Climate change, global supply chain disruptions and a dearth of capital are squeezing Europe’s farmers. Their futures, and that of the food supply, depend on a transition to greener practices.
“We cannot proceed as we did for the last 20 years,” said Laimonas Noreika of Lithuanian climate finance company InSoil. “The farmers know it and they are ready for a change. What they need is finance, knowledge and de-risking.”
InSoil secured a €120 million ($138 million) credit facility from UK-based Pollen Street Capital to ramp up lending to Europe’s small and mid-sized agriculture businesses.
The firm is stepping into a void left by traditional lenders, which have left a more than €60 billion financing gap for farmers and food processors, including about €19 billion in needed green financing.
The deal between InSoil and Pollen Street is one of the largest private credit commitments to sustainable agriculture lending in Europe, both parties said.
Financing farmers
Since launching in 2020, InSoil has backed the sustainable agriculture transition of more than 3,500 agri-businesses in Europe. Pollen Street’s credit facility will mostly support businesses in Poland, which has more small farms than other parts of Europe and a younger farmer population eager to shift to regenerative agriculture, Noreika told ImpactAlpha. The remaining 20% to 30% of the capital will finance farmers in Lithuania.
Catalytic capital
Noreika sees European agriculture entering a “new investment cycle,” with sustainable agriculture becoming “an investable asset class for institutional capital.” InSoil nevertheless secured a guarantee from the European Investment Fund’s InvestEU program for the underlying loans. The guarantee both buffers Pollen Street’s risk and allows InSoil to lend to farmers at lower than average rates and to lend to riskier clients, said Noreika. “We wouldn’t do it without it. It’s a key element in the transaction.”
Paul Varty of Pollen Street said the guarantee offered “compelling structural protection,” for his firm, which manages of over €8 billion ($9.1 billion) in private equity and credit strategies for global institutional investors, banks, foundations and family offices.
