Neuss, C., Horn, M., Oehler, A., 2026, Do Investors Care About Biodiversity Greenwashing?; European Financial Management Association EFMA, 2026 Annual Meeting, June 24-27, University of Agder, Kristiansand, Norway; 4th Conference on Sustainable Banking and Finance, July 1-2, Naples; International Conference on Operations Research 2026, September 1-4, Passau; 3rd European Sustainability Accounting & Reporting Conference (ESARC), September 10-11, Bamberg; Research in Behavioral Finance Conference (RBFC), September 18-19, Amsterdam.

Abstract
We investigate the relation between firms’ biodiversity-related disclosures and stock returns and idiosyncratic risk. We use 10‑K filings of US listed firms from 2018 to 2024 and text-based measures of biodiversity greenwashing risk. The evaluation is conducted through a customized large language model, with rule-based instructions for assessing the biodiversity disclosures. When considering biodiversity footprints provided by Iceberg Data Lab, we find that companies with high biodiversity impact show lower returns when their disclosure is subject to biodiversity greenwashing risk. We find a similar pattern for the idiosyncratic stock risk. The latter increases when firms with high biodiversity footprint provide disclosure with high biodiversity greenwashing risk. Notably, these results are based on biodiversity footprints adjusted by capital expenditure. The results do not hold when the biodiversity footprint is adjusted by sales. Our interpretation is that investors consider biodiversity risk as a future long-term risk related to long-term investments and not to recent sales. The findings highlight the importance of biodiversity disclosure practices for financial markets, emphasizing the need for standardized reporting frameworks and highlighting potential greenwashing risk faced by investors.

Keywords

Biodiversity disclosure, Greenwashing, ChatGPT, Idiosyncratic volatility

JEL Classifications

G11, G12, Q56, D80