Executives’ green cognition and biodiversity risk avoidance in international operations

Purpose Biodiversity loss has become a material yet largely nonpriced risk in global investment decisions. However, little is known about how multinational enterprises (MNEs) internalize biodiversity risk in overseas subsidiary operations and whether managerial environmental orientation shapes such decisions. This study aims to examine whether executives’ green cognition influences MNEs’ exposure to biodiversity risk. Design/methodology/approach Using a sample of China A-share listed companies from 2009 to 2023, the authors investigate the relationship between executives’ green cognition and the biodiversity risk exposure of overseas subsidiaries. Findings Empirical results show that executives’ green cognition prompts firms to reduce the biodiversity risk exposure of their overseas subsidiaries. Boundary condition analyses indicate that the relationship between executives’ green cognition and biodiversity risk avoidance is significant among firms that have made climate commitments, disclosed climate risk information or attracted investor attention to climate risks, and this conclusion holds after a series of robustness tests. Extended analyses further reveal that the relationship remains significant under both short- and long-term climate commitments, while different types of investor climate attention exhibit distinct patterns, with the relationship being more evident for attention to pollution control and ecological protection. Originality/value This study connects executives’ green cognition with biodiversity risk management in MNE operations, demonstrating how managerial environmental orientation influences cross-border risk decisions. By developing an objective, species-occurrence-based measure of biodiversity risk and mapping it to firms’ overseas subsidiary locations, this study provides a replicable framework for examining biodiversity risks in international investment and corporate governance.