Financing Nature:Investment Funds and Biodiversity Risks

Daniel te Kaat and Alexander Raabe

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: How do international investors adjust portfolios in response to biodiversity risk? Using monthly data on investment fund portfolios, we show that the 2021 Kunming Declaration led fund managers to reallocate portfolios from high-biodiversity risk countries to less risky ones, while ultimate fund investors remained unresponsive. Fund managers reduced exposures to extremely high biodiversity risk without seizing low biodiversity risk as an opportunity for profit, characterizing biodiversity as downside risk factor. Investment funds drive cross-country spillovers as the reallocation triggers significant capital flows beneï¬ ting countries in the same geographic region, but outside of a fund's hitherto established portfolio. Using a novel measure of legal action to protect nature, we demonstrate that countries adopting more legal acts are partially shielded from funds reducing their exposure to high-biodiversity risk countries.

Keywords: biodiversity; risk; portfolio reallocation; cross-border capital flows; spillovers; investment fund; Kunming Declaration (search for similar items in EconPapers)
JEL-codes: F3 G1 G2 Q5 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2026-06
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2026-41

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