we 0:12:54.740 --> 0:12:58.250 know it's about healthy soils you know improving soil health 0:12:58.750 --> 0:13:02.209 um improving water holding capacity improving organic matter those are 0:13:02.230 --> 0:13:04.810 the those are the important things so Let's focus on 0:13:04.910 --> 0:13:07.000 doing that rather than arguing about what we call it, 0:13:07.030 --> 0:13:07.290 I think. 0:13:07.900 --> 0:13:10.300 Absolutely. And I think that tends to be sometimes some 0:13:10.340 --> 0:13:12.920 of the struggle across sustainability more broadly. It's trying to 0:13:12.940 --> 0:13:16.340 define things, quantify things, but actually that shouldn't limit us 0:13:16.420 --> 0:13:18.160 making progress and steps. Yeah. 0:13:18.420 --> 0:13:23.850 And vocabulary is important because it can depend on whether 0:13:23.950 --> 0:13:26.290 what we're trying to talk to our farmers and farming 0:13:26.330 --> 0:13:29.990 customers about works or not. Because people do switch off 0:13:30.210 --> 0:13:32.500 if they hear a term they don't like, but as 0:13:32.520 --> 0:13:35.260 I say, if we talk about principles and trying to 0:13:35.300 --> 0:13:37.660 get to where we're trying to get to rather than 0:13:37.720 --> 0:13:39.820 focusing on what we call things, I think that's the 0:13:39.840 --> 0:13:40.560 important part. 0:13:40.880 --> 0:13:41.380 Absolutely. 0:13:41.480 --> 0:13:43.380 And I think it's interesting, all those different kind of 0:13:43.400 --> 0:13:47.810 moving parts, but things like soil quality, soil resilience and 0:13:47.890 --> 0:13:51.930 stuff that previously just such big industrial processes hasn't necessarily fostered. 0:13:52.630 --> 0:13:55.449 I wonder, as we begin to see the shift in 0:13:55.550 --> 0:13:59.300 conversation from, as you already mentioned, agriculture has been one 0:13:59.320 --> 0:14:02.600 of the largest parts of kind of Finance emissions, significant 0:14:02.820 --> 0:14:08.250 environmental impact from the sector to perhaps more towards maintaining 0:14:08.270 --> 0:14:11.490 that commercial viability. You mentioned profitability is really the key 0:14:11.550 --> 0:14:15.270 resilience factor of farms in a changing climate. Do you 0:14:15.290 --> 0:14:16.910 think these are kind of separate things or do you 0:14:16.929 --> 0:14:18.959 think they play into one another? 0:14:19.300 --> 0:14:22.820 Yeah, I mean, I think we've moved away from it 0:14:22.860 --> 0:14:25.460 being all about emissions, which it probably was five, six 0:14:25.480 --> 0:14:30.530 years ago. So natural habitats, biodiversity, water management are all 0:14:30.580 --> 0:14:34.240 becoming much more important parts of that conversation and linked 0:14:34.280 --> 0:14:36.940 to it. If we focus on those, we will naturally 0:14:36.980 --> 0:14:39.820 get the reduction in emissions. We'll move towards net zero. 0:14:40.540 --> 0:14:44.880 But we've spoken about using regen or regenerative farming as 0:14:44.940 --> 0:14:47.540 a term. Net zero as a term probably means even 0:14:47.580 --> 0:14:50.580 less to farmers. So we need to focus on that 0:14:51.020 --> 0:14:56.380 holistic environmental target rather than just focusing on emissions. And yes, 0:14:56.420 --> 0:15:01.390 in terms of commercial viability, absolutely, again, another term that's 0:15:01.450 --> 0:15:05.570 debated is resilience. But if you don't have resilient businesses, 0:15:05.690 --> 0:15:12.300 which is based fully around profitability, then farmers just won't 0:15:12.320 --> 0:15:14.880 have the money to invest to make those changes. It 0:15:15.000 --> 0:15:17.760 is a big step for a lot of farmers. They've 0:15:17.780 --> 0:15:19.760 been farming in a certain way for a long time. 0:15:19.800 --> 0:15:22.060 They've been told that they are the problem, but they 0:15:22.100 --> 0:15:24.580 are also the solution to a lot of problems, not 0:15:24.600 --> 0:15:28.220 just in the agriculture sector, but being able to sequester 0:15:28.260 --> 0:15:31.400 emissions from other sectors, being able to use things like 0:15:31.700 --> 0:15:35.640 natural capital markets, BNG, to be able to solve problems 0:15:35.680 --> 0:15:38.100 for other parts of the country, for other parts of 0:15:38.120 --> 0:15:43.260 the UK sectors. So, yeah, they need to have resilient businesses. 0:15:43.300 --> 0:15:45.710 They need to make the most of the opportunities. They 0:15:45.750 --> 0:15:48.410 need to be commercially viable. They need to be profitable. Otherwise, 0:15:48.490 --> 0:15:54.430 we won't have this continued transition towards better soils, better water, 0:15:54.950 --> 0:15:55.830 better habitats. 0:15:56.050 --> 0:15:56.120 And. 0:15:57.410 --> 0:16:00.950 continue food production and improve food production with lower emissions 0:16:01.010 --> 0:16:02.960 so that's a really important part of. 0:16:02.960 --> 0:16:06.160 It it's super interesting what you're saying around um even 0:16:06.180 --> 0:16:08.100 being able to tap into things like carbon markets and 0:16:08.120 --> 0:16:10.800 we think last we got potentially i think it was 0:16:10.820 --> 0:16:12.520 the end of last week we saw google announced a 0:16:12.720 --> 0:16:18.180 substantial deal for carbon credits leveraging agricultural emissions sequestration so 0:16:18.230 --> 0:16:20.330 i think it's really interesting as we're seeing some sectors 0:16:20.350 --> 0:16:23.210 that maybe previously weren't as emissions intensive now the tech 0:16:23.230 --> 0:16:26.170 sector is becoming quite in terms of with data centres 0:16:26.230 --> 0:16:29.010 and how they're kind of that financial interplay and being 0:16:29.030 --> 0:16:33.930 able to leverage progress through other sectors like agriculture so super. 0:16:33.450 --> 0:16:38.390 Interesting those opportunities are coming for farmers but there needs 0:16:38.450 --> 0:16:40.670 to be they need to be clearer for farmers we 0:16:40.730 --> 0:16:44.070 need better guidelines we need guardrails we need better regulation 0:16:44.630 --> 0:16:48.080 we need to build trust in those markets I think 0:16:48.100 --> 0:16:50.660 there's a lack of trust from both buyers and sellers 0:16:51.140 --> 0:16:53.080 at the moment we've seen a lot of issues in 0:16:53.380 --> 0:16:57.430 those markets and And farmers will very quickly lose trust 0:16:57.670 --> 0:17:00.320 if they get burnt early on. So we need to 0:17:00.380 --> 0:17:02.400 ensure that they're safe for the buyers and the sellers, 0:17:02.460 --> 0:17:08.399 that the issues around permanence and stacking and additionality are 0:17:08.960 --> 0:17:11.760 worked on so that farmers can access those markets and 0:17:11.800 --> 0:17:13.899 can access those financial opportunities. 0:17:14.340 --> 0:17:17.550 Yeah, absolutely. I think, as you mentioned, building integrity into 0:17:17.590 --> 0:17:20.369 the markets to give both buyers and sellers confidence to 0:17:20.390 --> 0:17:23.310 kind of move into it. And I guess this leads 0:17:23.369 --> 0:17:27.490 me on to... the broader kind of financing of um 0:17:28.450 --> 0:17:30.890 the transition of this sector like why do we need 0:17:30.910 --> 0:17:34.660 to rethink the financial products to transition the agriculture sector 0:17:34.740 --> 0:17:38.160 to more regenerative practices why can't we just leverage the 0:17:38.200 --> 0:17:41.119 same financial products that we're using in other sectors yeah 0:17:41.140 --> 0:17:41.379 it's a. 0:17:41.380 --> 0:17:43.820 Good it's a good question and it comes back to 0:17:44.460 --> 0:17:47.859 the early answer about agriculture is different um you know 0:17:47.900 --> 0:17:50.930 it is a different sector um the sorts of things 0:17:50.970 --> 0:17:53.419 that farmers are being asked to do whether that's by 0:17:53.460 --> 0:17:58.900 supply chain partners, by government to access sustainable farm initiative. 0:17:59.510 --> 0:18:05.690 These sorts of things need upfront investment. There is multi-year payback. 0:18:05.750 --> 0:18:10.590 As I've mentioned, agriculture is a long-term sector. Things don't 0:18:10.630 --> 0:18:14.260 work over months, they work over years. There are seasonality issues. 0:18:14.280 --> 0:18:20.420 There's that short-term productivity risk and profitability risk. And there's 0:18:20.460 --> 0:18:24.220 no one-size-fits-all transition either. So we need to tailor things 0:18:24.280 --> 0:18:28.720 to different businesses. And generic finance just doesn't fit those economics. 0:18:28.760 --> 0:18:31.960 So one of the most important things that farmers need 0:18:32.020 --> 0:18:37.449 is cash flow. So we designed our agriculture transition finance 0:18:37.490 --> 0:18:42.350 proposition last year. And we designed it around those barriers. 0:18:42.690 --> 0:18:47.440 So we offer fee-free lending. Some farmers will need capital, 0:18:47.720 --> 0:18:51.180 others won't. So if they do, we offer that new 0:18:51.220 --> 0:18:55.220 lending fee-free with terms up to 25 years. But if 0:18:55.280 --> 0:18:58.159 they don't, they can always also bring in existing lending 0:18:58.200 --> 0:19:01.480 into this proposition. And the real USP for it is 0:19:01.540 --> 0:19:06.420 that either that new lending or existing lending can move 0:19:06.510 --> 0:19:09.649 to interest only. So they get a capital repayment holiday 0:19:09.710 --> 0:19:12.390 for up to five years. And that provides that cash 0:19:12.410 --> 0:19:16.570 flow cushion. It enables them to take a few more risks, 0:19:16.690 --> 0:19:18.950 to be able to look at what works on their 0:19:18.990 --> 0:19:23.860 farm and have that five-year period where they know they're 0:19:23.880 --> 0:19:26.439 not going to have to have the pressure of capital 0:19:26.460 --> 0:19:30.879 repayments to free up that cash flow. So, yeah, it's 0:19:30.920 --> 0:19:33.619 just looking at different ways to lend to them to 0:19:33.680 --> 0:19:34.940 meet their needs for that period. 0:19:35.720 --> 0:19:37.780 Yeah, it's so interesting to hear kind of the innovation 0:19:37.880 --> 0:19:41.159 and change in financial products to suit the sector and 0:19:41.220 --> 0:19:43.770 how integral it is to meet kind of, I guess, 0:19:43.970 --> 0:19:46.830 I think like the five year repayment holidays to allow 0:19:46.869 --> 0:19:51.240 them to actually transition into different practices and. I'm curious, also, 0:19:51.560 --> 0:19:55.060 Lloyd's launched their Food and Nature Resilience Fund. Can you 0:19:55.080 --> 0:19:57.160 tell us a little bit more about that and any 0:19:57.240 --> 0:20:00.240 other kind of, obviously, we have the transition finance that 0:20:00.540 --> 0:20:04.020 you've talked about, but anything else that Lloyd's is doing. 0:20:03.840 --> 0:20:08.420 In this space? Yeah. So, as I said earlier, collaboration 0:20:08.480 --> 0:20:11.350 across the industry is key. Collaboration across supply chains, value 0:20:11.380 --> 0:20:13.690 chains is really key. We need to take the risk 0:20:14.190 --> 0:20:16.750 away from the farmers or some of the risk away 0:20:16.790 --> 0:20:18.490 from the farmers. We need to share the costs, share 0:20:18.510 --> 0:20:22.050 the risks. So, we're perhaps in a fairly unique position 0:20:22.090 --> 0:20:25.330 in that as well as those 46,000 farming customers, we 0:20:25.850 --> 0:20:29.450 also bank a lot of the supply chain, the processors, 0:20:29.690 --> 0:20:35.280 the retailers, and people outside the food supply chain. So 0:20:36.400 --> 0:20:39.880 the insurers, there are other banks, there are water companies, 0:20:39.940 --> 0:20:43.400 et cetera, who all have an interest and will benefit 0:20:43.460 --> 0:20:47.810 from scaling of regen agriculture. So Yes, the Food and 0:20:47.830 --> 0:20:50.790 Nature Resilience Fund, which we launched with Wild Farmed in 0:20:50.830 --> 0:20:55.959 the summer, that's very much designed around scaling regenerative agriculture. 0:20:56.000 --> 0:21:01.760 So Wild Farmed pay farmers a premium for producing cereals 0:21:02.260 --> 0:21:05.889 in a regenerative way. And they have huge ambitions to 0:21:05.990 --> 0:21:10.550 scale up that across. There's three million hectares of arable crops, 0:21:10.570 --> 0:21:12.930 cereal crops in the UK at the moment in Wild Farmed. 0:21:13.540 --> 0:21:16.300 have ambitions to to move a lot of that into 0:21:16.320 --> 0:21:21.530 regenerative agriculture but what that needs is funding from non-food 0:21:21.550 --> 0:21:25.929 chain non-food supply chain partners so we are investing in 0:21:25.990 --> 0:21:31.419 it as our seven trent affinity water and axa so 0:21:31.460 --> 0:21:35.520 two two water companies and an insurer and they can 0:21:35.580 --> 0:21:39.859 see the benefits of scaling regions through we mentioned water 0:21:39.880 --> 0:21:43.920 management but also water quality and flood risk mitigation. So 0:21:43.960 --> 0:21:46.610 for an insurer, they can have a lot of assets, 0:21:46.890 --> 0:21:50.270 being sure that we can show that regenerative agriculture can 0:21:50.310 --> 0:21:54.710 reduce that flood risk through better water holding capacity, and 0:21:54.730 --> 0:21:58.730 therefore they will benefit. Similarly, the water companies, they're being 0:21:58.780 --> 0:22:01.460 very progressive, actually, the water companies, because while they've been 0:22:01.540 --> 0:22:04.560 used to funding people within their priority catchment areas, farmers 0:22:04.580 --> 0:22:08.550 within their priority catchment areas for water quality, they have 0:22:08.590 --> 0:22:11.040 said that the money that we put into that fund 0:22:11.080 --> 0:22:13.080 can be used for anywhere in the country because they 0:22:13.119 --> 0:22:17.060 see the benefits of scaling regen across the country. And 0:22:17.080 --> 0:22:19.120 we've had lots of interest from the other water companies, 0:22:19.180 --> 0:22:25.740 from banks, from other insurers. There's opportunities from large infrastructure owners. 0:22:26.119 --> 0:22:29.460 Any property owner is going to benefit from flood risk mitigation. 0:22:29.500 --> 0:22:32.149 So there's lots of opportunities to bring in other funders. 0:22:32.490 --> 0:22:36.350 On the other side, so that's the non-food supply value chain, 0:22:37.260 --> 0:22:40.300 On the other side, for the food supply chain, we 0:22:40.320 --> 0:22:44.020 work with Sword Association Exchange to launch Exchange Market a 0:22:44.060 --> 0:22:47.700 couple of years ago. And that's a carbon in-setting fund. 0:22:47.780 --> 0:22:53.550 So that rewards verified emissions reductions for farmers. So they 0:22:53.570 --> 0:22:56.730 have a calculation at the beginning of the year. They 0:22:56.750 --> 0:22:58.570 do their practices, have a calculation at the end of 0:22:58.609 --> 0:23:01.510 the year, and however much they've reduced carbon by will 0:23:01.550 --> 0:23:05.510 pay them £ 60 per tonne. And that's being funded by, again, 0:23:05.619 --> 0:23:11.369 by Lloyds, but also Little, Tesco, Co-op, church commissioners as 0:23:11.710 --> 0:23:17.110 institutional landlords, and a number of global food processors. So again, 0:23:17.150 --> 0:23:22.629 the recognition that those practices will benefit everybody, whether that's 0:23:22.690 --> 0:23:24.790 in the food supply chain or non-food supply chain. 0:23:25.310 --> 0:23:27.550 Yeah it's interesting to think all the different kind of 0:23:27.609 --> 0:23:31.080 stakeholders involved in the ag sector and actually I'm really 0:23:31.119 --> 0:23:33.119 interested to hear about the insurance because I was immediately 0:23:33.140 --> 0:23:36.680 thinking oh yeah one there's usually relatively low insurance coverage 0:23:36.720 --> 0:23:39.919 for ag they're kind of evolving their products to have 0:23:39.960 --> 0:23:42.460 like parametric insurance and things like that but I hadn't 0:23:42.480 --> 0:23:44.530 really thought about the other side of things that actually 0:23:44.650 --> 0:23:47.850 ag's if it's covering 70% of the UK it's land 0:23:48.190 --> 0:23:51.229 as in a role in flood mitigation protection and nature's 0:23:51.290 --> 0:23:54.380 role in that is huge so that's Yeah, a very 0:23:54.430 --> 0:23:58.100 interesting kind of adaptation play as well, investment there as well. 0:23:58.920 --> 0:24:01.180 And I think as a sector, we've actually seen a 0:24:01.220 --> 0:24:04.500 huge amount of innovation. You know, there's a lot of 0:24:04.680 --> 0:24:09.660 talk about agri-tech and precision agriculture, nature-based solutions and things 0:24:09.720 --> 0:24:13.730 like maybe more drought-tolerant crops and things like that. I'm 0:24:13.790 --> 0:24:17.510 curious which innovations perhaps most excite you in the space 0:24:17.910 --> 0:24:21.850 and where you think the biggest commercial opportunities lie or 0:24:21.890 --> 0:24:22.470 are emerging. 0:24:23.000 --> 0:24:25.980