Natems Sugar Holdings (UK) Limited has today launched its Sustainable Agriculture Bond to raise £5 million. The funds will be used to enable NSH to complete its acquisition of a sugar factory in the state of Andhra Pradesh.
NSH has appointed Social Finance Limited as placement agent to raise funds for the Sustainable Agriculture Bond.
NSH is committed to improving the lives of the communities in which it works in a way that is sustainable for the long-term. Under the terms of the Sustainable Agriculture Bond, NSH is committing to improving the yield of the farmers growing sugar for the factory by an average of 50% over the five year term of bond, thereby dramatically increasing the incomes of these farmers. This will be achieved through a combination of investment in new equipment (solar water pumps, drip irrigation, and mini tractors) and helping the farmers adopt new, more efficient farming techniques.
The innovation in the Sustainable Agriculture Bond is that Natems Sugar Holdings (UK) Limited is committing to deliver this social impact by benchmarking the yield of the factory farmers over the next five years against the yield achieved by farmers over the last five years. In the event that NSH fails to increase the yield by 50% over this period, then NSH will pay penalty interest on the Sustainable Agriculture Bond.
In this way, the Sustainable Agriculture Bond gives investors an attractive financial return together with a commitment to deliver a significant social impact. After five years, investors will have received this attractive financial return and delivered a meaningful social impact in some of the world’s poorest communities, or will have received a high financial return if the social impact is not delivered. This incentivises NSH to deliver the maximum social impact that is possible over the five year period of the Sustainable Agriculture Bond.