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The biodiversity premium

Author

Listed:
  • Guillaume Coqueret

    (EM - EMLyon Business School)

  • Thomas Giroux

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

  • Olivier David Zerbib

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

Abstract

Focusing on biodiversity risks, we perform an empirical asset pricing analysis and document three main results. First, the factor going long on low biodiversity intensity assets and short on high biodiversity intensity ones as well as the factors based on the biodiversity intensity subcomponents (land use, greenhouse gases—GHG, air pollution, and water pollution) have heterogeneous dynamics but are not spanned by the Fama and French (2015) and carbon factors. Second, the biodiversity factor excluding the GHG subcomponent (ex-GHG) commands a positive risk premium on realized returns and a negative one on expected returns in the sector highly exposed to the double materiality of biodiversity risks (i.e., physical and transition risks). Third, we show that the negative premium of both the biodiversity and the ex-GHG biodiversity factors on expected returns has materialized strongly from 2021 onward and that it amplifies with attention to biodiversity issues and risk aversion.

Suggested Citation

  • Guillaume Coqueret & Thomas Giroux & Olivier David Zerbib, 2025. "The biodiversity premium," Post-Print hal-04792327, HAL.
    • Handle: RePEc:hal:journl:hal-04792327
    DOI: 10.1016/j.ecolecon.2024.108435
    Note: View the original document on HAL open archive server: https://hal.science/hal-04792327v1
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    References listed on IDEAS

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