Berkeley — A team of researchers who developed tools for investors, academics, and businesses to measure economic risks from the loss of the planet’s biodiversity has won the inaugural Berkeley Haas Sustainable Business Research Prize.

The new $20,000 prize, which recognizes research with the greatest potential to spur immediate change in the face of environmental crises, has been awarded to the paper “Biodiversity Risk” by Stefano Giglio of the Yale School of Management, and Theresa Kuchler, Johannes Stroebel, and Xuran Zeng of New York University’s Stern School of Business. (Read paper summary.)

Giglio says he and his co-authors are honored to receive the inaugural prize and hope it will encourage further research and practical change.

“While research in the field of climate finance has been expanding dramatically over the last few years, a lot more work needs to occur to ensure that the ideas developed in academic research find practical applications in the business and policymaking world,” Giglio says. “This is even more important for topics like biodiversity risks and its financial implications, where much less work has been done so far.”

Actionable research

The prize is administered by the Berkeley Haas Center for Responsible Business (CRB) and was launched with the support of Allan Spivack, MBA 79, to encourage serious scholarship with real-world business applications related to responsible business, sustainability, and ESG (environmental, social, and governance) issues.

The judging panel’s focus for the prize’s inaugural year was on papers that investigate economic levers to motivate individuals, corporations, and markets to act with urgency on climate and resource-saving initiatives. The winner was selected from a competitive field of 63 papers submitted by academic researchers around the world.

Berkeley Haas Dean Ann Harrison, a noted economist, served on the judging panel. “Thank you to our winning researchers for calling attention to the emerging area of biodiversity risk. All too often, groundbreaking academic research fails to gain traction or get put into practice in the ‘real world,’” Harrison said of the prize winners. “Rewarding research with direct implications for business and policy is another way that Berkeley Haas can help stem the multiple environmental crises we are facing.”

Defining biodiversity risk

The winning paper noted that humans rely on biodiversity to thrive. For example, diverse ecosystems are key to food production, while medicines are derived from natural compounds found in plants, animals, and microorganisms. Yet damages caused by the loss of ecosystem services alone—such as the supply of raw materials like food and fuel—have been estimated as high as $20 trillion per year, according to the paper.

Using surveys, news coverage, and analysis of 10-K statements, the researchers developed multiple measures of biodiversity risk. They determined that it is  a separate phenomenon from climate risk and concluded that the energy, utilities, and real estate sectors are most exposed. They also concluded that biodiversity risks are partially reflected in stock prices over the past decade.

The researchers recommend that businesses regularly monitor and report how their activities affect the biodiversity of the areas where they operate, both directly and indirectly. It is also important that these data are aligned with emerging standards and regulations.

The paper has immediate applications: Investors can now use the scholars’ findings to better understand how biodiversity risk affects current and future business performance and take better-informed positions on industries and specific equities. At the same time, researchers can use the new measures to delve more deeply into impacts in economics, business, and human welfare, the co-authors say.

Three finalists

In addition to the winning paper, the judging panel—comprising sustainability researchers and practitioners affiliated with Haas—chose three finalists:

• “Cost-Efficient Pathways to Decarbonizing Portland Cement Production,” by Gunther Glenk, Harvard University and University of Mannheim; Anton Kelnhofer, Technical University of Munich; Rebecca Meier, University of Mannheim; and Stefan Reichelstein, Stanford University and University of Mannheim.
  • The researchers developed an economic model for identifying cost-efficient pathways for decarbonization. Read full summary.
• “CRISK: Measuring the Climate Risk Exposure,” by Hyeyoon Jung, Federal Reserve Bank of New York; Robert Engle, NYU Stern School of Business; and Richard Berner, New York University’s Stern School of Business.
  • Figuring out how much risk financial institutions face from climate change poses challenges. To address these challenges, the authors suggest using market-based metrics. Read full summary.
• ​​Corporate decarbonization initiatives matter less than state climate policies,” by Benjamin Leffel, UNLV School of Public Policy and Leadership; Thomas Lyon, University of Michigan’s Ross School of Business; and Joshua Newell, University of Michigan’s School for Environment and Sustainability.
  • Corporate America needs to decarbonize due to its massive contribution to climate change, but how? This paper seeks to understand the most effective way of closing the emissions gap by exploring if corporations can be left alone to govern themselves or if subnational (city and state) government policies should contribute to this fight. Read full summary. 

The prize is part of Dean Harrison’s three strategic priorities for the Haas School: sustainability, entrepreneurship, and diversity, equity, inclusion, justice, and belonging (DEIJB). As the top public business school, Berkeley Haas is committed to addressing sustainability challenges by preparing its students to lead the transition to a sustainable and inclusive economy through designing and implementing new business models, policies, and solutions.

Read the Yale SOM announcement.