Sustainable coffee: BNP Paribas and Neumann Kaffe brew up $25m loan facility
French bank establishes revolving loan facility to help support sustainable coffee farming and tackle poverty in 10 countries
BNP Paribas has teamed up with global coffee giant Neumann Kaffe Gruppe to establish a $25m loan facility aimed at supporting long-term, sustainable sourcing of coffee from smallholder famers across 10 countries, the French bank announced yesterday.
The revolving loan facility has been set up in support of Neumann Gruppe's sustainable sourcing initiative NKG Bloom, which is designed to financially assist more than 100,000 coffee farmers, as well as offer them sustainability training and resources, according to the German firm.
The initiative enables farmers to secure, manage, and diversify their supplier base, adopt sustainability principles, and ensure their farm is economically viable, thereby helping to tackle poverty and climate change in coffee communities, it explained.
Catalina Eikenberg, head of sustainability business unit at Neumann Gruppe, said the new Smallholder Livelihoods Facility established by BNP Paribas would enable it to "bring the power of the global financial markets - long the missing piece - to smallholder coffee farmers".
"We've set ourselves an ambitious goal and we're excited to make it happen," she added.
The $25m loan facility has been set up in partnership with Dutch banking firms ABN AMRO and Rabobank, and is structured so that should a farmer default on a loan the partner banks share the direct risks, BNP Paribas explained.
The Risk Sharing Agreement also sits alongside two complementary default guarantees by the US Agency for International Development (USAID) and the Dutch Sustainable Trade Initiative (IDH), it explained.
Yannick Jung, BNP's head of global banking for the Europe, Middle East and Africa region, said the loan facility would help thousands of farmers and their families build more sustainable businesses.
"This loan facility is an example of how a responsible corporate citizen - Neumann Gruppe - and the finance sector can put in place a solution that helps entire communities currently at risk to poverty and financial inclusion," he said. "In short: great for coffee-dependent communities and another step forward in achieving the UN Sustainable Development Goals by tackling poverty, climate action, and inequalities through partnerships."
In related news, NatWest has today announced the first transaction through its existing sustainability-linked loan facility established with South West Water, where the margins on the loan are dependent on the environmental performance of the water firm.
The pilot loan is the first of its kind in the water sector, offering a lower interest rate to South West Water if it achieves defined sustainability targets. NatWest said it hopes to offer similar loans across the wider water market in the near future.
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