Financial risks of biodiversity loss: A review

In this paper, we review the burgeoning literature on financial risks stemming from biodiversity loss. To build our literature database, we systematically collect 444 journal articles and preprints written in English and published between 1989 and 2024, retrieved from Scopus. The selection focuses on studies in the fields of business, economics, and finance, identified through a transparent and reproducible query-based approach. We contribute to the literature by providing the first comprehensive synthesis of the emerging literature on biodiversity-related financial risks. Specifically, we compare existing biodiversity loss metrics and evaluate their strengths and limitations for finance research, while also reviewing evidence on firms’ and financial systems’ exposure to biodiversity physical and transition risks, as well as the influence of these risks on asset pricing. The review underscores that no single metric “outperforms” the others; rather, valuable insights arise from examining multiple indicators, with the choice of metric depending on the specific analytical objective. It also shows that the financial sector is highly, albeit indirectly, exposed to biodiversity physical risk, and that firms – and their value chains – exert substantial impacts on biodiversity. In addition, the review of the literature highlights that investors are increasingly demanding higher premiums to firms exposed to biodiversity risks, suggesting that financial markets deem such risks material. Finally, we identify key research gaps and discuss potential future developments for this field of study, outlining a possible research agenda on biodiversity-related financial risks.