Article Series: Banks are Already Considering Climate Change in Their Lending Decisions

As part of the ADGMA Research Centre Article Series we are publishing adapted articles from amongst our strategic collaborators. This article is republished with the kind permission of Imperial College Business School, IB Knowledge.  It follows our own research into how artificial intelligence can improve lending decisions to SMEs. With this article by Dr. Mandeep Singh, we share another view on factors impacting banks’ lending decisions.  New research shows larger banks are lending less to small farms affected by abnormally high temperatures, with potentially huge repercussions for a large portion of the world’s population.

Most businesses are vulnerable to the effects of climate change, but farmers worldwide are more exposed than most to extreme weather: drought, heat, or too much rain can devastate their crops and income. Vast swathes of the world’s population work in agriculture, particularly in developing nations, where farming is often a backstay of the economy. Climate change will, in future, determine the viability of agriculture, but how well farms and farmers can adapt to higher temperatures will depend upon the level of financing available.