The Biodiversity Impact of Corporate Divestitures

Amid growing regulatory scrutiny and stakeholder expectations, firms are increasingly expanding their environmental focus beyond greenhouse gas (GHG) emissions to include biodiversity impacts. While divesting GHG-intensive assets has become a common corporate strategy to reduce emissions, the broader ecological implications of such divestitures remain poorly understood. Because GHG emissions represent only a portion of a firm’s overall corporate biodiversity footprint (CBF), it is crucial to assess whether divesting carbon-intensive operations generates unintended spillovers—either positive or negative—on other dimensions of environmental performance. Addressing this issue may therefore help improve corporate strategy and policymaking for biodiversity conservation, since the degradation of ecosystems not only threatens wildlife but also undermines essential services that support human well-being, including food security, clean water, and disease regulation.

This study presents the first international, large-sample analysis of how GHG-intensive asset divestitures affect firms’ CBF. We find that such divestitures are associated with a reduction not only in GHG-related impacts but also in non-GHG biodiversity pressures, including land use, water pollution, and air pollution. When focusing on a subsample of firms with sufficient data on both the divesting and acquiring entities, we observe a net decrease in non-GHG CBF intensity, likely driven by operational and technological improvements among buyers. However, we do not detect a corresponding net reduction in GHG-related CBF, suggesting that emissions are largely being relocated rather than eliminated.

Cross-sectional analyses reveal that the positive spillovers on non-GHG CBF are stronger among firms with high-quality biodiversity disclosures, those operating in countries with mandatory sustainability reporting requirements and strong informal enforcement, and those with robust external biodiversity monitoring. In contrast, these benefits are muted among financially constrained firms that prioritize short-term liquidity and survival over long-term ecological objectives.

Overall, the findings highlight the need for policymakers, regulators, and investors to adopt a systemic, multi-dimensional approach to decarbonization, ensuring that corporate divestitures deliver genuine and enduring environmental benefits.