The Assembly of a Field Ideology: An Idea-Centric Perspective on Systemic Power in Impact Investing

Is there a biodiversity premium?

Even though climate is still the leading concern driving environmental premium, biodiversity and nature-related risks are increasingly taken into account by responsible investors thanks to frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD) or Science Based Targets initiative.

To assess the actual impact of biodiversity on stock prices, Guillaume Coqueret and Thomas Giroux used data from Iceberg Data Lab to quantify the biodiversity premium.

Their main conclusions include:

• No significant biodiversity premium can be measured on realised returns, based on the dataset used in this paper.
• Expected returns show a negative biodiversity premium, which suggests biodiversity is expected to be a material risk factor in the near future.
• The premium on expected returns is more significant for firms in industries for which biodiversity is a highly material extra-financial topic.
• Biodiversity, consumer sentiment and oil prices are the most significant drivers of the risk premium measured on the US equity market.
• Biodiversity is a complex topic, and the dimensions strongly linked to climate change like air pollution seem to be better taken into account by investors than others like land use, even though it has a greater impact on biodiversity.

Biodiversity is still an overlooked topic, considering its collapse is strongly linked to climate change and could have even more devastating effects if dedicated transition plans are not implemented fast enough.

Beyond voluntary frameworks, regulatory initiatives like the CSRD and the EU Taxonomy are offering guidance and standards to integrate these considerations into company reporting and strategies.