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Aussie banks urged to overhaul land valuation methods

A new Ernst & Young report for the Australian Conservation Foundation has called on banks to rethink lending to sectors damaging the environment.

Banks need to rethink the way they value land in order to help protect Australia’s environment, a new report warns.

That’s one of several recommendations in research prepared by Ernst & Young Australia for the non-profit Australian Conservation Foundation (ACF).

ACF corporate campaigner Jonathan Moylan explained to Yahoo Finance that natural landscapes had historically been given less value than paddocks that had been cleared for crops. That's despite wilderness areas playing a key role in making farms more resilient to drought, assisting in water retention, and providing habitat for pollinators like bats and insects.

“In effect, farmers that are trying to do the right thing have been punished in some ways by historic practices, and that needs to change to reflect the fact that nature has value in landscapes,” Moylan said.

An aerial view of a Queensland farm.
Australian banks have been urged to reevaluate their legacy decisions about land evaluation. Source: Getty (File)

He argues these legacy decisions made by the banking sector have the ability to impact the entire supply chain. If agricultural land is impacted by drought or flood because of climate change, the farmgate price for crops will rise and this will cause supermarkets to put up their prices too.

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"Agricultural spaces affected by environmental degradation increase the cost of living for every Australian," he said.

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$260 billion in banking loans given to high-risk sectors

Environmental destruction directly harms both banks and consumers, but it’s not just agriculture that’s impacted. Roughly 49 per cent of Australia’s economy is directly linked to nature, and that includes key sectors like tourism, fishing and real estate.

Reads 'What on Earth? Australia is the only developed nation identified as a “deforestation front” by WWF with a collage of a truck, foliage and wood.
Reads 'What on Earth? Australia is the only developed nation identified as a “deforestation front” by WWF with a collage of a truck, foliage and wood. (Discover more of our environment coverage.)

The report estimates more than $260 billion worth of Australian banking loans are to sectors that have a “high risk” of impacting nature.

It specifically raises concerns about financing numerous projects in agriculture, property, resources and energy because they can lead to issues like deforestation, water pollution and climate change.

Upon the release of the report, EY's Emma Herd warned tightening regulatory settings and global commitments meant "nature and biodiversity risks" were rapidly becoming part of the "risk landscape" for the finance sector.

“There are also significant opportunities for banks which act now to establish strong approaches to nature risk management and work with their clients to deliver rich biodiversity outcomes for Australia," she said.

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