Discussion paper

DP18626 Biodiversity Risk

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, the holdings of biodiversity-related funds, and a large survey of finance professionals, regulators, and academics. 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 in equity markets to be adequate. We also construct several measures of biodiversity risk exposure across U.S. counties, but find little evidence that those exposures are priced in municipal bond markets.


Giglio, S, T Kuchler, J Ströbel and X Zeng (2023), ‘DP18626 Biodiversity Risk‘, CEPR Discussion Paper No. 18626. CEPR Press, Paris & London. https://cepr.org/publications/dp18626