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Heartland Co-Op, CoBank partner on a five-year sustainability-linked loan
To receive a reduced interest rate, Heartland must meet three key performance indicators
Jan. 6, 2025 5:59 pm, Updated: Jan. 9, 2025 10:26 am
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Agricultural services company Heartland Co-Op has launched a first-of-its-kind loan with CoBank that will allow the co-op to receive an interest rate reduction if it meets multiple conservation goals.
CoBank, which is part of the Farm Credit System’s nationwide network that supports agriculture and rural infrastructure, is offering Heartland an loan interest reduction if it reaches or surpass three key performance indicators:
- The installation of more than 300 edge-of-field practices, like saturated buffers and bioreactors, to help reduce pollutants entering Iowa’s waterways;
- A 33 percent increase in annual cover crop acres sold, reaching a total of 98,000 acres aided by Heartland’s conservation staff;
- And a 39 percent increase in farmer engagement and outreach education by Heartland’s Conservation Agronomy team.
The loan between CoBank and Heartland Co-Op is a sustainability-linked loan. Ruth McCabe, conservation manager with Heartland, said this work is something their customers have been requesting.
“Our customers are asking for this, and they're not getting it right now. If our customers don't get it from us, they're going to go to where they can get it,” McCabe said. “We want to keep their business in whatever form it is.”
McCabe declined to specify what the interest rate reduction would be. She said that each of the key performance indicators, or KPIs, have an interest rate reduction associated with them, so even if Heartland does not meet one of the KPIs, but meets the other two, it still will receive a partial rate reduction.
“We are proud to support Heartland Co-Op’s conservation leadership with our first sustainability-linked loan, and to contribute to their future success, as well as that of their farmer members,” CoBank’s Chief Sustainability Officer Steve Wittbecker said in a news release
Heartland uses the Iowa Department of Agriculture and Land Stewardship’s cost share programs to pay for the conservation practices themselves. McCabe described Heartland’s role with conservation work as the “project managers.”
She said this includes a “time commitment” of vetting the land, overseeing the installation and working with landowners to determine which conservation practice is the right fit for them.
The reduced interest rate and grants from their conservation partners helps Heartland support and oversee more conservation projects.
McCabe said Heartland has been working on how to structure the loan with CoBank for the past three years and what services they could offer to Iowa farmers.
“We build partnerships with nonprofits or water treatment utilities or counties or watershed management authorities who have a specific conservation goal,” McCabe said. “Partners come to us and say, ‘Look, we have this goal over the next three years of getting this many acres of cover crops on the ground and this many saturated buffers and this many filter strips, and this many acres of prairie establishment. Can you help us?’ And we put together basically a scope of work where we say, ‘Here's how we'll get you these things.”’
Thomas Fawcett, director of Environmental Resources & Precision Agriculture with Heartland, said the Co-Op had been focusing on conservation work for a long time, but did not launch its conservation department until 2020.
For their work, McCabe said Heartland is paid only if they help farmers and conservationists succeed in getting their conservation practices in the ground. If they don’t break ground, they don’t get paid.
“The cost savings from the sustainability-linked loan with CoBank will help us expand our successful conservation agronomy program, provide more benefits to farmers and improve Iowa’s water quality,” said Tom Hauschel, Heartland Co-Op’s chief executive officer.
Meeting their goals
McCabe said Heartland helps farmers implement many different conservation practices on their land, including filter and buffer strips, prairie works and wetlands, in addition to bioreactors and saturated buffers.
Heartland’s three KPIs tied to the loan were selected in tandem with CoBank and other conservation partners based on which practices would have the greatest environmental benefit, McCabe said.
“The Environmental Defense Fund actually stepped in with scientists and some staff who do all kinds of environmental assessments and literature reviews to look at how different conservation practices impact the landscape,” McCabe said.
McCabe said that after an assessment from the EDF, they found about six KPIs that would have the broadest impact on Iowa’s environment. Out of the pool of six proposed KPIs, Heartland and CoBank selected three.
The sustainability-linked loan is a five-year loan. Heartland must meet its KPIs every fiscal year. If they don’t reach them within that fiscal year, Heartland won’t receive the rate reduction for the following year.
Heartland Co-Op is a farmer-owned cooperative with over 70 locations throughout Iowa, Nebraska and Texas. McCabe said the loan technically covers all three states, but the bulk of the conservation work is within Iowa.
Increased partnership
In addition to consulting with the Environmental Defense Fund, the sustainability-linked loan was also supported by the Great Outdoors Foundation.
The Great Outdoors Foundation, a nonprofit that focuses on enhancing Iowa's environment and improving conservation and outdoor recreation, granted $150,000 to Heartland.
Hannah Inman, chief executive officer of the Foundation, said that most conservation practices being used date back nearly a century.
“Conservation practices haven’t changed radically since the 1930s, but the industry of agricultural technology has changed dramatically,” Inman said. “So, one of the things The Great Outdoors Foundation is really trying to do is build the business model for conservation … we’re asking ourselves how we can make it an easier, more simple choice for those in the business of conservation and agriculture, and how do we can accelerate the pace of conservation.”
Inman said with the Foundation’s ethos of wanting to deliver these conservation practices to farmers in an easier way and wanting to expand beyond traditional conservation projects like wetlands, Heartland’s program with CoBank was work the organization “really liked.”
“They're really trying to build that business model for conservation, both on the retail and Co-Op side, along with the farmer. And sometimes those things require up-front investments” Inman said. “Our board really looks at how can we invest in innovation and building that business case for conservation.”
Olivia Cohen covers energy and environment for The Gazette and is a corps member with Report for America, a national service program that places journalists in local newsrooms to report on under-covered issues.
Comments: (319) 398-8370; olivia.cohen@thegazette.com
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