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Financing Nature:Investment Funds and Biodiversity Risks

Author

Listed:
  • Daniel Marcel te Kaat
  • Alexander Raabe

Abstract

How do international investors adjust portfolios in response to biodiversity risk? Using monthly data on investment fund portfolios, we show that the 2021 Kunming Declaration led fund managers to reallocate portfolios from high-biodiversity risk countries to less risky ones, while ultimate fund investors remained unresponsive. Fund managers reduced exposures to extremely high biodiversity risk without seizing low biodiversity risk as an opportunity for profit, characterizing biodiversity as downside risk factor. Investment funds drive cross-country spillovers as the reallocation triggers significant capital flows beneï¬ ting countries in the same geographic region, but outside of a fund's hitherto established portfolio. Using a novel measure of legal action to protect nature, we demonstrate that countries adopting more legal acts are partially shielded from funds reducing their exposure to high-biodiversity risk countries.

Suggested Citation

  • Daniel Marcel te Kaat & Alexander Raabe, 2026. "Financing Nature:Investment Funds and Biodiversity Risks," CAMA Working Papers 2026-41, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2026-41
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    File URL: https://crawford.anu.edu.au/sites/default/files/2026-06/41_2026_teKaat_Raabe.pdf
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    JEL classification:

    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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