Nature and Biodiversity Loss: A Research Agenda for Financial Economics

We outline a research agenda to better understand the economic and financial consequences of nature and biodiversity loss. Our starting point is a simple model in which ecosystem services — such as pollination, water filtration, and carbon sequestration — enter economic production, and where nature degradation and climate change reinforce one another through a "Twin-Crises Multiplier." We then extend this framework to allow for heterogeneity across firms, industries, and geographies in how they depend on, and in turn affect, nature. This broader perspective provides a foundation for empirical analyses of how biodiversity loss influences aggregate output, firm productivity, and financial risk. We conclude by identifying opportunities for asset pricing and corporate finance research to systematically incorporate nature and biodiversity into financial economics.