The Effect of Biodiversity and Environmental Risks on Banks’ Performance

Giuseppe Rimo () and Simona Cosma ()
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Giuseppe Rimo: University of Bologna, Department of Management
Simona Cosma: University of Bologna, Department of Management

Chapter 6 in Biodiversity and Banks, 2026, pp 123-145 from Palgrave Macmillan

Abstract: Abstract This chapter presents an empirical analysis of how integrating Biodiversity and Environmental Risks (BER) into credit screening affects bank performance. Building on the theoretical foundations developed in earlier chapters and examining a global panel of 726 banks across 56 countries from 2015 to 2024 through fixed-effects panel regressions, we document three main findings. First, BER integration is associated with higher asset quality, reflected in significantly lower non-performing loan ratios. Second, our results show that banks that take biodiversity criteria into account have greater profitability in terms of ROA and ROE, which implies a better intermediation process and risk control. Third, BER integration seems to be valued by markets, as suggested by its positive and significant association with Tobin’s Q. These results are not homogeneous: performance benefits emerge in non-megadiverse countries, where ecological risks seem to be less systemic and BER practices remain less homogenised. Finally, the Kunming Declaration, the Glasgow Climate Pact, and the Basel Committee's focus on climate risk seem to mark a turning point: the improvements resulting from BER integration in credit screening are reflected in accounting indicators only after 2021. Overall, the evidence shows that integrating biodiversity risks is not merely a compliance requirement, but a strategic and prudential tool that enhances banks’ resilience in a context of accelerating environmental degradation.

Keywords: Biodiversity finance; Biodiversity risk; Bank performance; Credit risk; Sustainable banking (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:pal:psifcp:978-3-032-17631-8_6

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DOI: 10.1007/978-3-032-17631-8_6

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