The BNZ has taken the initiative in rolling out a loan to a farming company based on environmental standards.
The bank is lending dairy investment company Southern Pastures $50 million but the pricing and terms of the loan have been linked to meeting high water quality, biodiversity, and carbon reduction standards.
BNZ head of natural capital Dana Muir said it was the first of its kind but if it worked the bank would look to similar sorts arrangements.
''Southern Pastures is a leader in the NZ primary sector with ambitious environmental goals. It made sense to partner with them to show that capital incentives can deliver financial and environmental benefits."
Southern Pastures has 20 dairy farms in Waikato and Canterbury, including the largest organic farm in the country, and also owns the well known Lewis Road Creamery business.
Its milk is produced under independently certified 10 Star Certified Values programme which impose strict environmental, climatic, animal and human welfare requirements.
"This deal recognises that farming to mitigate climate change and environmental impacts is in our common interest," Southern Pastures executive chairman Prem Maan said.
Achievement of the targets are directly linked to lower loan costs, although no details of the savings have been given, and an independent assessor, AsureQuality, will report on Southern Pastures' compliance with the loan conditions.
Muir said the BNZ aimed to lend as much as $10 billion to sustainably based business and farming ventures over the next few years.