GIS in Agriculture

Why Water GIS Matters to Ag Professionals

The versatility of water GIS is part of what makes it so useful to ag professionals. Instead of relying on complex charts, or switching between multiple datasets to understand a given issue, GIS presents data in a congregated, easily-digestible format that can be understood by stakeholders at all levels of the supply chain, from lenders to growers.

Most importantly, GIS allows for a granular approach to data analysis that’s especially significant when striving toward water security. After all, water is local, and it affects every region and farming operation uniquely.

In order to better understand water risk and mitigate the effects of water stress in agriculture, ag professionals need to be able to interpret a combination of small data and macro-level water trends.

As water expert Peter Williams explains,

“Not long ago in California, if you wanted to understand water risk for a given land parcel, you were faced with a mish-mash of Federal, state, and local records… Data on groundwater levels at a given location might simply not have been available as there was no legal requirement for a landowner to provide it.”

With new regulations that require growers to monitor water use, water GIS can compile many layers of complex datasets and allows for a closer analysis of water data at the local, parcel-by-parcel level, allowing lenders to better assess a loan’s water risk.

This gives ag professionals a competitive edge in an era of increased water risk. As some of the country’s most important growing regions face extended droughts and periods of water stress, being able to navigate each state’s system of water rights, regulations, and weather conditions will be key to longevity and sustainability.

Read more about how water GIS can help agriculture finance professionals here.

Water Risk Assessment and GIS Go Hand in Hand

The Federal Reserve has recently warned that “Agriculture is among the most at-risk sectors to climate change as it depends on natural resources, such as soil and water, and predictable weather, such as temperature and precipitation.” Growers in affected regions could find themselves paying more for water, or unable to grow crops due to unexpected water shortages and increased competition for water.

Water risk isn’t just a concern for growers, however: the impacts of population growth, climate change, and other stressors will increase uncertainty up and down the supply chain, affecting food producers, investors, and ag bankers alike. Lenders may spend more time assessing the water risk of a given property before approving a loan, and investors may need to perform additional due diligence before closing a land deal.

In the 2019 ASFMRA’s Trends Report, AQUAOSO outlines four key steps that ag professionals can take to perform a water risk assessment:

• Identify
• Understand
• Monitor
• Mitigate

GIS technology can be an indispensable aid in the process because its characteristics mirror the steps. Ag professionals may find it easier to identify and understand water-related issues when they can view all of their datasets on a single map. GIS can be used to track runoff patterns, soil moisture levels, evapotranspiration data, and more. Because it’s easy to update datasets over time, growers can use the same tools to monitor changes over time.

Another key benefit of GIS in agriculture is that it can help provide a single system of record that all stakeholders can rely on. Instead of working from different points of reference with siloed data and information, growers, lenders, and investors can share datasets with each other to get on the same page about water risk and mitigation strategies.

Other uses of GIS in agriculture can include identifying the feasibility of a conservation project or assessing the impact of an investment in infrastructure.

Learn more about how GIS can help with water risk assessments here.

How to Reduce Risk in Portfolios with Modern Risk Decision-Making

Traditionally, the raw financial risk of the borrower defined loan decision-making. But with the impact of climate change, increased regulations, and ESG reporting requirements on the horizon, old-school approaches are no longer sufficient for managing risk across a diverse portfolio. To reflect this new reality, modern decision-makers require modern tools that place risk factors in a geospatial context.

In the agricultural sector, these warning signals include drought in the West, rising water prices in California, the growing prevalence of flood damage in agriculture, climate change, and regulation. These all illuminate the geospatial nature of loan portfolio risk. 

Ag finance professionals can learn how to reduce risk in portfolios with GIS tools. Additionally, these tools can help lenders and investors save time and money by improving their operational efficiency and contributing to a modern decision-making process that accounts for 21st-century concerns.

You can read more about how to reduce risk in portfolios here.

The Concept and Pertinence of Data Integration in Agricultural Finance

Data integration brings together disparate data sets into a central repository for more effective presentation or analysis. As climate change, water scarcity, and other transition risks threaten to destabilize the agricultural sector, ag professionals must make better use of all avalible data.

Particularly as it pertains to environmental, social, and governance factors, much of the data relevant to farm operations remain separate. For ag finance professionals, this data – should it be un-siloed – presents an opportunity to make better lending and investment decisions, and reduce overall portfolio risk. 

Data integration can:

• Provide valuable insights and allow stakeholders to see things more clearly
• Save time and money when it comes to research and decision-making
• Empower accurate, educated, and informed decisions
• Improve efficiency by auto-populating reports with existing data
• Build financial resilience through risk analysis, team collaboration, and data management

Un-siloed data can unlock hidden value to ag finance professionals, and help build the resiliency of the agricultural industry more broadly.

You can read more about the value of data integration here.

The Benefits of GIS in Banking

GIS presents additional opportunities in the field of banking and ag lending. Many banks are already using GIS tools, for example, by layering “employment status, income, [and] residential status of residents” onto maps, based on U.S. Census data. Ag lenders can further expand this analysis by adding data on land use, water rights, drought patterns and forecasts, flood zones, water districts, and more to identify and understand water risk.

According to a BlackRock Sustainability Survey, lack of data “remains a key challenge” for investors who want to support ESG initiatives. Sustainable agriculture has been linked to improved ROI, but without the right data, ag lenders and investors may struggle to identify properties and farm operations that carry water risk invest in.

Four of the key concerns that GIS in agriculture can help with include:

• Access to Water Risk Information: Instead of relying on a patchwork of regional datasets or local consultants to assemble maps by hand, lenders can use GIS tools to aggregate water data and perform water risk assessments.

• New Customer Acquisition: Ag lenders need to stay ahead of the curve in order to attract and retain borrowers in the face of increasing competition. They can use GIS technology to gain insight into water rights, land use, pumping restrictions, and more, strengthening their relationships with borrowers.

• Geographic Expansion: Since water rights and regulations vary so widely from state to state, GIS tools make it easier to expand into new regions while staying on top of any water use regulations or pumping restrictions that apply there.

• Reporting: As reporting requirements become commonplace in many regions, GIS tools can streamline and even automate parts of the reporting process by digitizing water use data and other key performance metrics.

• Borrower Relationships: The shareability of the data and analyses gained from GIS technology give a common ground to stakeholders throughout the supply chain – from lenders to borrowers.

These are just a few of the ways that GIS tools can help agricultural professionals in the banking sector. Other applications include monitoring water risk across a loan portfolio by tracking parcels of land individually or as a group. With better data, ag lenders can do their part to encourage more sustainable water use in the agricultural sector

You can read more about the benefits of GIS in banking here.

4 Steps to Unlocking Advanced Risk Analytics in Finance Using Bank Data

Risk analytics empower banks and other institutions to identify and mitigate material risks and therefore play a key role in the financial sector. Financial institutions can use these tools to drive internal decisions and to disclose relevant data to other stakeholders. Implemented effectively, risk analytics in finance operates in four steps:

1. Integrate
2. Map
3. Contextualize
4. Analyze

Climate change poses the greatest risk to financial stability since the financial crisis of 2008. Lenders, Farm Credits, and banks can all save time and money by incorporating risk analytics and GIS tools into their decision-making process. Moreover, they can use the resulting insights to build resiliency to future risks. By improving operational efficiency and strategic decision-making, they can lead the financial sector into the 21st century.

You can read more about risk analytics in finance here.

The Geospatial Nature of Loan Portfolio Risk

The old ways of decision-making simply don’t work anymore for assessing loan portfolio risk. Antiquated data management and risk calculation methods don’t take today’s most important factors into account – such as risks due to climate change – or integrate those risk factors into datasets

Financial risk now involves a combination of natural, social, and financial factors, which must be included in every lending decision. Linked with ESG considerations more broadly, these risk factors vary across time and space.  

Because GIS tools present data in a fluid and spatial format, financial professionals can use them to monitor changes over time or to drill down into a specific parcel of land, in a way that isn’t possible with static, disparate datasets. 

With a proactive, geospatial data-rich approach, ag finance institutions can reduce portfolio risk and improve the financial security of their businesses and the agricultural industry as a whole.

You can read more about the geospatial nature of loan portfolio risk here.

The Geospatial Nature of Loan Portfolio Risk

The process by which banks or lenders decide whether or not to approve a loan is called loan decisioning. As it becomes increasingly automated by new technologies and better data, ag finance professionals should take notice.

In the 21st century, lending choices based solely on financial factors such as the credit risk of the borrower ignore potential risks. Financial institutions should take geospatial factors into account because the risks that loan decisioning deals with are geospatial in nature. Aggregating multiple data sets and viewing them in a geospatial, map-based format can improve lenders’ ability to identify risks that would otherwise go unnoticed.

To make the right decisions, ag finance professionals should utilize GIS tools that can unlock their data and illuminate the dynamic, geospatial nature of ag loan risk.

You can read more about the role of GIS in loan decisioning here.

Asset Valuation In Ag Lending Should Built on Geospatial Data

Asset valuation is a process that financial institutions use to determine the value in their portfolios and decide whether or not to approve loans. While past methods relied on static measurements of a farm’s value, with so many factors influencing the viability of a farming operation – including water rights, soil and water quality, and changing weather patterns – ag banks and lenders must adapt.

Asset valuation must be based on robust, un-siloed datasets that take into account the dynamic and geospatial nature of risk as it impacts an agricultural lending portfolio.

As the ag finance industry adjusts to a new era of climate uncertainty, improved asset valuations and portfolio analytics will be key to protecting lenders’ bottom lines. Moreover, they empower the wider ag industry to mitigate transition risks, reduce barriers to sustainable agriculture adoption, and de-risk its businesses.

You can read more about the geospatial data in asset valuation here.

Protecting Against Stranded Assets Due To Water Risk

Because water stress is expected to increase around the world in the coming decade, assets that depend on water – including farmland and other agricultural investments – can be put at risk.

This article explores the link between stranded assets and water stress and how GIS data can help investors protect their portfolios against these impacts.

You can read more about how GIS can aid in protection against stranded assets here.

The Role of Data Aggregation in the Geospatial Risk Data Revolution

Data aggregation is a process that compiles disparate datasets together and assembles them in a format that is easy to manage and understand. In the past, ag banks and financial institutions have been limited by having separate data silos for different parts of their operations, such as loan, collateral, and appraisal data. 

By un-siloing this data, financial institutions can contextualize their portfolios and represent information in a way that meets the needs of an informed decision-making process. By aggregating multiple datasets, ag lenders and investors can improve their ability to identify and mitigate risk. They can pair their own existing financial datasets with environmental and social risk datasets to gain valuable insights and make better decisions about overall risk.

With the right platform, finance professionals can view data in an intuitive map-based format, adding and removing layers to explore unseen connections.

You can read more about the importance of data aggregation here.

3 Key Aspects of Acclimating Financial Data for Climate Change Risk

Data Acclimation is the process of geospatially contextualizing company data with integrated climate data for the purpose of understanding the impact of climate risks on loans and customers’ business.

Data acclimation helps manage climate change risk in three key ways:

1. More efficient and effective data management
2. Revealing insights hidden by other approaches
3. Facilitating communication and partnership

For financial institutions seeking to manage their climate change risk, data acclimation is essential. Utilizing the power of granular geospatial data, acclimation can increase accessibility, build risk insight, and enhance communication without sacrificing data security. Ultimately, data acclimation can revolutionize how ag lenders and investors do business.

Effectively utilized, these data management tools empower ag financial institutions to compete in the shifting business landscape of the 21st century.

You can read more about the data acclimation and climate change risk here.

How California Water Districts GIS Correlates with A Deep Understanding of Them

Navigating state-specific regulations is another key challenge facing ag professionals. For example, California’s SGMA regulations require individual groundwater basins in the state to develop their own Groundwater Sustainability Plans (GSPs). This means that even within the state, access to water can vary widely based on local weather conditions, pumping restrictions, and water rights situations.

Ag professionals may need to be able to look up the boundaries of CA water districts, view basin-specific GSPs, and research the validity of a water rights claim, all before approving a loan or closing a land deal. GIS tools can make this process easier, allowing users to view multiple layers of data on a single map.

In addition to data on water and watershed boundaries, ag professionals can download information related to geology, wildlife, land use, the environment, and more.
GIS resources can provide stakeholders throughout the supply chain with a toolkit with which to navigate the state’s complex water situation and better understand water risk.

Coming soon, learn more about California water districts GIS data here.

Using GIS as an ESG Data Provider in Agricultural Lending

ESG reporting will require financial institutions to fully understand the environmental, social, and governance risks in their portfolios. Agriculture lenders and investors are no exception.

Gathering ESG data, though, can be a nebulous task; no two parcels will exhibit the exact same risk situation. This is where utilizing the power of granular data in a GIS format makes the most sense.

In using GIS as an in-house ESG data provider, agriculture professionals can match their data collection strategies to improve their risk mitigation initiatives as well as streamline their ESG reporting. These benefits give more control and flexibility and will likely come at a lower cost than hiring a third-party data provider.

Learn more about using GIS as an ESG data provider here.

SaaS GIS as a Risk Mitigation and Reporting Tool for Ag Lenders

SaaS GIS tools are an efficient way to assess the water and climate risks of a lending or investment portfolio and collaborate with other stakeholders from a digital, subscription-based format. 

Not only can SaaS GIS tools help ag professionals make better financial decisions, but they can also help empower stakeholders to play a part in reducing water and climate risk in agriculture.

Learn more about using SaaS GIS for a risk mitigation and reporting tool here.

GIS and Data Analytics – The Business Risk Mitigation Duo

GIS tools can be a powerful resource for agricultural professionals – especially when combined with data analytics. GIS can be used to monitor risk across supply chains, from physical risks like water scarcity to legal and reputational risks as more regions implement ESG reporting requirements and climate-related disclosures.

Most importantly, using GIS and data analytics to assess and monitor risk means that stakeholders at all levels can work from a single source of truth to make more informed decisions about physical and material risks. Properly valuing natural and social capital is key to mitigating financial risk and protecting the longevity of agricultural investments.

Learn more about using GIS and data analytics here.

Portfolio Analytics That Will Build Financial Resilience in the 21st Century

Financial resilience relies on data-driven intelligence and portfolio analytics. These revolutionary tools give financial professionals deeper insights into portfolio risks as never before possible. Whether it’s monitoring drought risk or identifying stranded assets, these modern risk decision-making tools can help build financial resilience by presenting data in an intuitive, geospatial format.

Financial resilience in the 21st century will require an expanded definition of risk – one that takes ESG (environmental, social, and governance) factors into account, along with traditional borrower risk data. By using portfolio analytics tools in consort with GIS technologies, banks and lenders can streamline their lending workflows and improve their overall resiliency.

Learn more about portfolio analytics here.

Using Risk Analytics Tools to Build Water and Climate Resilience in Agricultural Finance

Geospatial risk analytics tools help lenders and investors save time and money as they de-risk their portfolios. With climate change posing a growing threat to US agriculture, adopting spatialized approaches is crucial for financial institutions to remain competitive. If climate risk is not truly understood, failed harvests will lead to failed businesses. Continuing to do business as usual is a dangerous proposition.

GIS supports the strategic decision-making required to navigate 21st-century challenges. Drought, water stress, and wildfires are all on the rise. The complex interactions between different climate factors lead to vastly different impacts depending on location. Tools unable to resolve parcel-to-parcel variations give an incomplete picture. Geospatial analytics is the future of ag risk management.

Learn more about risk analytics tools here.

The Bottom Line

GIS technology is a useful tool for professionals in a wide range of sectors, including agriculture and agricultural finance. Because it uses a familiar map-based format to present complex information and data, it’s intuitive and easy-to-use, even for those who lack on-the-ground knowledge or are researching a region from afar.

From discovery to mitigation, GIS aids in the process of turning water risk into water security. The utilization of GIS tools can help agriculture professionals stay ahead of regulations, a changing environment, and the elevating intensity of competition.

To learn more about water risk, browse our resources page or sign up for our newsletter to stay up to date on GIS in agriculture. Or, contact us directly to set up a free demo of our Water Security Platform.