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Mitigating Corporate Biodiversity Risk through Green Finance: The Role of Green Development and Climate Risk in the USA

Author

Listed:
  • Salim Bagadeem

    (Arab Open University, Faculty of Business Studies, Riyadh, Saudi Arabia)

  • Salem Hamad Aldawsari

    (Department of Finance, College of Business Administration Hotat Bani Tamim, Prince Sattam bin Abdulaziz University)

Abstract

[Purpose] This study examines whether green finance mitigates corporate biodiversity risk in the United States, focusing on the decision-making mechanisms underlying this relationship. It specifically evaluates the mediating role of corporate green development and the moderating effect of climate risk in shaping firms’ responses to sustainability-oriented financial incentives. [Design/methodology/approach] Using a balanced panel of U.S. publicly listed firms from 2003 to 2025, corporate biodiversity risk is measured through BERT-based textual analysis of 10-K disclosures aligned with the Taskforce on Nature-related Financial Disclosures (TNFD) framework. Green finance is captured using a state-level Green Finance Development Index constructed via the Entropy Weight Method. The empirical strategy employs firm and year fixed effects, Propensity Score Matching (PSM), and a Difference-in-Differences (DID) approach to address endogeneity. Mediation analysis is applied to examine corporate green development as a transmission mechanism, while moderation analysis is used to assess whether climate risk strengthens the effect of green finance on corporate green development. [Findings] The results show that green finance significantly reduces corporate biodiversity risk (p

Suggested Citation

  • Salim Bagadeem & Salem Hamad Aldawsari, 2026. "Mitigating Corporate Biodiversity Risk through Green Finance: The Role of Green Development and Climate Risk in the USA," Advances in Decision Sciences, Asia University, Taiwan, vol. 30(2), pages 258-301, June.
    • Handle: RePEc:aag:wpaper:v:30:y:2026:i:2:p:258-301
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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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