In the face of a constantly changing climate, creating long-term business resilience has evolved from nice-to-have to a necessity.
From uncertainty and increasing competitive pressures to the need to mitigate today’s climate and regulatory risks, a myriad of challenges have created an opportunity to digitize the agriculture finance sector. Agricultural data and risk management are entering an age of understanding that boasts rapid and integrated decision support, empowering proactivity. The business paradigm is shifting toward advanced risk discovery and mitigation — a shift caused by unprecedented external threats.
Fintech is widely and rapidly being embraced, and ag finance institutions leveraging fintech tools will be equipped to better understand how to mitigate and adapt to a changing climate. Transitioning to the digital age through fintech gives agricultural finance many benefits, including the bolstering of risk management practices, the streamlining of data management and a way to better connect with their borrowers.
Whether discussing human and economic impacts or social and environmental well-being, climate change has an outsized — and occasionally overlooked — impact on agriculture. Modern risks in agriculture pose both acute and chronic risks to financial portfolios. Consequently, ag finance businesses need speed, integration and connectedness. They require a new approach to organizing and analyzing actionable data to improve operations and mitigate risk efficiently and effectively.
The question, then, revolves around where to start. In order to see real progress in de-risking financial portfolios, there must first be a deeper understanding of parcel-specific vulnerability to climate risks and other criteria that aggregate to create a picture of portfolio risk. This level of understanding begins when there is clarity and accuracy of parcel-level loan data.
Once obtained, the data requires sufficient context to reveal what it doesn’t show on its own — and make the knowledge actionable by financial institutions. Context can be provided by integrating third-party data with first-party data. That context, though, is useless to an ag finance business without a medium to rapidly activate the newfound insights.
In other words, the portfolio, loan and investment data that is held by a financial institution — which includes climate risk data, land use data, public records data, borrower loan data, appraisal data, probability of default scores and more — needs to be unlocked holistically. This process, called data acclimation, is done with climate fintech to help solve issues associated with a changing climate.
For ag finance, climate fintech paves the way forward by helping farm credits, national and regional lenders, farmland investors and international food brands identify — and proactively mitigate — climate-related risks. With the ability to better manage data, quantify risk exposure, assess and track climate risks, and aid in risk planning and mitigation, climate fintech tools empower ag finance institutions to acclimate their data to a changing climate and build long-term resilience.
Chris Peacock, founder and CEO of AQUAOSO Technologies, is a recognized authority in risk management and the leader of a purpose-built fintech ecosystem designed to de-risk financial portfolios in the agriculture sector through geospatial data and risk management; his core principles are built on the belief that data must not be siloed to create change and build resilience
Did you Know: AQUAOSO Technology’s “Climate Fintech” white paper presents information on specifics of climate fintech and data acclimation. Chris Peacock, founder and CEO of AQUAOSO Technologies, has witnessed firsthand the human and economic impact that climate change inflicts.