Natural Capital Credit Risk Assessment in Agricultural Lending: An Approach Based on the Natural Capital Protocol

This report builds on previous work by presenting an in-depth approach to natural capital and credit risk in agriculture. This framework has been developed on the knowledge that agricultural enterprises have significant impacts and dependencies on natural capital, leading to risks (and opportunities) which are unlikely to have been fully evaluated by lenders in the past, leading to sub-optimal allocation of capital in current credit risk assessment processes. Evaluating these natural capital risks (and/or opportunities) would allow improved allocation of capital, with more flowing towards enterprises with better management of natural capital impacts and dependencies, resulting in enhanced financial outcomes for the lender, and greater value for society as a whole.