The biodiversity premium

Guillaume Coqueret (), Thomas Giroux and Olivier Zerbib
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Guillaume Coqueret: EM - EMLyon Business School
Thomas Giroux: CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique

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Abstract: Focusing on biodiversity risks, we perform an empirical asset pricing analysis and document three main results. First, the factor going long on low biodiversity intensity assets and short on high biodiversity intensity ones as well as the factors based on the biodiversity intensity subcomponents (land use, greenhouse gases—GHG, air pollution, and water pollution) have heterogeneous dynamics but are not spanned by the Fama and French (2015) and carbon factors. Second, the biodiversity factor excluding the GHG subcomponent (ex-GHG) commands a positive risk premium on realized returns and a negative one on expected returns in the sector highly exposed to the double materiality of biodiversity risks (i.e., physical and transition risks). Third, we show that the negative premium of both the biodiversity and the ex-GHG biodiversity factors on expected returns has materialized strongly from 2021 onward and that it amplifies with attention to biodiversity issues and risk aversion.

Keywords: Biodiversity risk; Asset pricing; Sustainable finance (search for similar items in EconPapers)
Date: 2025-02-01
New Economics Papers: this item is included in nep-env
Note: View the original document on HAL open archive server: https://hal.science/hal-04792327v1
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Published in Ecological Economics, 2025, 228, 14 p. ⟨10.1016/j.ecolecon.2024.108435⟩

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Journal Article: The biodiversity premium (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04792327

DOI: 10.1016/j.ecolecon.2024.108435

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