The pricing of biodiversity risk in commodity markets

Massimo Guidolin and Manuela Pedio

Review of Finance, 2026, vol. 30, issue 1, 351-389

Abstract: This article provides empirical evidence that biodiversity-related transition risk is priced in global commodity markets, with particular emphasis on agricultural commodities. Using intensity-based metrics of species loss per harvested land unit, we obtain empirical evidence that commodities with higher biodiversity footprints earn significant risk premia, after controlling for commodity-specific factors. An event study around the Kunming Declaration further shows that commodities associated with greater biodiversity risk experienced negative abnormal returns following the declaration. In an aggregate-level analysis, we additionally find that commodities with higher sensitivity (beta) to biodiversity shocks earn significantly higher excess returns, reinforcing the presence of a biodiversity-related risk premium across global commodity markets. Our findings suggest that investors are increasingly internalizing the biodiversity-related risks at the commodity-asset level. The findings can be rationalized by a commodity production model, which we outline in Section 5.

Keywords: biodiversity risk; transition risk; commodity returns; biodiversity premium (search for similar items in EconPapers)
JEL-codes: G12 Q56 Q57 (search for similar items in EconPapers)
Date: 2026
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