Climate Impacts on Farming

Productivity and Profitability

Climate change poses significant challenges for Australian agriculture. In particular, farmers are being effected by changing local weather conditions, and facing more frequent and more extreme weather events, which together are already having an impact on farm profitability.

The Australian Government Department of Agriculture, Fisheries and Forestry publishes periodic reports on the current and projected impacts of climate change on farming. The most recent report found that:

• Further adaptation and productivity gains will be required to maintain competitiveness in international markets
• New and more diverse income streams, such as renewable energy generation and carbon farming, is important for long term profitability

Farmers are experiencing this impact firsthand. An FCA survey conducted in November 2023 found that 92% of farmers have experienced changes to seasonal conditions and more climate-related impacts to their business over the last 3 years. The survey also found that climate change is viewed as the greatest threat to farming’s future in Australia.

Insurance and Banking

The insurance and banking sectors are major service providers for farmers, and they have a strong focus on climate as a key risk to their businesses. The Insurance Council of Australia (ICA) says that $16.8 billion worth of insurance claims have been paid for catastrophic and significant natural disaster declarations since 2019. “These worsening climate impacts are driving challenges with the affordability of insurance in high-risk regions of Australia, and making some areas uninsurable” (Insurance Council of Australia, 2019).

In response, the ICA has developed a Climate Change Roadmap, which includes targets to reach net zero for all business operations by 2030, and net-zero across all investments by 2050.

The banking sector is similarly considering risk to investments posed by climate change, as outlined in this article from the Reserve Bank of Australia. Banks are also looking for ways to address emissions generation in their lending portfolios and own business operations. In fact, 60% of ASX 200 companies have made net-zero commitments, which are seen by the market as an important non-financial indicator of a company’s future profitability.

New Business Climate Reporting Requirements

The Australian Government is considering how to implement new climate related financial disclosure requirements in Australia. These disclosures will require some large firms to report Scope 1, 2 and 3 emissions as part of yearly financial reporting. Importantly for agriculture, Scope 3 emissions for these large firms would include reporting on emissions from farm suppliers.