Implementing natural capital credit risk assessment in agricultural lending

Ascui, Francisco; Cojoianu, Theodor

doi:10.1002/bse.2313

Cited by 29 publications

(21 citation statements)

References 37 publications

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“…Better understanding of risks can help farm businesses develop effective strategies which minimise the potential loss of agricultural value (Caldecott et al , 2013). This also results in better flow of capital, resulting in enhanced financial outcomes for lenders and greater value for society as a whole (Ascui and Cojoianu, 2019). One way to better understand the risks is through investment in internal technology to create improved data in times of climate crises or pandemic-related disruptions (Caldecott et al , 2013).…”

Section: Data Integrated Covid-19 Scenario-based Planning and Its Relevance To Primary Productionmentioning

confidence: 99%

“…Agriculture is increasingly interlinked with other sectors of the economy that demand and can command accounting and valuation data, including the banks (Kelly et al , 2019; Seidl et al , 2019). Farmers’ natural capital is highly exposed to risks (and opportunities) which are unlikely to have been fully evaluated by banks in most cases, leading to sub-optimal allocation of capital (Ascui and Cojoianu, 2019). Furthermore, credit risk assessment processes in times of unprecedented crises are based on insensitive historical data, projections from modelling or even a “best estimate” (Ascui and Cojoianu, 2019).…”

Section: Need For Data Integration For Scenario-based Planning: An Analogous Case Of Water-related Risk and Decision-makingmentioning

confidence: 99%

“…Farmers’ natural capital is highly exposed to risks (and opportunities) which are unlikely to have been fully evaluated by banks in most cases, leading to sub-optimal allocation of capital (Ascui and Cojoianu, 2019). Furthermore, credit risk assessment processes in times of unprecedented crises are based on insensitive historical data, projections from modelling or even a “best estimate” (Ascui and Cojoianu, 2019). For famers to disclose to banks their climate and other related risks embedded in accounting information would allow for more flow of capital to those able to integrate accounting with their biophysical decision-making.…”

Section: Need For Data Integration For Scenario-based Planning: An Analogous Case Of Water-related Risk and Decision-makingmentioning

confidence: 99%

“…Australian farmers are no stranger to risk and uncertainty and their careful management (Hardaker et al , 2015). As interest in Australian agriculture as an investment opportunity has grown, capital has flowed into productivity enhancing investments but recent high-profile risks, such as those posed by COVID-19, are creating a risk of sub-optimal allocation of capital for the sector and possible “stranded assets” [1] (Caldecott et al , 2013; Ascui and Cojoianu, 2019). Investors, stakeholders, regulators and business managers across primary production are all seeking information on how to best plan for changes to their businesses and make, and disclose, estimates about the potential effect of climate change and COVID-19 (Task Force on Climate-Related Financial Disclosures [TCFD], 2017).…”

Section: Introductionmentioning

confidence: 99%

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The need for accounting-integrated data streams for scenario-based planning in primary production: responding to COVID-19 and other crises

Tingey-Holyoak

Pisaniello

2020

SAMPJ

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Purpose This study aims to explore the need for improved data sources and models for COVID-19 and climate-related risk scenario analysis in primary production. The COVID-19 pandemic is impacting global markets for agricultural produce, making short-term forecasting highly uncertain. Meanwhile climate-related risk continues for agricultural businesses. Farmers and their accountants need to plan and make estimates about the potential effect of COVID-19 and ongoing climate risks to their natural and financial capital and so they need accounting-integrated biophysical and socio-economic data streams. Design/methodology/approach This research note reviews the current state of scenario-based planning for COVID-19 and other risks for Australian businesses generally, in addition to planning for farming businesses more specifically. Discussion of the authors’ current research in integrating accounting and farming data for water-related risk caused by climate and other challenges is presented as an analogous case. Findings Review and analogous case comparison demonstrate the need for farm data to be integrated more efficiently and effectively with accounting data for accurate scenario planning for COVID-19 and other risks, including those posed by climate. Practical implications While not strangers to the need for scenario analysis, given exposure to ever-increasing natural resource and climate variability, this research note highlights how primary producers and their accountants require increased accounting-integrated farm data and systems to make judgements, assumptions and estimates about the potential effect of COVID-19 and ongoing climate risks to their business. Social implications The sustainability of the agricultural sector is of great relevance to all of us and so the development of tools and resources that can assist food producers in times of ongoing climate pressures and new crises, such as COVID-19, is important. Better understanding of such risks can help farm businesses develop effective strategies which minimise the potential loss of agricultural value resulting in improved flows of greater capital value for society. Originality/value Through application to the analogous case of water-related risk and decision-making, the research note demonstrates that linking of biophysical and accounting data streams will be essential for evidence-backed numbers included in scenario plans with enough legitimacy to be interrogated inside and outside of the business. The “best estimate of the directors” is no longer enough in challenging socio-economic and biophysical times ahead for primary producers.

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Section: Data Integrated Covid-19 Scenario-based Planning and Its Relevance To Primary Productionmentioning

confidence: 99%

Section: Need For Data Integration For Scenario-based Planning: An Analogous Case Of Water-related Risk and Decision-makingmentioning

confidence: 99%

Section: Need For Data Integration For Scenario-based Planning: An Analogous Case Of Water-related Risk and Decision-makingmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The need for accounting-integrated data streams for scenario-based planning in primary production: responding to COVID-19 and other crises

Tingey-Holyoak

Pisaniello

2020

SAMPJ

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“…According to [10,11], the credit potential of a bank is the ability of a commercial bank to implement lending activities to the population and enterprises based on the financial resources available to it.…”

Section: Introductionmentioning

confidence: 99%

The problem of lending to agricultural enterprises in the context of the COVID-19 pandemic

Yekimov¹,

Guzhina

Lukyanov

et al. 2021

E3S Web Conf.

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The main obstacle to the implementation of lending to agricultural enterprises is the high cost of credit. In our opinion, an adequate state agricultural policy should increase the interest of commercial banks in providing loans. In our opinion, it should be aimed at increasing the availability of bank loans for agricultural enterprises. For this purpose, it is advisable to partially compensate the payment of bank interest by agricultural enterprises. In the world practice in the banking sector, negative rates of return on deposits have found application. Commercial banks are able to borrow money at a discount rate. At the moment, there is a practice according to which the Central Bank has only one discount rate. In our opinion, there could be several discount rates at the same time. We hold the view that depending on the purposes to which the commercial bank directs the funds received from the Central Bank, the size of the Central Bank’s discount rate may be different and even have a negative value. We believe that the negative discount rate applied by the central bank for lending to commercial banks to continue providing loans for the purchase of agricultural machinery could encourage them to issue loans to agricultural enterprises. In our opinion, the use of a negative discount rate of the Central Bank in some cases may contribute to the realization of the bank’s credit potential and enhance its lending activities.

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From impacts to dependencies: A first global assessment of corporate biodiversity risk exposure and responses

2022

Self Cite

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There is growing awareness that biodiversity loss poses a significant risk to the global economy, but a lack of clarity on what this means for corporations, and how they are responding. This study provides a first quantitative assessment of biodiversity risk exposure across the world's largest listed companies, compared with their adoption of biodiversity policies, through analysis of disclosures from a sample of 11,812 companies from 2004 to 2018. We find that companies have started responding strategically to biodiversity risk, with 29% having adopted a biodiversity policy by 2018.However, around $7.2 trillion of total enterprise value remains exposed to unmanaged biodiversity risk. Companies in sectors with material impacts on biodiversity tend to have high levels of response, but there is poorer responsiveness to material biodiversity dependency risks. A natural-capital-based view (NCBV) of the firm is proposed to theorise how corporations are constrained by both their impacts and dependencies on natural capital.

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Implementing natural capital credit risk assessment in agricultural lending

Cited by 29 publications

References 37 publications

The need for accounting-integrated data streams for scenario-based planning in primary production: responding to COVID-19 and other crises

The need for accounting-integrated data streams for scenario-based planning in primary production: responding to COVID-19 and other crises

The problem of lending to agricultural enterprises in the context of the COVID-19 pandemic

From impacts to dependencies: A first global assessment of corporate biodiversity risk exposure and responses

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