Publication Type

Journal Article

Version

acceptedVersion

Publication Date

4-2019

Abstract

Agriculture has critical impacts and dependencies on natural capital, and agricultural lenders are therefore exposed to natural capital credit risk through their loans to farmers. Currently, however, lenders lack any detailed guidance for assessing natural capital credit risk in agriculture and are challenged by the fact that the relevant material risks vary considerably by agricultural sector and geography. This paper develops a natural capital credit risk assessment framework based on a bottom-up review of the material risks associated with natural capital impacts and dependencies for Australian beef production. It demonstrates that implementing natural capital credit risk assessment is feasible in agricultural lending, using a combination of quantitative and qualitative inputs. Implementation challenges include the complexity and interconnectedness of natural capital processes, data availability and cost, spatial data analytical capacity, and the need for transformational change, both within lending organisations and across the banking sector.

Keywords

Natural capital, credit risk assessment, environmental credit risk, agricultural lending, beef production, Australia

Discipline

Agricultural and Resource Economics | Finance and Financial Management

Research Areas

Integrative Research Areas

Publication

Business Strategy and the Environment

Volume

28

Issue

6

First Page

1234

Last Page

1249

ISSN

0964-4733

Identifier

10.1002/bse.2313

Publisher

Wiley

Additional URL

https://doi.org/10.1002/bse.2313

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