IDEAS home Printed from https://ideas.repec.org/a/gam/jrisks/v13y2025i3p59-d1615997.html
   My bibliography  Save this article

The Impact of Nature Restoration Law on Equity Behavior: How Biodiversity Risk Affects Market Risk

Author

Listed:
  • Paolo Capelli

    (Risk Management, Etica SGR, 20124 Milan, Italy)

  • Lorenzo Gai

    (Department of Economics and Management, University of Florence, Via delle Pandette 9, 50127 Florence, Italy)

  • Federica Ielasi

    (Department of Economics and Management, University of Florence, Via delle Pandette 9, 50127 Florence, Italy)

  • Marco Taddei

    (Department of Management and Law, Faculty of Economics, University of Rome Tor Vergata, Via Columbia 2, 00133 Roma, Italy)

Abstract

This study examines the market reaction to the approval of the Nature Restoration Law, a key component of the EU Biodiversity Strategy, and its implications for biodiversity-related financial risks. Using an event study methodology, we analyze the equity price movements of companies listed in the MSCI Europe Index that are equally weighted in relation to the announcement. We select the RepRisk Due Diligence Score, focusing on incidents linked to landscapes, ecosystems, and biodiversity, as a measure of biodiversity risk. At first, it seems that companies with a high RepRisk Due Diligence Score show limited or positive abnormal returns, suggesting that biodiversity risks are already priced for companies that have experienced incidents linked to this issue. Conversely, firms with lower biodiversity risk exposure see null or negative impacts, reflecting heightened investor concerns about new environmental regulations or compliance costs. Although the event does not have a systemic impact on European companies in the index, it seems that some sectors are affected when analyzed using parametric and non-parametric distributions.

Suggested Citation

  • Paolo Capelli & Lorenzo Gai & Federica Ielasi & Marco Taddei, 2025. "The Impact of Nature Restoration Law on Equity Behavior: How Biodiversity Risk Affects Market Risk," Risks, MDPI, vol. 13(3), pages 1-19, March.
    • Handle: RePEc:gam:jrisks:v:13:y:2025:i:3:p:59-:d:1615997
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-9091/13/3/59/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-9091/13/3/59/
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jrisks:v:13:y:2025:i:3:p:59-:d:1615997. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.