Stefano Giglio (Yale): Biodiversity Risk

Presenter: Stefano Giglio (Yale University)

Discussant: Caroline Flammer (Columbia University)

Zoom webinar link: https://stanford.zoom.us/j/97275324309?pwd=WWU5KzJ2WVl3MXFzcStjNkpUOVVP…

Webinar ID: 972 7532 4309 Passcode: 335166

Biodiversity Risk

Authors: Stefano Giglio, Theresa Kuchler, Johannes Stroebel and Xuran Zeng

Abstract: We explore the effects of physical and regulatory risks related to biodiversity loss on economic activity and asset values. We first develop a news-based measure of aggregate biodiversity risk and analyze how it varies over time. We also construct and publicly release several firm-level measures of exposure to biodiversity risk, based on textual analyses of firms’ 10-K statements, the holdings of biodiversity-related funds, and a large survey of finance professionals, regulators, and academics. Exposures to biodiversity risk vary substantially across industries in a way that is economically sensible and distinct from exposures to climate risk. We find evidence that biodiversity risks already affect equity prices: returns of portfolios that are sorted on our measures of biodiversity risk exposure covary positively with innovations in aggregate biodiversity risk. However, our survey indicates that market participants do not perceive the current pricing of biodiversity risks in equity markets to be adequate. We also construct several measures of biodiversity risk exposure across U.S. counties, but find little evidence that those exposures are priced in municipal bond markets.

Bio of speaker: Professor Giglio’s research interests span several topics, including asset pricing, macroeconomics, and real estate, with a particular focus on hedging macroeconomic risks using different financial instruments: crash risk, uncertainty risk, and climate risk. Before joining Yale, Professor Giglio was an Associate Professor of Finance at the University of Chicago Booth School of Business. He received his PhD from Harvard University. He has been awarded several prizes, including the AQR Insight Award, the Fama-DFA Prize for the Best Paper in the Journal of Financial Economics, and the UBS Global Asset Management Award for Research in Investments, and his work has been featured in several news outlets, including the Economist and the New York Times. He currently serves as an editor for the Review of Financial Studies.

Bio of discussant: Caroline Flammer is a Professor of International and Public Affairs and of Climate at Columbia University with joint appointments at the School of International and Public Affairs (SIPA) and the Climate School. She is also a Research Associate at the National Bureau of Economic Research (NBER) and a Research Member at the European Corporate Governance Institute (ECGI). Caroline is an expert in sustainable investing and the recipient of numerous prestigious awards. Her research examines whether and how sustainable finance and impact investing can help finance a more sustainable world. Moreover, her research examines how, and under which conditions, firms can incorporate environmental, social, and governance (ESG) considerations into their activities to enhance their competitiveness while strengthening—instead of undermining—the very system in which they operate and hereby play a critical role in addressing climate change, inequality, global health, and other grand challenges related to society and the natural environment. The Web of Science ranked her among the top-100 Highly Cited Researchers in the economics and business profession in terms of impact over the past 10 years. At Columbia, she serves as the Director of SIPA's new Sustainable Investing Research Initiative which aims to foster scholarship, education, and dialogue on the interplay and interdependencies between investment and major challenges such as climate change, biodiversity loss, poverty, and social inequalities. Among other roles, Caroline serves as the President of the Alliance for Research on Corporate Sustainability (ARCS), a global multi-disciplinary network of scholars fostering rigorous academic research on corporate sustainability, as the Chair of the Academic Advisory Committee of the United Nations-supported Principles for Responsible Investment (PRI), the largest network of responsible investors to date, and as a Council Member of the World Economic Forum (WEF)’s Global Future Council on the future of responsible investing. She is an Associate Editor for both Management Science and the Strategic Management Journal.