Washington, DC – A new report from the Center for American Progress explores the growing threat of climate change to the agricultural finance sector.
From emerging pests and diseases to changing weather patterns, the climate crisis poses extreme risks for farmers and ranchers. If left unchecked, climate change is likely to devastate the agricultural economy and wreak havoc on the agricultural and rural credit markets. The report examines the agricultural credit sector’s exposure to climate change-related risks. It turns out that a climate-induced downturn in agriculture would have ramifications for the entire financial system, but it would hurt companies that specialize in agricultural credit, especially smaller community banks, the hardest – and some rural communities may not have access to credit. Additionally, if the scale of the climate crisis is severe enough, the Farm Credit System (FCS) could become insolvent, potentially requiring a federal bailout.
The report argues that regulators and policymakers should take action to prepare for the upcoming climate threat to the US agricultural credit market by:
- Strengthening the disclosure requirements for climate risk in the agricultural industry with the US Securities Exchange Commission
- Mandatory FCS climate resilience analysis by the Farm Credit Administration
- Increase in capital reserve requirements for the FCS
- Expansion of programs to finance sustainable cultivation methods
- Address the systemic climatic financial risk posed by the largest financial institutions
“For years, the largest banks have been driving climate change by financing fossil fuels. As a result, small agricultural banks and public agricultural programs are exposed to an enormous climate risk, which in the long term threatens the supply of agricultural and rural loans, ”said Zoe Willingham, Research Associate for Economic Policy at CAP and author of the report. “Financial regulators and other policymakers must act now to reform the sector to mitigate risk before it is too late.”
Read the report: “Promotion of climate-resilient agricultural and rural loans“By Zoe Willingham
For more information or to speak to an expert, Please contact Julia Cusick at [email protected]