Biodiversity Risk

69 Pages Posted: 18 Apr 2023 Last revised: 12 May 2023

See all articles by Stefano Giglio

Stefano Giglio

Yale School of Management; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Theresa Kuchler

New York University (NYU)

Johannes Stroebel

New York University (NYU) - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Xuran Zeng

New York University (NYU) - Leonard N. Stern School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: April 4, 2023

Abstract

We explore the effects of physical and regulatory risks related to biodiversity loss on economic activity and asset values. We first develop a news-based measure of aggregate biodiversity risk and analyze how it varies over time. We also construct and publicly release several firm-level measures of exposure to biodiversity risk, based on textual analyses of firms' 10-K statements, the holdings of biodiversity-related funds, and a large survey of finance professionals, regulators, and academics. Exposures to biodiversity risk vary substantially across industries in a way that is economically sensible and distinct from exposures to climate risk. We find evidence that biodiversity risks already affect equity prices: returns of portfolios that are sorted on our measures of biodiversity risk exposure covary positively with innovations in aggregate biodiversity risk. However, our survey indicates that market participants do not perceive the current pricing of biodiversity risks in equity markets to be adequate. We also construct several measures of biodiversity risk exposure across U.S. counties, but find little evidence that those exposures are priced in municipal bond markets.

Suggested Citation

Giglio, Stefano and Kuchler, Theresa and Stroebel, Johannes and Zeng, Xuran, Biodiversity Risk (April 4, 2023). Available at SSRN: https://ssrn.com/abstract=4410107 or http://dx.doi.org/10.2139/ssrn.4410107

Stefano Giglio

Yale School of Management ( email )

135 Prospect Street
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National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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Centre for Economic Policy Research (CEPR) ( email )

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Theresa Kuchler

New York University (NYU) ( email )

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Johannes Stroebel

New York University (NYU) - Leonard N. Stern School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Xuran Zeng (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States

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