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RC - Working Paper
30.11.2022

The Market Effect of Acute Biodiversity Risk: the Case of Corporate Bonds

Published 

30 November, 2022

> 10 minutes
30.11.2022
The Market Effect of Acute Biodiversity Risk: the Case of Corporate Bonds
Published 

30 November, 2022

> 10 minutes

Abstract


In this paper, we investigate the relationship between biodiversity and companies, through the lens of corporate bonds. We focus on acute biodiversity events and address biodiversity as a risk, considering its looming losses. We illustrate the material and tangible operational risk that may arise from biodiversity losses and propose an event study to measure the market effect of acute biodiversity events on Australian and Brazilian corporate bonds’ spreads.
To our knowledge, this is one of the first papers to investigate the linkages between acute biodiversity events and micro-level security pricing. We show that most of the studied events appear to be priced into the corporate bond market segment linked to biodiversity impact. Our results indicate that on average, companies in the sectors that have the greatest impact on biodiversity have seen their corporate bond spreads widen in the wake of acute biodiversity events in the 2019-2022 period, providing empirical evidence of corporate financial effects triggered by biodiversity losses.
We also illustrate the interlinkage between biodiversity, socio-economic and food systems. Our analyses indicate that the investor community’s growing awareness of biodiversity issues is also justified given its integration in price discovery.

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This website is solely for informational purposes.
 
This website does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or any other product or service. Any securities, products, or services referenced may not be registered for sale with the relevant authority in your jurisdiction and may not be regulated or supervised by any governmental or similar authority in your jurisdiction.
 
Furthermore, nothing in this website is intended to provide tax, legal, or investment advice and nothing in this website should be construed as a recommendation to buy, sell, or hold any investment or security or to engage in any investment strategy or transaction. There is no guarantee that any targeted performance or forecast will be achieved.

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