Climate Change Exposure and Firms' Biodiversity Impact Reduction Strategy

ABSTRACT

This paper investigates how climate change exposure shapes long‐run biodiversity disclosure strategies, for instance, by informing efforts to reduce biodiversity impacts and by contributing to the existing environment and strategy literature in various ways. First, this paper adds insight into horizon issues related to climate change and shows that biodiversity disclosure improves firm‐level efficiency. Using S&P 1500 firms from 2005 to 2023, the study's findings reveal that heightened climate risk exposure motivates firms to adopt a biodiversity impact reduction strategy as an adaptive organisational capability that supports the preservation of efficiency under climate‐related uncertainty. The study documents robust evidence that the adverse effect of climate change exposure on firm efficiency is mitigated by the application of a biodiversity impact‐reduction strategy and by corporate intention towards SDG 15 (Life on Land). Overall, the findings provide an alternative perspective on the climate risk management benefits of SDG 15, suggesting that a biodiversity impact‐reduction strategy can be considered a response to climate change exposure.