Mitigating Corporate Biodiversity Risk through Green Finance: The Role of Green Development and Climate Risk in the USA
DOI:
https://doi.org/10.47654/v30y2026i2p258-301Keywords:
GFTP, Sustainable Finance, Climate Risk, Corporate Green Development, Biodiversity Risk, U.S. listed corporationsAbstract
Purpose - This study examines whether green finance mitigates corporate biodiversity risk in the United States, focusing on the decision-making mechanisms underlying this relationship. It specifically evaluates the mediating role of corporate green development and the moderating effect of climate risk in shaping firms’ responses to sustainability-oriented financial incentives.
Design/methodology/approach - Using a balanced panel of U.S. publicly listed firms from 2003 to 2025, corporate biodiversity risk is measured through BERT-based textual analysis of 10-K disclosures aligned with the Taskforce on Nature-related Financial Disclosures (TNFD) framework. Green finance is captured using a state-level Green Finance Development Index constructed via the Entropy Weight Method. The empirical strategy employs firm and year fixed effects, Propensity Score Matching (PSM), and a Difference-in-Differences (DID) approach to address endogeneity. Mediation analysis is applied to examine corporate green development as a transmission mechanism, while moderation analysis is used to assess whether climate risk strengthens the effect of green finance on corporate green development.
Findings - The results show that green finance significantly reduces corporate biodiversity risk (p < 0.01). Corporate green development, proxied by Green Total Factor Productivity (GTFP), serves as a significant mediating channel, indicating that financial incentives promote environmentally efficient practices. Climate risk strengthens this relationship, suggesting that firms in high-risk environments respond more strongly to green finance signals. The findings are robust across multiple specifications.
Originality/Value - This study is among the first to integrate green finance, climate risk, and biodiversity exposure within a unified decision-making framework at the firm level. Employing TNFD-aligned textual analysis and a mediation–moderation structure provides rare empirical evidence on how financial systems influence corporate responses to nature-related risks in a developed economy. The study contributes to Advances in Decision Sciences by offering evidence-based insights into how sustainability-oriented financial incentives shape corporate risk management, resource allocation, and strategic adaptation under environmental uncertainty, thereby enhancing decision-making in complex and evolving risk.
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