Costing the Earth: The Increasing Urgency of Climate Change Adaptation for the Nordic Finance Sector
The impacts of climate change in the Nordics are no longer distant or abstract. Reduced snow reliability, shifting growing seasons, and increasingly frequent extreme weather events are already affecting the land-based production systems upon which multiple financial products depend. These changes are already beginning to impact asset performance and portfolio stability, with food shortages and rising prices making these structural underpinnings increasingly felt and visible.
Smoke comes up from a forest fire under extreme heat and drought, Sweden. Image by: B. Forenius
Financial consequences for agriculture and forestry
Agriculture and forestry are cornerstone sectors for Nordic economies, underpinning food security, bio-based industries and rural livelihoods, whilst also providing multiple ecosystem services. At the same time, they are a critical instrument for the finance sector, with land-assets often functioning as collateral for loans, as well as being a substantial focus for insurance objects, industrial inputs and long-term revenue streams.
Increasingly unstable environmental conditions threaten both agricultural and forestry production, with direct consequences for the banks, insurers and investors financially implicated in these systems.
A flooded grain field in Öland, Sweden. Image by: Kennerth Kullman
Insurance as mission critical
The demand for secure insurance coverage is increasing as storms, heatwaves, drought, pests and pathogens proliferate. Meanwhile, insurers themselves face rising damage costs and are being forced to reassess coverage conditions, pricing and long-term exposure.
In regions where climate risks cannot be effectively mitigated, insurers are becoming increasingly reluctant to offer certain products outright. This trend is already being observed in areas that are at increased risk of wildfires, raising critical, if not existential questions, about insurance products for agriculture and forestry.
Of course, both insurers and landowners bear climate risk whether it is priced in or not. Without adequate insurance, landowners are more exposed to financial shocks; without credible risk foresight, insurers undermine the long-term viability of their core services.
Marja Nykänen, Deputy Governor of the Board of the Bank of Finland, recently wrote that banks could end up bearing losses if a borrower's repayment ability weakens due to climate-related damage and the damaged property is uninsured. She also noted that the damage caused by climate change is widespread and that their combined impact on the financial and insurance sectors could be significant. This highlights the interest of banks that provide loans for agriculture and forestry.
Fallen trees in a forest after a storm, Finland. Image by: adamikarl
How Precilience is taking action
Precilience supports the identification and mitigation of climate risks in Nordic agriculture and forestry by linking climate data and risk analysis with practical adaptation solutions that are co-developed with stakeholders across sectors and regions. Working directly with the finance sector, fellow projects, and service users, the project aims to improve outcomes for financiers, forests and farms alike.
Learn more: sign up for our next webinar
To bring these themes into focus, Precilience is co-hosting a webinar with the PIISA project on “Climate resilient natural resources management: simulation-based approaches, forest insurances and climate services” on 9 February, 09:30–11:30 CET. The event is designed for risk analysts, actuaries, forestry and agriculture experts, insurers and anyone engaging with climate-risk assessment and adaptation in land-based sectors.
During the webinar, you’ll hear how climate change adaptation intersects with insurance solutions, weather and risk modelling, and emerging climate services, illustrating exactly why proactive adaptation is a core risk management activity for finance, insurance and investment professionals.
Find out more and register here.
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Want to learn more about our work and how you and your organisation may participate? Want to be featured in a future webinar, or as a guest pen in our blog posts? Contact Luontoa for more information: Lauri Moisander, lauri@luontoaconsulting.fi