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Biodiversity Risk

Author

Listed:
  • Stefano Giglio
  • Theresa Kuchler
  • Johannes Stroebel
  • Xuran Zeng

Abstract

We explore the effects of physical and regulatory risks related to biodiversity loss on economic activity and asset values. We first develop a news-based measure of aggregate biodiversity risk and analyze how it varies over time. We also construct and publicly release several firm-level measures of exposure to biodiversity risk, based on textual analyses of firms’ 10-K statements, a large survey of financial professionals, regulators, and academics, and the holdings of biodiversity-related funds. Exposures to biodiversity risk vary substantially across industries in a way that is economically sensible and distinct from exposures to climate risk. We find evidence that biodiversity risks already affect equity prices: returns of portfolios that are sorted on our measures of biodiversity risk exposure covary positively with innovations in aggregate biodiversity risk. However, our survey indicates that market participants do not perceive the current pricing of biodiversity risks to be adequate.

Suggested Citation

  • Stefano Giglio & Theresa Kuchler & Johannes Stroebel & Xuran Zeng, 2023. "Biodiversity Risk," NBER Working Papers 31137, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31137
    Note: AP CF EEE EFG ME PE
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    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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