Climate-smart credit incorporates climate-smart agricultural and land-management practices into loan terms. When a client signs a loan agreement, they also sign a land-management agreement which requires the client to manage their land in a way which is designed to protect them and their farm from climate-change related events. This approach is designed to enhance credit-provider profitability by reducing credit default risk and increasing client debt service coverage ratio. Additionally, it ensures farmers are building resilience to weather events associated with climate change.
The F3 Life credit incentive system can be adapted to enhance provision of any ecosystem good or service where land is managed by farmers in need of commercial debt. We have developed systems for watershed management, soil conservation and even coastal fisheries management.
Environmental Interest Rates
A key component of the F3 Life approach is the development of "Environmental Interest Rates". Exclusive focus on financial interest on loans leads to a sub-optimal allocation of economic resources. We are developing a methodologically robust system to match financial interest with environmental interest so as to ensure the restoration of degraded farmlands and forest landscapes.