Advertisement

The Development of Green Finance in EU Agriculture: Main Obstacles and Possible Ways Forward

  • Marco Migliorelli
Chapter
Part of the Palgrave Studies in Impact Finance book series (SIF)

Abstract

This chapter analyses the causes of the very limited role played by green finance in agriculture, a sector that is responsible for about 25% of the greenhouse gas emissions. By focusing on the situation in the European Union (EU), it is first argued that the structure of the farming industry (composed in many cases of small businesses) and the actual model of financing of agriculture (backed by public support through grants and banking loans) are among the major hurdles to the development of green-labelled financing instruments. A number of options are presented to overcome these hurdles, including dedicated financing facilities and the contribution of the cooperative sector. The development of green finance in agriculture would contribute to reach the most ambitious environmental goals.

References

  1. Affinito, M., & Tagliaferri, E. (2010). Why do (or did?) banks securitize their loans? Evidence from Italy. Journal of Financial Stability, 6, 189–202.CrossRefGoogle Scholar
  2. Ahn, J. H., & Breton, R. (2014). Securitization, competition and monitoring. Journal of Banking and Finance, 40, 195–210.CrossRefGoogle Scholar
  3. Allen, F., & Carletti, E. (2006). Credit risk transfer and contagion. Journal of Monetary Economics, 53, 89–111.CrossRefGoogle Scholar
  4. Altunbas, Y., Gambacorta, L., & Marques-Ibanez, D. (2009). Securitisation and the bank lending channel. European Economic Review, 53, 996–1009.CrossRefGoogle Scholar
  5. Ashcraft, A. B., & Schuermann, T. (2008). Understanding the securitization of subprime mortgage credit. Staff Reports 318, Federal Reserve Bank of New York.Google Scholar
  6. Bartolini, F., Gallerani, V., Raggi, M., & Viaggi, D. (2012). Modelling the linkages between cross-compliance and agri-environmental schemes under asymmetric information. Journal of Agricultural Economics, 63(2), 310–330.Google Scholar
  7. Basel Committee on Banking Supervision (BCBS). (2014, December). Revisions to the Basel securitisation framework.Google Scholar
  8. Beck, T., Demirgüç-Kunt, A., & Martínez Pería, M.S. (2009). Banking SME around the world: Lending practices, business models, drivers and obstacles. World Bank Policy Research Working Paper, 4785.Google Scholar
  9. Bellucci, A., Borisov, A., & Zazzaro, A. (2013). Do banks price discriminate spatially? Evidence from small business lending in local credit markets. Journal of Banking and Finance, 37, 4183–4197.CrossRefGoogle Scholar
  10. Berger, A. N., & Udell, G. F. (1995). Relationship lending and lines of credit in small firm finance. The Journal of Business, 68(3), 351–381.CrossRefGoogle Scholar
  11. Berger, A. N., & Udell, G. F. (2002). Small business credit availability and relationship lending: the importance of bank organizational structure. The Economic Journal, 112, F32–F53.CrossRefGoogle Scholar
  12. Berger, A. N., & Udell, G. F. (2006). A more complete conceptual framework for SME finance. Journal of Banking and Finance, 30, 2945–2966.CrossRefGoogle Scholar
  13. Berger, A., Klapper, L., & Udell, G. (2001). The ability of banks to lend to informationally opaque small businesses. Journal of Banking and Finance, 25, 2127–2167.CrossRefGoogle Scholar
  14. Bijman, J., & Iliopoulos, C. (2014). Farmers’ cooperatives in the EU: Policies, strategies, and organization. Annals of Public and Cooperative Economics, 85(4), 497–508.CrossRefGoogle Scholar
  15. Bolton, P., Freixas, X., Gambarotta, L., & Mistrulli, P. E. (2013). Relationship and transaction lending in a crisis. BIS Working Papers, No 417.Google Scholar
  16. Boot, A. W. A. (2000). Relationship banking: what do we know? Journal of Financial Intermediation, 9, 7–25.CrossRefGoogle Scholar
  17. Caballero, R. J., & Krishnamurthy, A. (2009). Global imbalances and financial fragility. American Economic Review, 99(2), 584–588.CrossRefGoogle Scholar
  18. Cardone-Riportella, C., Samaniego-Medina, R., & Trujillo-Ponce, A. (2010). What drives bank securitisation? The Spanish experience. Journal of Banking and Finance, 34, 2639–2651.CrossRefGoogle Scholar
  19. Cornée, S., Fattobene, L., & Migliorelli, M. (2018). An overview of cooperative banking in Europe. In M. Migliorelli (Ed.), New cooperative banking in Europe. Strategies for adapting the business model post-crisis. London: Palgrave Macmillan.Google Scholar
  20. Cowling, M., & Siepel, J. (2013). Public intervention in UK small firm credit markets: Value-for-money or waste of scarce resources? Technovation, 33(8), 265–275.CrossRefGoogle Scholar
  21. de la Torre, A., Soledad Martínez Pería, M., & Schmukler, S. L. (2010). Bank involvement with SMEs: Beyond relationship lending. Journal of Banking & Finance, 34(9), 2280–2293.Google Scholar
  22. Duffie, D. (2008). Innovations in credit risk transfer: Implications for financial stability. BIS Working Paper, 255.Google Scholar
  23. Espinosa-Goded, M., Barreiro-Hurlé, J., & Ruto, E. (2010). What do farmers want from agrienvironmental scheme design? A choice experiment approach. Journal of Agricultural Economics, 61(2), 259–273.CrossRefGoogle Scholar
  24. European Commission (EC). (2015a, November). Annual report on European SMEs 2014/2015.Google Scholar
  25. European Commission (EC). (2015b, March). CAP post-2013: Key graphs and figures.Google Scholar
  26. European Commission (EC). (2015c, September). Proposal for a regulation of the European Parliament and of the Council laying down common rules on securitisation and creating a European framework for simple, transparent and standardised securitization.Google Scholar
  27. European Commission (EC). (2018, March). Actionplan: Financing sustainable growth. COM (2018) 97 final.Google Scholar
  28. Farruggio, C., & Uhde, A. (2015). Determinants of loan securitization in European banking. Journal of Banking and Finance, 56, 12–27.CrossRefGoogle Scholar
  29. Fraser, R. (2002). Moral hazard and risk management in agri-environmental policy. Journal of Agricultural Economics, 53(3), 475–487.CrossRefGoogle Scholar
  30. Fraser, R. (2012). Moral hazard, targeting and contract duration in agri-environmental policy. Journal of Agricultural Economics, 63(1), 56–64.CrossRefGoogle Scholar
  31. Gijselinckx, C., & Bussels, M. (2014). Farmers’ cooperatives in Europe: Social and historical determinants of cooperative membership in agriculture. Annals of Public and Cooperative Economics, 85(4), 509–530.CrossRefGoogle Scholar
  32. Gorton, G. B., & Pennacchi, G. G. (1995). Banks and loans sales marketing nonmarketable assets. Journal of Monetary Economics, 35, 389–411.CrossRefGoogle Scholar
  33. International Monetary Fund (IMF). (2015, January). Securitization: The road ahead. IMF Staff discussion note.Google Scholar
  34. International Panel on Climate Change (IPCC). (2014). Climate change 2014. Mitigation of climate change.Google Scholar
  35. Jimenez, G., Salas, V., & Saurina, J. (2009). Organizational distance and use of collateral for business loans. Journal of Banking and Finance, 33, 234–243.CrossRefGoogle Scholar
  36. Keys, B. J., Mukherjee, T., Seru, A., & Vig, V. (2009). Financial regulation and securitization: Evidence from subprime mortgage loans. Journal of Monetary Economics, 56, 700–720.CrossRefGoogle Scholar
  37. Kuminoff, N. V., & Wossink, A. (2010). Why isn’t more US farmland organic? Journal of Agricultural Economics, 61(2), 240–258.CrossRefGoogle Scholar
  38. Liu, M., Margaritis, D., & Tourani-Rad, A. (2011). Asymmetric information and price competition in small business lending. Journal of Banking and Finance, 35, 2189–2196.CrossRefGoogle Scholar
  39. Loan Market Association (LMA). (2018). Green loans principles. London.Google Scholar
  40. Mian, A. (2006). Distance constraints: The limits of foreign lending in poor economies. Journal of Finance, 61, 1465–1505.CrossRefGoogle Scholar
  41. Mian, A., & Sufi, A. (2009). The consequences of mortgage credit expansion: evidence from the 2007 mortgage default crisis. Quarterly Journal of Economics, 124(4), 1449–1496.CrossRefGoogle Scholar
  42. Migliorelli, M. (Ed.). (2018). New cooperative banking in Europe. Strategies for adapting the business model post-crisis. London: Palgrave Macmillan.Google Scholar
  43. Migliorelli, M., & Brunelli, S. (2017). The transmission of the monetary policy in the euro area: The role of the banks’ business model. Annals of Public and Cooperative Economics, 88(3), 302–322.CrossRefGoogle Scholar
  44. Migliorelli, M., & Dessertine, P. (2018). Time for new financing instruments? A market-oriented framework to finance environmentally friendly practices in EU agriculture. Journal of Sustainable Finance and Investment, 8(1), 1–25.CrossRefGoogle Scholar
  45. OECD. (2017). Mobilising bond markets for a low-carbon transition. Paris.Google Scholar
  46. Riding, A., Madill, J., & Haines, G. (2007). Incrementality of SME loan guarantees. Small Business Economics, 29(1–2), 47–61.CrossRefGoogle Scholar
  47. Schulz, N., Breustedt, G., & Latacz-Lohmann, U. (2014). Assessing farmers’ willingness to accept “greening”: Insights from a discrete choice experiment in Germany. Journal of Agricultural Economics, 65(1), 26–48.CrossRefGoogle Scholar
  48. Siebert, R., Toogood, M., & Knierim, A. (2006). Factors affecting European farmers participation in biodiversity policies. Sociologia Ruralis, 46, 318–340.CrossRefGoogle Scholar
  49. Stein, J. (2002). Information production and capital allocation: Decentralized versus hierarchical firms. Journal of Finance, 57, 1891–1922.CrossRefGoogle Scholar
  50. Wezel, A., Casagrande, M., Celette, F., Vian, J., Ferrer, A., & Peigné, J. (2014). Agroecological practices for sustainable agriculture. A review. Agronomy for Sustainable Development, 34, 1–20.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Marco Migliorelli
    • 1
    • 2
  1. 1.IAE Université Paris 1 Panthéon-Sorbonne (Sorbonne Business School)ParisFrance
  2. 2.European CommissionBrusselsBelgium

Personalised recommendations