New Research Identifies Biodiversity Protection as a Material Financial Risk for Companies & Investors
TORONTO, ON – Friday, January 9, 2026 – As global conservation policies accelerate, new research from York University’s Schulich School of Business identifies biodiversity protection as an emerging and significant source of financial risk for firms – and for the investors who hold exposure to them.
A study co-authored by Lilian Ng, Professor of Finance and the Scotiabank Chair in International Finance at Schulich, and published in the Review of Finance, is among the earliest to systematically examine how biodiversity conservation affects corporate behavior, profitability and market valuation. This study is co-authored together with Amir Akbari (DeGroote School of Business, McMaster University), Man Duy (Marty) Pham (University of Auckland), and Jing Yu (University of Sydney).
Titled The Real Effects of Protecting Biodiversity, the paper analyzes how firms respond when new protected natural areas are designated near their operating facilities. With nearly 200 countries committed to the global “30 by 30” target to protect 30 percent of land and waters by 2030, the findings offer timely insights for asset managers, institutional investors and risk professionals.
The study finds that firms located near newly designated protected areas significantly reduce toxic emissions. However, these environmental gains are driven primarily by reduced production, lower output and workforce contraction – not by investments in cleaner technologies or operational innovation.
“From an investor perspective, the key takeaway is that biodiversity regulation can directly affect cash flows and firm value,” says Professor Ng. “Companies respond to heightened biodiversity-related oversight largely by scaling back activity, which can translate into lower profitability and weaker valuations.”
The research shows that operational disruptions at individual facilities can propagate to firm-wide financial effects. Firms with greater exposure to newly protected areas experience declines in profitability and market value, reflecting increased compliance burdens, regulatory scrutiny and operational constraints.
“Biodiversity exposure is a geographically specific, regulatory risk that markets are only beginning to recognize,” adds Ng. “Our findings suggest investors should pay close attention to where firms operate, not just what they produce, when assessing long-term financial risk.”
To help quantify this exposure, the study introduces a geospatial, location-based measure of Corporate Biodiversity Exposure, which captures how close firms’ operating sites are to newly protected ecosystems. The framework aligns with emerging efforts in nature-related financial risk assessment and disclosure, including the growing use of spatial data in investment analysis.
Overall, the findings highlight biodiversity conservation as a distinct category of financial risk – spatially targeted and regulatory in nature – rather than a climate-related shock. As conservation policies expand globally, the research underscores the importance of incorporating biodiversity-related regulatory exposure into portfolio construction, valuation models and capital allocation decisions.
