Asset Redeployability and Biodiversity Risk

ABSTRACT We examine how asset redeployability influences a firm's exposure to biodiversity risk. Our empirical analysis provides robust evidence that firms possessing greater levels of redeployable assets exhibit significantly lower biodiversity risk. This negative relationship remains robust after addressing potential endogeneity concerns through rigorous econometric methods and comprehensive sensitivity analyses. Further, our mechanism analysis reveals that asset redeployability mitigates biodiversity risk primarily by fostering corporate innovation, suggesting that flexible assets empower firms to innovate and adopt environmentally sustainable practices more effectively. Additionally, the mitigating effect of asset redeployability on biodiversity risk is particularly pronounced in firms with strong corporate governance structures, a dedicated sustainability committee, and high levels of social responsibility. These results underscore the strategic importance of asset flexibility in enhancing corporate sustainability and ethical corporate practices.