There is an alarming decline in biodiversity around the world and in the Netherlands. A transition to organic farming is an important way to turn that tide, according to Kortekaas. Triodos Groenfonds supports this transition by acting as a lender to farmers and projects. Thanks to the tax benefits for fund investors, these loans can be provided at attractive interest rates for farmers.
As a result, farmers receive crucial support, and investors can make a real contribution to the important switch to organic.
Kortekaas: “These investments are desperately needed because the Netherlands is lagging behind the rest of Europe. The goal is to have 25% organic farmland by 2030; we are currently at 4%. Growth in the consumption and production of organic food has been disappointing in recent years.”
Conversion loans for new organic farmers
The modest growth of organic farming is partly due to a rigid food chain in which supermarkets and the processing industry have a lot of power. "A number of organic farmers are already processing farming products themselves and setting up packaging lines. We also finance these kinds of projects,” says Kortekaas. However, according to the expert, it is crucial that more farmers make the transition to organic farming and that the consumption of organic products is encouraged. A better balance between supply and demand is needed.
Triodos Groenfonds is investing heavily in conversion loans for farmers who want to make the switch. “Many farmers want to, but the transition process is not easy. In the first two years, they have higher costs, lower production and normal selling prices. Because they are still in transition, the farmers are not allowed to sell the products as organic and therefore don’t receive the higher prices for organic products,” explains Kortekaas. "There is no government subsidy available for them."
The entire agricultural system is geared towards traditional farmers, not farmers who want to make the transition. Kortekaas: "Their own banks are often reluctant to provide financing because a transition requires additional working capital, while the prospects for operating results in the first two years are negative. This doesn’t provide enough financial comfort for most banks to fund the transition. On the other hand, we have experience with the transition process and know what businesses are up against. If they wish, we can connect them with businesses who have already made the transition so that they can hear from others about their experiences," says Kortekaas.
Organic farming helps biodiversity
Traditional farming methods use large machinery, pesticides and fertilisers and this can severely affect the biodiversity of the land, water and soil. Monocultures such as maize also significantly affect soil quality. Organic farmers commonly use a rotation system, whereby the same crops are not grown in the same soil every year. “This immediately provides enormous benefits for biodiversity,” says Kortekaas. "It creates a healthy soil teeming with life, where plants can take root properly and deeply, and which also allows water to drain during heavy rainfall or be retained during drought."
A lot of things are interrelated, Kortekaas explains. “For example, we finance a dairy cattle project where the animals are switching to being fed mainly with grass. This is better for animal welfare. It also leads to much cleaner manure, which in turn ensures more insects and other organisms present in the soil to become food for other animals.”
Projects that we finance must meet the fiscal green fund scheme conditions. However, Triodos Groenfonds also has its own list of criteria. “The project must contribute to biodiversity, but also to animal welfare and tackling climate change,” says Kortekaas.
Working towards an organic future
Kortekaas does not believe that the Netherlands will achieve the target of 25% organic farming land by 2030 at the current pace. He believes that farmers who want to make the transition should be given more support. "We are now in the process of setting up a network of organic farmers to contribute to this."
He is positive about community initiatives such as consumers joining forces with farmers and organisations focused on the shift to a healthier diet. Kortekaas sees a key role in raising awareness of the importance of organic farming. This as an important tool against the power of the lobbies which support conventional agriculture such as those representing the manufacturers of chemical pesticides, fertilisers, feed concentrates and genetically modified organisms.
Triodos is also trying to broaden awareness in the financial sector itself. “As one of the founding members, we recently signed the principles of the Partnership for Biodiversity Accounting Financials (PBAF). This is a group of financial companies committed to measuring and reporting the impact of loans and investments on biodiversity.”
Explore Triodos Groenfonds' impact report ‘Financing organic farming in the Netherlands’ to find out more about our role as impact investor.