Publication Type

Journal Article

Version

submittedVersion

Publication Date

9-2017

Abstract

Farmers are highly dependent on stocks of natural capital, and lenders are in turn exposed to natural capital through their loans to farmers. However, the traditional process for assessing a farmer’s credit risk relies primarily on historical financial data. Banks’ consideration of environmental factors tends to be limited to major risks such as contaminated land liabilities, and to large project and corporate finance, as opposed to the smaller loans typical of the Australian agricultural sector. The relevant risks and dependencies for agriculture vary by sub-sector and geography, and there is a lack of standardised methodologies and evidence to support risk assessment. We provide an evidence base to support natural capital risk assessment for a single sub-sector of Australian agriculture – wheat farming. We show that such an assessment is possible, with a combination of quantitative and qualitative inputs, but the complexity and interconnectedness of natural capital processes is a challenge, particularly for soil health.

Keywords

Natural capital, environmental risk, environmental credit risk assessment, responsible lending, wheat farming, Australia

Discipline

Finance and Financial Management

Research Areas

Integrative Research Areas

Publication

Journal of Sustainable Finance & Investment

Volume

8

Issue

2

First Page

95

Last Page

113

ISSN

2043-0795

Identifier

10.1080/20430795.2017.1375776

Publisher

Taylor and Francis Group

Additional URL

https://doi.org/10.1080/20430795.2017.1375776

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