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Biodiversity Risk and Commodity Markets: Evidence, Theory, and an Agenda for Future Research

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  • Massimo Guidolin, Manuela Pedio

Abstract

Biodiversity loss is among the most severe environmental externalities facing commodity markets, yet its pricing in futures and spot markets remains poorly understood. Agricultural commodities, timber, and livestock are simultaneously the primary drivers of global habitat destruction and the assets most directly exposed to the ecosystem services they degrade. This double materiality operates more immediately in commodity markets than in the equity and bond markets on which the biodiversity-finance literature has concentrated its attention. This paper provides a critical review and research agenda organized around three pillars. First, we map ecological indicators, footprint-based metrics, and text-based attention proxies. Second, we trace the transmission channels through which ecosystem degradation reaches commodity prices: physical supply disruption, regulatory transition risk, and the financial investor channel, with particular attention to the scale-versus-intensity distinction in regulatory design. Third, we review the theoretical frameworks for commodity biodiversity pricing, explain why equity and bond results cannot be transplanted into commodity markets, and present the first systematic commodity-market evidence, consistent with intensity-based biodiversity risk being priced in spot but not futures returns. Because the commodity-specific pricing literature is nascent, the empirical section combines a review of existing conditional evidence with an original empirical analysis of a commodity return panel data set. We conclude with a structured research agenda centered on causal identification, the spot-futures wedge, climate-biodiversity integration, and data infrastructure.

Suggested Citation

  • Massimo Guidolin, Manuela Pedio, 2026. "Biodiversity Risk and Commodity Markets: Evidence, Theory, and an Agenda for Future Research," BAFFI CAREFIN Working Papers 26286, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
  • Handle: RePEc:baf:cbafwp:cbafwp26286
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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