The Intersection of Climate Risk and Ag Lending

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Recorded04 Aug 2023

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Climate risk is hardly a new concept, and the ag industry is always looking for ways to mitigate and adapt to the ongoing changes and increased risk exposures facing farmers today. In this episode of The Forward Thinking podcast, host Stephanie Barton, VP of Marketing and Communications at FCCS is joined by Chris Peacock, CEO and founder of AgCor for a conversation about the various aspects of climate risk and its implications for the ag lending industry. Together they explore the ways that the four major trends of generational shift, climate events, regulatory forces, and the rise of digital competition are all shaping the landscape of agricultural lending and its approach to climate risk. Episode Insights Include: Defining climate risk in the ag lending space Climate risk is not a new concept in the agriculture industry. Adaptations need to be made in response to long-tail risk exposures. The combination of multiple risk events are creating an unprecedented need to modify risk mitigation. The role of the lender is to be a partner to the farmer to better understand and prepare for potential risks. Increased climate risks require increased financing to make necessary adaptations. Why is climate risk such a hot topic now? Ag lenders have always had extreme weather events in mind, but compounding events are increasing its urgency. Generational shifts are altering expectations of land usage. There are fewer people entering the ag lending space, creating a knowledge gap. Consumer expectations of companies and brands are creating a higher demand from producers. Regulatory forces and fintech are also impacting climate. Benefits to ag lenders of increasing climate focus Making climate easy to understand helps to consider it when making decisions at the board level. The role of the lender is to encourage borrower success by providing the financial resources and capital necessary for growth. The bottom line is impacted by risk and trends are showing that climate is a major factor. There are major opportunities for financial institutions to help their borrowers find the capital necessary to make adaptive changes to their farms. Lenders have the opportunity to build new financial products to deliver capital to farmers. Climate related policies that will impact ag lending Chris offers insights into potential climate related policies and regulatory forces that will impact ag lending. There is practical value in farmers getting information in order for the regulatory frameworks that are coming. Elections and unforeseen natural events will have an impact on regulations, so be proactive and prepared for whatever possibilities might be coming. Trends in the world of water Drought, hurricanes, hail, wildfires and changing growing seasons are all a result of the power of water. The financial demands of managing water are continually increasing. Regulatory and policy changes are impacting the way water is managed. Hydroponics, vertical farming, improved irrigation systems and groundwater recharge trends are improving water management, and all require capital. Rights to aquifers Understanding and applying climate data AgCor works to decipher and distill water data to a more understandable format for ag lenders. Digital strategy plays a huge role in the future of agricultural lending. Contextualizing the lender data into organized format is an essential task. AgCor data can analyze whether there is enough water to successfully grow a crop through automated water budgets. Building better relationships is an important component to deploying more capital. This podcast is powered by FCCS. Resources Learn more about the FCCS Passkey Program- https://www.fccsconsulting.com/passkey/home Connect with Chris Peacock - https://peacockcj.com/ Get in touch [email protected]

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