The Real Effects of Protecting Biodiversity

Abstract

As protected areas become a key policy tool for biodiversity conservation, their broader economic and corporate impacts remain underexplored. This study examines how proximity to newly designated protected areas affects corporate operations, environmental performance, and financial outcomes. Using data from 1990 to 2021, we show that industrial facilities near these areas significantly reduce toxic emissions, primarily through scaled-back production and workforce contraction rather than proactive investments in pollution control. Heightened regulatory scrutiny imposes operational constraints, leading to financial burdens for parent companies and measurable declines in profitability and stock market valuations. Further analysis identifies environmental enforcement actions near protected areas as the primary channel through which exposure to biodiversity conservation initiatives shapes corporate behavior. As global efforts to protect ecosystems expand, our findings highlight the substantial operational and financial risks firms face from biodiversity-related regulatory exposure, carrying important implications for policymakers, businesses, and investors.

Keywords: Biodiversity, Protected Areas, Regulatory Risk, Real Effects, Industrial Pollution