From peripheral ESG to core financial risk
The goal of this initiative, led by the Centre for Endowment Asset Management (CEAM) and the Review of Finance, is to establish biodiversity and natural capital as core topics in mainstream finance.
As this field grows in importance, rigorous academic research is essential to deepen our understanding and guide our growing knowledge. This initiative showcases emerging evidence on measuring and pricing nature related risks, asks how finance can support biodiversity, and sets out a broad future research agenda linking ecology, asset pricing, and corporate behaviour.
About this initiative
A global call for research, launched by the Centre for Endowment Asset Management and the Review of Finance, sought proposals for research linking capital markets research with topics that bear upon the financial economics of nature and biodiversity change. From 147 submission, 11 were selected for the Review of Finance Special Issue on Biodiversity and Natural Resource Finance.
The aim of this initiative is to spur deeper discussion on how nature’s assets and services are integrated into financial economic decision making and how ecological value can be more rigorously studied in financial economics.
Learn more about the successful research projects
Materiality of biodiversity and nature risks
Four projects explore the materiality of biodiversity and nature risks, revealing mixed evidence on how firms and markets perceive and price these risks. Surveys show growing recognition, with physical and transition risks deemed financially significant. Portfolio analyses indicate biodiversity risks are increasingly priced into equity markets after major biodiversity events. Firm-level metrics highlight the financial exposure linked to ecosystem dependence, predicting ESG incidents. However, challenges remain in standardising metrics and addressing stakeholder pressures. Regulatory actions, such as protected areas, reduce emissions but often constrain operations. These findings underline biodiversity finance’s early development and its complex integration into decision-making.
Global survey data reveals that nearly half of companies now view nature loss as financially material. Firms report rising investor attention, operational impacts, and growing strategic relevance—highlighting major implications for investors.
This research creates the first firm-level, value-chain-based metric of nature dependence, revealing significant sectoral patterns and financial implications. The results help investors assess exposure to nature-related disruptions and transition risks.
New research quantifies biodiversity-related physical and regulatory risks, develops firm-level exposure measures, and shows these risks are already partially priced into equities—highlighting major implications for investors and financial stability.
New research shows protected areas significantly reduce industrial pollution but also constrain production, profitability, and valuation. Firms near new conservation zones face heightened regulatory scrutiny, making biodiversity exposure a material financial risk for investors.
How biodiversity is capitalised into asset values and risk premia
Three projects examine how biodiversity impacts the valuation of real and financial assets, each focusing on different yet interconnected pricing areas. They show that biodiversity affects asset values in distinct ways – through production costs, property prices, or climate risk resilience – and provide evidence that these effects are observable and measurable in market prices. Together, the projects consistently show that biodiversity impacts asset values through several significant economic channels. These results also underline the importance for further research to understand how these channels interact, and to develop multi-asset pricing models that incorporate biodiversity’s effects on production costs, local amenities, and climate resilience.
New research shows biodiversity-related risks significantly influence commodity prices. Using news-based indices and market modelling, the study reveals clear risk transmission channels with important implications for investors, hedging strategies and portfolio construction.
New research shows US property markets increasingly price biodiversity. Local biodiversity loss boosts development value, while regional species richness enhances desirability – revealing growing investor preference for biodiversity as a financial asset.
New research shows Florida mangroves significantly reduce hurricane-related home price losses. Properties near mangroves experience smaller value declines and lower price volatility, revealing strong private financial benefits from nature-based climate resilience.
Effectiveness of financial instruments in protecting biodiversity
Two projects assess financial initiatives targeting biodiversity loss and emerging markets for nature-based ventures. They highlight that no single financial solution fits all biodiversity challenges, and increased funding alone doesn’t guarantee better ecological outcomes. Large public programmes improve forest cover but are less effective on species integrity and extinction risk. Entrepreneurial ventures innovate and attract diverse capital but face limits in deal sizes and hybrid business models. Both emphasise aligning financial tools with specific biodiversity goals and the importance of investor diversity and strategic communication to overcome financing barriers in biodiversity-focused projects.
Explore biodiversity entrepreneurship, analysing start-up financing, impact investments, and social media engagement. Discover funding disparities, investor roles, and the significance of biodiversity-focused ventures in promoting sustainability and environmental restoration.
Discover how biodiversity financing impacts conservation and research projects. This study explores private sector opportunities, funding challenges and strategic solutions to combat biodiversity loss for sustainable ecological and scientific progress.
Evaluating voluntary carbon markets
Two projects examine the role of voluntary carbon markets. The first study uses satellite data to assess ecological outcomes from 1,730 nature-based carbon offset projects, revealing a 3.7% increase in habitat pressure, which questions the effectiveness of biodiversity-linked projects. The second examines market reactions to carbon credits certified under the Climate, Community & Biodiversity (CCB) Standard, revealing positive investor sentiment despite growing scepticism around carbon offsets. Together, the studies highlight the disconnect between ecological outcomes and financial incentives, emphasising the need for stronger alignment and governance.
30-Word Short Summary for landing page:
New global evidence shows investors differentiate between biodiversity-certified and standard carbon offsets. After controversy over rainforest credits in 2023, markets penalised low-integrity offsets, while biodiversity-linked CCB credits maintained investor confidence.
New evidence shows many carbon offset projects generate significant biodiversity co-benefits. Projects in high-diversity regions deliver the strongest ecological gains, offering investors meaningful opportunities to support nature-positive climate solutions.
Hear more from some of the researchers involved with the initiative
Nature risks are newly emerging, the key question is are these financially material? Are they investment risks? The key insight from our paper is that the answer is yes.
If they don't invest in climate solutions such as nature-based solution, in this case protection restoration of mangroves, investors are leaving money on the table.
If we know that more money won't make an impact, then investors have to think about how best to redirect their resources towards things that will actually improve biodiversity outcomes.
Initiative convenors
Elroy Dimson
Professor of Finance and Director of Research at Cambridge Judge Business School, University of Cambridge, Co-Founder and Chairman of Centre for Endowment Asset Management
Marcin Kacperczyk
Professor of Finance, Imperial College London
Laura Starks
George Kozmetsky Centennial University Distinguished Chair at the McCombs School of Business, University of Texas at Austin
Sarah Carter
CEAM Executive Director
Sarah Carter is Executive Director of the University of Cambridge’s Centre for Endowment Asset Management, and previously set up and managed the Master of Finance at Cambridge Judge Business School. Before that, she worked for Plan International and for the United Nations Association. She has undertaken PhD coursework and research at the University of Wales, Aberystwyth, and was awarded an MA with distinction in International Studies by Durham University and a BA (Hons) in Psychology by the University of Hertfordshire.
Merve Karakaş
CEAM Centre Manager
Merve is Centre Manager of the University of Cambridge’s Centre for Endowment Asset Management (CEAM). Prior to joining CEAM, she was practicing corporate law in Turkey as an in-house lawyer in Istanbul. Merve holds LLM in Economic Law from Galatasaray University, and LLB from Istanbul University.
Supporters
We’d like to thank the following organisations for their invaluable support towards this initiative.
Intiative events
An opportunity for shortlisted researchers to present their completed projects.
An opportunity for the shortlisted researchers to present their research proposals in more detail.
Related news and insights
Biodiversity finance is moving from a specialist sustainable‑finance topic to a core concern for investors, companies and policymakers. A new Special Issue of the Review of Finance on biodiversity and natural resource finance brings this emerging field into focus. Explore its main messages and takeaways from the key papers included.
Research centre news
Global initiative to bridge finance and biodiversity
A global initiative devised by Cambridge Judge Business School and the Review of Finance is driving a new wave of high-quality research to address critical gaps in understanding how capital markets and financial economics can tackle biodiversity and natural resource challenges.