Why Climate Matters for Your Loan
Climate change is not only an environmental issue. For farmers, livestock producers, agro-processors and rural businesses in Nepal, it can directly affect production, income, operating costs, market access and the ability to repay a loan.
This lesson explains how climate risks can affect your business and how the Climate Canvas can help you present practical solutions as part of a stronger loan application.
1. Climate change can affect your business
Changes in rainfall, temperature and extreme weather can affect many parts of an agriculture or rural enterprise. These impacts may include lower harvests, weaker livestock health, reduced irrigation water, higher feed costs, damaged storage facilities, transport delays, increased input prices and reduced access to markets.
In Nepal, climate risks may look different depending on location. A farmer in the Terai may face flooding, drought or heat stress. A hill farmer may face landslides, soil erosion or irregular rainfall. A mountain producer may face snowfall changes, road disruption, cold waves or reduced access to markets.
Practical examples from Nepal
Example 1: Vegetable farmer in the Terai
A vegetable farmer may face dry-season water shortages, extreme heat and pest outbreaks. These risks can reduce yields and increase irrigation and pesticide costs. A loan for drip irrigation, water storage, mulching or shade netting can help reduce crop losses and stabilise income.
Example 2: Dairy farmer in a hill district
A dairy farmer may face heat stress affecting animal health and milk production, or landslides that disrupt feed supply and milk collection routes. A loan for improved animal housing, ventilation, water access, feed storage and drainage can help protect livestock and maintain regular production.
Example 3: Fish farmer in a flood-prone area
A fish farmer may face pond overflow, poor water quality, high water temperature or flood damage. A loan for pond strengthening, drainage, water monitoring and emergency overflow systems can reduce the risk of fish loss and protect investment.
Example 4: Cold storage or agro-processing SME
A cold storage or agro-processing business may face higher electricity costs, power interruptions, transport delays and spoilage of perishable goods. A loan for energy-efficient cooling, insulation, backup power or improved storage systems can reduce losses and improve reliability.
Example 5: Mountain producer or rural trader
A producer in mountain areas may face road closures, cold waves, changing snowfall patterns or delayed transport to markets. A loan for safer storage, packaging, small processing equipment or diversified market channels can reduce the impact of transport disruption and product losses.
2. A climate-informed loan application is stronger
A climate-informed loan application helps the applicant explain the main climate risks facing the business and show how the proposed loan will help manage those risks. This makes the application clearer, more practical and more credible.
Instead of only describing what the loan will buy, the applicant can also explain how the investment will protect production, reduce losses, improve efficiency or strengthen business continuity.
For example, a loan for irrigation equipment is not only a purchase of equipment. It can also be explained as a measure to reduce drought risk, protect crop production, reduce water waste and improve the farmer’s ability to repay the loan.
Practical point:
A good loan application should explain not only the business opportunity, but also the climate risks that could affect success and the actions proposed to reduce those risks.
3. The Climate Canvas helps organise this information
The Climate Canvas is a simple one-page tool that helps applicants organise climate-related information in a clear and structured way. It guides the applicant to identify climate threats, business impacts, adaptation and mitigation measures, expected costs, expected benefits, commitments and simple indicators.
By completing the Climate Canvas, the applicant can show how climate change affects the business and how the proposed loan can support practical solutions.
The completed Climate Canvas can then be used as a supporting document for the loan application and as a simple plan for implementing the proposed climate-related measures.
How this connects to the Climate Canvas
Climate Threats: drought, flood, heat, landslide, pest outbreak, cold wave or storm.
Business Impacts: lower yield, livestock illness, transport delay, storage loss, higher input prices or reduced sales.
Adaptation Measures: drip irrigation, drainage, safer storage, improved animal housing, resilient crop varieties or water harvesting.
Mitigation Measures: solar pumps, energy-efficient equipment, reduced diesel use, better manure management or reduced food waste.
Financial Benefits: reduced losses, lower operating costs, more reliable production, better product quality and stronger repayment capacity.
Reflection question
Think about your own farm or business:
1. What climate problem has affected your business most in the last few years?
2. How did it affect your production, livestock, costs, sales, storage, transport or income?
3. What investment could help reduce this risk?
4. How could this investment make your loan application stronger?
Resources for this lesson
World Bank Group: Nepal has achieved significant development progress in recent decades. To sustain the development gains, Nepal must adapt its development pathway to a changing climate. Nepal 's Country Climate and Development Report (CCDR) identifies ways that Nepal can achieve its overall development objectives while fostering its strategic ambition to transition to a greener, more resilient, and inclusive development pathway.