Financial Executives Release Report on Climate Risks Calling for Agricultural Resilience

A report released today by a subcommittee of the U.S. Commodity Futures Trading Commission, Climate risk management in the US financial system, examines the threat that increasingly extreme and volatile weather conditions pose to the stability of financial markets, including U.S. agricultural markets. EDF representatives sat on the 35 members panel.

The report found that climate risks pose a wide range of threats to U.S. agriculture, including heat stress to farm workers, livestock and crops, degradation of soil and water quality, disturbances more frequent supply chain trends and decreases in productivity.

This past spring, farmers in the Midwest were hit by record spring flooding, sweeping away crops and livestock. This year, many of the same farmers have been hit by the double whammy of derecho amid a pandemic.

These threats translate into financial risks for agricultural businesses and finance providers, compromising the financial health of community banks, agricultural banks and local insurance markets, which could leave small businesses, farmers and households behind. without access to essential financial services.

Despite these challenges, farmers – and the financial system that supports them – have the resources and capacities to build their resilience.

Climate-resilient agricultural practices that pay off

Many well-known conservation practices like direct seeding, cover crops, extensive crop rotations and nutrient use efficiency generate both financial and environmental value reducing production costs and the risk of crop yields during adverse weather conditions.

For example, an analysis of yield data collected from a national cover crop survey found that farmers experienced a 3% increase in corn yield and a 5% increase in soybeans after five consecutive years. use of cover crops. In the drought year of 2012, farmers reported even larger yield increases when they used cover crops – nearly 10% for corn and 12% for soybeans.

However, the challenges of transitioning to new practices in the early years prevent many farmers from achieving these long-term benefits.

Business leaders, from food businesses to agricultural credit institutions, can support farmers’ transition to conservation practices and help build resilience in the food, agriculture and finance sectors in states -United.

How business and financial leaders can help

The central message of the CFTC report is that U.S. financial regulators must recognize that climate change poses serious emerging risks to the U.S. financial system, and they must act urgently and decisively to measure, understand, and manage those risks. He also urges the financial community not to wait for regulators to act, but rather to innovate and develop their own solutions.

EDF recently published a report, Financing resilient agriculture: How agricultural lenders can reduce climate risks and help farmers build resilience, which details how agricultural lenders can assess their climate risk and realign decision making and lending products to better leverage climate resilience.

Food companies are also working to remove barriers to adopting good agricultural practices that benefit the environment. For example, Cargill, who also served on the CFTC subcommittee with EDF, is a founding investor in the Soil and Water Outcomes Fund, a collaborative market-based program to accelerate soil health and water conservation on Iowa farmland and provide a vital new source of financial incentives for Iowa farmers.

John Hartmann, Global Sustainability Manager for Cargill’s Agricultural Supply Chain, said: “At Cargill, we believe the future path should generate positive incentives that realize the potential of nature-based climate change solutions and agriculture and avoid adding financial constraints to agricultural producers.

With a commitment to tackle climate risks and collaborate on solutions, we must not rely solely on the courage of farmers to weather the storms ahead. Farm businesses and donors can help farmers transition to a more resilient future.

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