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Developing an evidence base for assessing natural capital risks and dependencies in lending to Australian wheat farms

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  • Theodor F. Cojoianu
  • Francisco Ascui

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.

Suggested Citation

  • Theodor F. Cojoianu & Francisco Ascui, 2018. "Developing an evidence base for assessing natural capital risks and dependencies in lending to Australian wheat farms," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 8(2), pages 95-113, April.
  • Handle: RePEc:taf:jsustf:v:8:y:2018:i:2:p:95-113
    DOI: 10.1080/20430795.2017.1375776
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    Cited by:

    1. Francisco Ascui & Theodor F. Cojoianu, 2019. "Implementing natural capital credit risk assessment in agricultural lending," Business Strategy and the Environment, Wiley Blackwell, vol. 28(6), pages 1234-1249, September.
    2. Ascui, Francisco & Ball, Alex & Kahn, Lewis & Rowe, James, 2021. "Is operationalising natural capital risk assessment practicable?," Ecosystem Services, Elsevier, vol. 52(C).
    3. Helena Redondo & Elisa Aracil, 2024. "Climate‐related credit risk: Rethinking the credit risk framework," Global Policy, London School of Economics and Political Science, vol. 15(S1), pages 21-33, March.

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