Do investors care about the rainforest? Evidence from voluntary carbon offsets around the world

Centre for Endowment Asset Management (CEAM)
Centre for Endowment Asset Management (CEAM)

Overview

The voluntary carbon market (VCM) is increasingly central to climate strategies, yet its credibility has come under intense scrutiny. The project ‘Do Investors Care about the Rainforest? Evidence from Voluntary Carbon Offsets around the World’, provides the first large-scale financial analysis of how investors respond to biodiversity-related carbon offsetting activities. Leveraging a global dataset of 781 publicly listed firms and more than 3,000 forest-related carbon credit retirements between 2009 and 2024, the research uncovers how stock markets interpret rainforest conservation, biodiversity impact and the integrity of carbon offsets.

An interview with Eric Nowak.

Authors

Franklin Allen

Imperial College London

Patrick Behr

Universita della Svizzera Italiana

Riccardo Cosenza

Universita della Svizzera Italiana

Eric Nowak

Swiss Finance Institute and Universita della Svizzera Italiana

Project aims

The project seeks to determine whether investors value biodiversity-linked carbon offsets differently from standard carbon credits, and how market reactions shift when public trust in rainforest offsets is challenged. The study focuses on 4 main questions:

1

Market reaction to forestry-offset retirement

Analyse how stock prices respond when companies retire forestry-related carbon credits.

2

Influence of CCB biodiversity and social certification

Assess whether offsets certified under the Climate, Community and Biodiversity (CCB) Standard shape investor reactions to credit retirement.

3

Impact of credibility shocks on market perceptions

Examine how the January 2023 Guardian investigation alleging rainforest offsets were worthless altered investor views of forestry-based credits.

4

Protective role of biodiversity co-benefits

Investigate whether biodiversity and social co-benefits can help insulate firms from greenwashing concerns and credibility shocks in the voluntary carbon market.

The study addresses an important gap: although deforestation is one of the biggest drivers of global biodiversity loss and carbon emissions, little is known about how financial markets interpret corporate actions aimed at mitigating these impacts.

Key insights

1

Investors react differently to biodiversity-certified vs non-certified offsets

Before 2023, average stock market reactions to forest-related carbon credit retirements were neutral. However, retirements of CCB-certified credits consistently received less negative or neutral reactions, reflecting investor confidence in biodiversity and social co-benefits. In contrast, retirements of non-CCB forestry credits showed more frequent and significantly negative abnormal returns, suggesting investors increasingly distinguish between high-integrity and low-integrity offsets.

2

The 2023 Guardian article was a major shock to carbon markets

On 18 January 2023, The Guardian alleged that more than 90% of major rainforest offsets were worthless. This created an exogenous credibility shock. Following the article:

  • retirements of general (non-CCB) forestry credits generated significantly negative market reactions
  • CCB-certified retirements showed no statistically significant negative response
  • some firms rapidly shifted towards higher-integrity CCB credits, visible in a post-article spike in CCB retirements

This indicates investors sharply revised beliefs about offset integrity and began penalising firms reliant on questionable carbon mechanisms.

3

Credibility and biodiversity impact are increasingly priced into corporate climate actions

The study finds that offset quality, not merely offset quantity, is what investors value. CCB projects require demonstrable net-positive biodiversity outcomes and community engagement, conditions investors appear to trust more. Offsets without such assurances became viewed as potential greenwashing liabilities after 2023.

4

Sector and regional differences reveal heightened scrutiny for high-emission industries

Mining and manufacturing firms experienced the strongest negative reactions, especially for non-CCB offsets. Companies operating in South and Central America, regions closely associated with tropical deforestation, also saw larger declines, reflecting increased scepticism toward rainforest-based credits.

5

Biodiversity-linked offsets mitigate greenwashing risk

Cross-sectional regressions confirm that CCB certification reduces the magnitude of negative abnormal returns, particularly in longer event windows. This suggests biodiversity and social co-benefits enhance investor trust and resilience against external credibility shocks.

Why this matters for investors

High-integrity offsets protect corporate value

The research shows that offsets with credible biodiversity impact, such as CCB-certified credits, act as a hedge against reputational and regulatory risk. In contrast, low-integrity offsets expose firms to negative investor reactions, particularly when public scrutiny intensifies.

Biodiversity is emerging as a financial differentiator

Global biodiversity loss is projected to cause trillions of dollars in economic damage and reduce GDP growth significantly by 2050. Investors are beginning to price biodiversity risk and certifications like CCB help signal genuine nature-positive action.

Regulation and disclosure requirements are tightening

As frameworks like TNFD evolve, markets increasingly reward transparency and penalise weak claims. Firms using CCB-certified offsets are better positioned for future regulatory environments emphasising measurable biodiversity impact.

Demand for sustainable, high-quality offsets is rising

Despite the challenges facing the VCM, price premia for offsets with co-benefits suggest clear investor preference for biodiversity-aligned projects. Biodiversity remains a scarce and therefore valuable attribute within carbon markets.

Offsetting strategies must shift toward integrity and impact

The study demonstrates that investors actively differentiate between forms of corporate climate action. Biodiversity-positive offsets strengthen investor trust, while low-integrity offsets increasingly risk being seen as greenwashing.

Conclusion

This study shows that investors increasingly differentiate between high-integrity, biodiversity-linked carbon offsets and lower-quality credits, especially after the 2023 credibility shock to rainforest offsets. By analysing global firms’ carbon-credit retirements, the research demonstrates that biodiversity-certified offsets help protect corporate value, reduce greenwashing risk and strengthen investor confidence. As scrutiny of the voluntary carbon market intensifies, the findings highlight that integrity, transparency and measurable biodiversity impact are now central to how financial markets evaluate corporate climate strategies.

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