MINNEAPOLIS—Today, the Institute for Agriculture and Trade Policy (IATP) released a paper emphasizing the urgent need for U.S. agricultural financial policy and institutions to respond to rising climate risk. Agricultural Finance for Climate Resilience: An assessment with policy options analyzes current legislation and regulation, as well as proposes reforms for increased climate resilience. Climate change is a systemic risk to all finance: agricultural finance is no exception.
Congress responds to extreme weather events impacting agriculture with short-term fixes, including ad hoc disaster payments and increased subsidies for private crop insurance. As climate change exacerbates the severity and frequency of such events, these remedies will not be fiscally or environmentally sustainable. The report called for the terms of public and private agricultural insurance to be changed, and credit and bond issuance to internalize the costs and risks of climate change.
“Changes must apply both to finance for farmers and ranchers and agribusiness firms,” says Dr. Steve Suppan, senior policy analyst at IATP. “Agribusiness failure to report climate-related financial risks to investors and regulators is part of a larger failure to reduce and pay for the external impacts of agricultural production.”
The paper explores reforms to reduce climate-related risk in the following sectors of agriculture finance:
“Unmitigated climate instability presents a threat to the financial and agricultural system,” says Dr. Suppan. “If we don’t start to incorporate climate risk into agricultural finance, we will exacerbate climate-related impacts on agriculture and rural communities. We must apply our understanding of climate risk into policy action.”
To read the full analysis and a brief conclusion on impediments to and drivers to encouraging the international adoption of climate-related financial risk measures, visit: www.iatp.org/ag-finance-climate.
Based in Minneapolis with offices in Washington, D.C., and Berlin, Germany, the Institute for Agriculture and Trade Policy works locally and globally at the intersection of policy and practice to ensure fair and sustainable food, farm and trade systems.