N°23-24: Do Investors Care About Biodiversity?

This paper introduces a new measure of a firm's negative impact on biodiversity, the corporate biodiversity footprint, and studies whether it is priced in an international sample of firms. On average, the biodiversity footprint does not explain the cross-section of stock returns. However, a biodiversity footprint premium (higher returns for firms with larger footprints) began emerging after the UN Biodiversity Conference (COP15). Consistent with this finding, firms with large footprints lost value in the days after the two COP15 events, the Kunming Declaration (October 2021) and the Montreal Agreement (December 2022). The results indicate that investors started to require a risk premium upon the prospect of, and uncertainty about, future regulations to preserve biodiversity.