© Jan Huber
US banks could face trillions of dollars in losses from climate risk at the top meat, dairy and animal feed producers, a study by Netherlands-based research group Profundo has found.
The world’s top 31 dairy and meat producers face near-term risks from climate change that could lead to a loss of US$116bn by 2030. Disruptions from climate change, regulatory shifts and market volatility could also potentially lead to a loss of $5.4tn by 2050.
The losses could substantially impact financial institutions that lend or invest in the agricultural sector.
The study assessed the risks of the biggest dairy, meat, and feed producers, as well as the potential financial risks for the three largest US banks to the market, namely Bank of America, Citigroup and JPMorgan Chase.
The researchers used climate scenarios drawing on financial data from 2016 to 2023 to calculate the potential risks for the three banks from various consequences, such as methane emissions and weather-related risks.
The findings suggest that Bank of America, Citigroup and JPMorgan Chase could face potential losses of between $430m and $1.12bn by 2030 and $2.5bn to $9.3bn by 2050 due to their exposure to the industry. The three banks provide a total of $10.4bn in financing to the 31 firms assessed in the study.
The findings did not account for nature-based risks, such as deforestation, pollution and water scarcity, and the authors warned the financial impacts could actually be greater.
The study underscores the risks that companies in the farming sector face, both as contributors to the climate crisis and being exposed to climate risks at a time when politicians and businesses in the US are questioning the need for a green transition.
US banks recently left the Net Zero Banking Alliance, a volunteer climate commitment group, while the Federal Reserve and other US financial regulators have departed from their European counterparts on the role of central banks in helping the economy transition to a green economy.
Central banks and regulators play an important role in creating an environment to finance sustainable agriculture but at the moment, large-scale agriculture is only “superficially covered” by sustainable reporting and finance rules, said Pavel Boev, sustainable supply chain and market researcher at Profundo.
“Central banks are not requiring banks to report agricultural exposure at the portfolio level. However, given the climate impact of agriculture … such measures would be desirable,” he said.
Regulators should run agriculture-focused climate stress tests or include it in their climate stress testing, while banks should be encouraged to include agriculture-related risks and impacts in their risk management processes.
Central banks should also require financial institutions to assess the exposure of their agriculture portfolios to physical climate risks and transition risks, Boev said. While in theory banks should hold more capital to finance environmentally harmful agriculture projects, “this is difficult to attain even for more obvious sectors like fossil fuels”.
This page was last updated February 19, 2025
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
