Do investors care about biodiversity?

Alexandre Garel (), Arthur Romec, Zacharias Sautner () and Alexander Wagner
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Alexandre Garel: Audencia Business School
Zacharias Sautner: CEPR - Center for Economic Policy Research
Alexander Wagner: CEPR - Center for Economic Policy Research

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Abstract: This article introduces a new measure of a firm's negative impact on biodiversity, the corporate biodiversity footprint (CBF), and studies whether it is priced in an international sample of stocks. On average, the CBF does not explain the cross-section of returns between 2019 and 2022. However, a biodiversity footprint premium (higher returns for firms with larger footprints) began emerging in October 2021 after the Kunming Declaration, which capped the first part of the UN Biodiversity Conference (COP15). Consistent with this finding, stocks with large footprints lost value in the days after the Kunming Declaration. The launch of the Taskforce on Nature-related Financial Disclosures (TNFD) in June 2021 had a similar effect. These results indicate that investors have started to require a risk premium upon the prospect of, and uncertainty about, future regulation or litigation to preserve biodiversity.

Keywords: biodiversity corporate biodiversity footprint Kunming Declaration natural capital nature stock returns Taskforce on Nature-related Financial Disclosures (TNFD) JEL classifications: G12; G30; Q57; biodiversity; corporate biodiversity footprint; Kunming Declaration; natural capital; nature; stock returns; Taskforce on Nature-related Financial Disclosures (TNFD) JEL classifications: G12; G30; Q57; biodiversity; stock market; cop15; kunming; montreal (search for similar items in EconPapers)
Date: 2024-07
Note: View the original document on HAL open archive server: https://hal.science/hal-04649052
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Citations: View citations in EconPapers (5)

Published in Review of Finance, 2024, 28 (4), ⟨10.1093/rof/rfae010⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04649052

DOI: 10.1093/rof/rfae010

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