
Yet, agriculture is not without its risks, particularly those relating to the environment. Climate change, green regulations, disease, fertiliser availability: the list of potential wobbles along the way is vast and complex. Take water. Global agriculture is currently responsible for 70% of all water withdrawn from aquifers, streams and lakes. If the taps are turned off or these water resources run dry, the implications for the farming sector are potentially disastrous. "You can't invest in agriculture without thinking carefully about these issues", warned Ben Caldecott, co-author of the new report, Stranded Assets in Agriculture, and a programme director at the University of Oxford's Smith School of Enterprise and Environment.
The potential losses are colossal. Using a high-level value at risk (VaR) assessment, Caldecott and his colleagues at the Smith School estimate that there's a 5% chance of agricultural-related losses amounting to more than $8tn (£5.17tn) in a single year. Other than a "very small band of investors", pension funds and other large financial institutions fail to factor environmental risks into their due diligence or product pricing when it comes to agriculture, according to Caldecott.
Such disregard is surprising. The idea that environment-related risks could cause assets to decline in value, or even turn into liabilities, has been preoccupying energy investors for a while now. A recent report by the think tank Carbon Tracker suggests that climate change could wipe trillions of dollars off the value of the world's largest oil companies...
Wheat stubble in Poland, shot by Ludek, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license
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