Banks need to radically rethink how they support farmers to shift to farming systems that prioritise climate and nature, according to new farmer-led research from Soil Association Exchange.

The study spoke to more than 100 UK farmers and revealed a clear absence of financial solutions and advice that recognises the complexity of the transition they are looking to make for climate and nature.

The ‘Banking for Change: Addressing Financial Risk as a Barrier to Farm Transition’ research was led by farm environmental monitoring platform Soil Association Exchange with support from the Green Finance Institute and the British Business Bank.

It found that most farmers think financial and business risks are barriers to a transition to agroecological farming systems, but access to lending itself was not seen as the primary barrier.

Instead, farmers highlighted the need for flexible and preferential terms on either new or existing lending, which would give them the capacity and space to navigate transition without financial risk to their farm business. This flexibility, combined with long-term business advice, was seen as essential for a successful transition.

Soil Association Exchange chief executive Joseph Gridley said: “This research shows that while farmers are ready and willing to make changes to address climate and nature, financial barriers remain a major obstacle. Importantly, however, farmers are not simply looking for new loans. What they told us is that they need the lending flexibility and business support from their bank to help them through the transition because they cannot burden the financial risk.

“Supporting farmers is not just a job for government. It is clear that banks and development finance institutions have a critical role to play in helping farmers manage the risks associated with transitioning to more sustainable systems, but they need to radically rethink how they are doing it today.”

Financial risk:

•    66.1% of farmers said they agree or strongly agree that financial and business risks are barriers to transitioning to farming systems that prioritise climate and nature.

•    58.6% view conventional farming systems as an ‘insurance’ policy, meaning they feel locked into a system that they know, even though the system is not resilient to climate impacts or fluctuating input costs.

•    55.9% said they agree or strongly agree that they lack the financial flexibility needed for experimentation and learning during the transition process.

Benefits of transition:

Despite these concerns, the benefits of transitioning to agroecological farming systems were widely recognised:

•    75.7% of farmers ranked improving soil health among their top five reasons for transitioning.

•    63.1% pointed to the visible return of nature as a key advantage among their top five reasons for transitioning, and second to soil health.

Call for financial support:

Farmers expressed a clear need for tailored financial support. The top two priorities identified were:

1.    Financial products with preferential terms during the transition period (47.7%), which would help manage business risks and cash flow needs.

2.    Financial advisory services integrated with transition planning (43.2%), providing crucial guidance as farmers shift to new systems.

Positive support for the transition from the banking industry would also have a reputational impact with 69.4% of farmers agreeing or strongly agreeing that it would “make them think positively” about their bank if they were offered support with transitioning their farm.

Tony Greenham, managing director, sustainability at the British Business Bank, which helped fund the research, added: “The findings underscore the importance of providing flexible and truly innovative financial solutions that align with the specific needs of farmers during this critical transition period. Supporting the agricultural sector’s move towards sustainability is not only necessary for climate resilience and nature restoration, but also for the long-term financial success of farming businesses.”

The research concluded with a call for the development of ‘Nature Transition Finance’ products that recognise the financial risks associated with agroecological transitions.

These solutions would offer flexible financial products, such as preferential lending terms that for example give payment flexibility during the transition period. Farmers felt this should be seen as a package of transition support, combining financial and farm advice being delivered hand-in-hand with financial products.

To spark action, Soil Association Exchange is convening an industry roundtable in December, held at the British Business Bank and attended by representatives from all the major banks, to discuss the findings of the report and agree a charter of change.

To read the report in full, visit: www.soilassociationexchange.com/bankingforchange