Time:2023/04/07 (Fri.), 13:30 -15:00 (Beijing Time)

Title:   Biodiversity Finance: Does Corporate ESG Correctly Measure Firms’ Impact on the Ecosystem?

Venue:  Zhonghui Building 106

About the speaker:

Yuanning Liang is an Assistant Professor in the School of Economics at Peking University. Her areas of specialization are environmental, transportation, urban economics, and biodiversity. Her research focuses on advancing understanding of the impacts of regulatory enforcement and compliance in both domestic and international settings. She also uses large datasets from ecological studies to document the impact of economic activities on ecosystem health. She received her PhD from the Dyson School of Applied Economics and Management at Cornell University. 

Abstract:

Biodiversity conservation posts great challenge on financial institutions on framing and evaluating the risk related to biodiversity loss. Despite the popularity of existing commercial vendors of ESG (Environmental, Social and Governance) ratings, little is known on the accuracy of ESG in capturing firms’ impact on local environment. This paper compares the firms’ biodiversity score in the environment pillar of ESG with actual biodiversity status measured by bird abundance in the vicinity of those firms using citizen science data in the United States. We find that ESG ratings perform well in capturing the relative ranking of firms among all firms evaluated in the same year, in terms of their actual impact on biodiversity. However, there is a constant rating inflation since the inception of ESG, which leads to incorrect implication that local biodiversity in the firms’ area of operation have been improving over the years, while actual biodiversity has declined. Our results indicate that much is to be improved upon current ESG ratings as they increasingly influence business decisions.