Guardians of the Globe? Institutional Investors’ Preferences for Biodiversity
Abstract
Using firms' exposure to areas of unprotected biodiversity importance and announcement of the 30-by-30 initiative, we employ a difference-indifferences design for corporate bonds. Mutual funds with high Sustainability Ratings decrease their holdings of bonds issued by nature-dependent firms with high biodiversity exposure. This decrease persists throughout Biden Administration's tenure and is not reversed following the 2024 Presidential Election. We also observe similar effects across different maturities. We interpret these results as institutional investors are not hedging against administration-specific or longer-term financial risk. Overall, our results support the existence of non-pecuniary preferences related to biodiversity.