Does biodiversity at the subsidiary location relate to financial performance?

Companies rely on biodiversity and ecosystem services for the provision of goods and services and yet impact the natural environment through their activities. With increasing human activity, nature has come under threat, with six out of nine planetary boundaries crossed. In this paper, we argue that corporate dependencies on biodiversity and ecosystem services may create incentives for firms to protect and conserve nature and aim to highlight these dependencies by relating local biodiversity and financial performance. Therefore, we take an accounting perspective that relies on subsidiary locations to derive firm-specific measures for biodiversity and ecosystem services. We use a set of biodiversity and ecosystem service measures from the natural sciences literature to derive firm-specific measures and relate them to financial performance. Our results show that local biodiversity and ecosystem services are only weakly associated with financial performance indicators whereas firm-specific industry-dependency on biodiversity and ecosystem services is strongly associated with financial performance. We further determine whether market returns better capture local biodiversity and ecosystem services but find no evidence that supports this claim. In sum, our results suggest that the current state of biodiversity and inherent risks are currently not related to financial performance or market returns. These findings provide important inputs to the debate on how biodiversity and ecosystem services dependencies shape corporate incentives to protect and conserve nature.