Biodiversity Scores and Corporate Profitability

ABSTRACT In sustainable finance, firm‐level international quantitative evidence is sparse. We address this gap by investigating how firms' biodiversity contributions impact financial performance globally. Our analysis leverages Robeco's 2010–2023 Sustainable Development Goal (SDG) scores. This dataset is unique in that it directly measures biodiversity efforts related to SDG 14 (Life Below Water) and SDG 15 (Life on Land), aligns with the EU Taxonomy, and enables cross‐country and industry comparisons. Our empirical results reveal a significant negative link between biodiversity contributions and short‐term financial performance. This is partially explained by heightened liquidity demands from biodiversity investments. Developed‐country firms and those in Industrials or Utilities outperform in biodiversity conservation. Small firms experience stronger negative effects. Theoretically, our study enriches the sustainability framework by linking biodiversity inputs to financial characteristics through the legitimacy and stakeholder theories. Practically, it guides investors to consider liquidity risks, warns firms to balance biodiversity investments with working capital, and encourages regulators to incentivise developed countries while supporting the capacity of developing countries. The bottom line is to reconcile short‐term costs with long‐term resilience.