Biodiversity, financial markets, and systemic risk: A synthesizing review

Biodiversity loss is now commonly recognized as a distinct source of financial risk, with transmission, measurement, and pricing properties that overlap with but are neither reducible nor identical to those of climate change Recent academic and policy work highlights that biodiversity shocks can undermine firm value, credit quality and access, and sovereign stability, while also contributing to systemic financial stress. However the field as yet remains at an early stage compared to the developed literature on climate finance. In this review, we aim to synthesize the emergent literature with particular emphasis on financial market evidence and systemic-risk channels. This review (i) briefly summarizes the biodiversity crisis as an ecological and economic phenomenon; (ii) introduces a working taxonomy of biodiversity-related financial risks; (iii) reviews corporate-level measures and their methodological strengths and weaknesses; (iv) overviews how biodiversity risk is priced, with particular attention to volatility, liquidity, and cross asset contagion; and (v) considers governance, disclosure, and supervisory initiatives. The paper concludes with a forward-looking research agenda.