Conference Programme

Biodiversity loss is increasingly recognized as a material financial risk, yet little is known about how investors integrate spatial ecological exposure with firm-level financial information. We study whether corporate biodiversity exposure (CBE), measured by the proximity of a firm’s polluting facilities to protected or conservation-priority areas, affects investors’ responses to earnings announcements. We argue that biodiversity exposure makes it more costly for investors to assess how earnings news maps into future cash flows and firm value, thereby weakening the incorporation of earnings information into prices at the time of disclosure. Consistent with this argument, firms with higher CBE exhibit significantly weaker earnings responsiveness, indicating that earnings surprises receive less valuation weight when they are announced. This attenuation is accompanied by lower trading activity and reduced liquidity around earnings announcements. Using a stacked difference-in-differences design based on protected-area expansions, we show that earnings–return sensitivity declines when firms become newly exposed to biodiversity-sensitive areas. We also find no evidence that the lower ERC reflects anticipatory pricing or delayed adjustment. We further show that CBE is related to valuation-relevant fundamentals, including weaker future growth and a higher ex ante cost of equity. However, these fundamentals do not explain the attenuation in earnings responsiveness, which also remains robust to controls for earnings quality, general ESG orientation, and broader climate risks. The effect varies predictably with ecological and institutional transparency, disclosure, and external monitoring, supporting an information-processing interpretation. Overall, our findings identify biodiversity exposure as a spatial, firm-level source of valuation uncertainty and show that ecological complexity shapes how earnings news is incorporated into asset prices.