Climate Risk Assessment Model for Agricultural Lending

This technical report presents preliminary findings from industry engagement regarding the climate risk model developed by EDF and Praedictus Climate Solutions for agricultural lending institutions. The report outlines that a significant majority of agricultural lenders recognize climate change as a material risk, yet only a small percentage are incorporating this into their decision-making processes. The model aims to address the unique characteristics of agricultural lending and was presented to 22 institutions, which discussed various application opportunities. Key strategies for utilizing the model include conducting climate stress testing to analyze the impact of climate risks on loan portfolios, informing additional data requirements for loan underwriting, identifying investment areas for climate-adapted crops, providing climate risk management education to customers, and integrating climate risk into Enterprise Risk Management frameworks. These strategies are designed to enhance the understanding and management of climate-related risks within the agricultural lending sector.