No. 130: Biodiversity Disclosures

Abstract

Biodiversity risks have only recently been widely recognized as financial risks. This recognition came after many firms had already gained experience with sustainability reporting. Using a combination of manual coding and textual analysis, I examine how these two factors shape the dynamics of biodiversity disclosures among European public firms between 2020 and 2024, and compare them with climate disclosures. The results reveal a sharp increase in biodiversity disclosures, with 68% more firms recognizing biodiversity risks as material, and disclosure content more than doubling in just a few years. The drivers of these dynamics are diverse and include established risk reporting capabilities, synergies with climate reporting, and pressures from non-investor stakeholders. Direct investor influence, however, remains limited. Despite this growth, biodiversity disclosure levels remain lower than climate disclosures, particularly with respect to quantitative information. This level difference can be attributed to a combination of three factors: the earlier stage of development of biodiversity disclosures, the perceived lower financial materiality of biodiversity risks, and the difficulty of measuring them. Nonetheless, this study underscores how the widespread recognition of risks, combined with risk reporting synergies, can accelerate disclosure practices.