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Andrew Karolyi Speaks at Tsinghua PBCSF Global Academic Leader Forum

Time: 2023-12-01 09:12 Print

On November 8th, 2023, Andrew Karolyi, Dean of the Cornell SC Johnson College of Business and Harold Bierman, Jr. Distinguished Professor of Management from Cornell University, participated in the Tsinghua PBCSF Global Academic Leader Forum. During the event, he delivered a thought-provoking speech titled "Biodiversity Finance: The Next Frontier?" The forum was organized by the PBC School of Finance, Tsinghua University (Tsinghua PBCSF).

Zhang Xiaoyan, Associate Dean of PBCSF and Professor of Finance, gave a welcome speech and hosted the lecture.

Karolyi commenced his speech by highlighting the results of a survey conducted by the World Economic Forum, which revealed biodiversity risk ranking as the third most significant global risk in the next decade. He emphasized the alarming decline in mammal, bird, fish, reptile, and amphibian populations by 60% over the past four decades, underscoring the importance of biodiversity to the world's economic stability, with over half of global GDP relying on a healthy natural environment. A 2020 report by the Paulson Institute, the Nature Conservancy, and Cornell's Atkinson Center revealed a significant investment gap in global biodiversity conservation, estimating that $124 to $143 billion was invested in 2019, far from the required $722 to $867 billion per year to halt biodiversity decline. Most funding currently originates from governments, prompting a need to mobilize private capital into biodiversity finance.

Karolyi discussed international efforts and policies aimed at addressing biodiversity risk, including environmental legislation in the UK, the Conservation Law of the State of Maryland, and the Nature-Related Risk & Opportunity Management and Disclosure Framework by the Taskforce for Nature-Related Financial Disclosures (TNFD). He lauded China's leadership in hosting the 15th Conference of the Parties to the Convention on Biological Diversity (COP 15) and the adoption of the "Kunming-Montreal Global Biodiversity Framework," a significant milestone in global biodiversity conservation. The financial industry's growing interest in biodiversity risk was also highlighted, with examples like Belize's blue bond and the emergence of blue bonds, rhino bonds, and carbon offset schemes, demonstrating finance's potential to contribute to biodiversity conservation.

Karolyi noted the absence of a research framework for biodiversity risk in top finance journals and emphasized the need for understanding how these risks are priced and how private capital can be directed towards biodiversity conservation. He suggested that insights from other fields, such as Martin Weitzman's diversity theory, provide a foundation for economic research on biodiversity, making biodiversity finance a promising frontier in financial academic research.

Karolyi concluded by presenting four open challenges in biodiversity finance: building a biodiversity trading database, measuring biodiversity risk, understanding its impact on corporate decisions, and assessing investor concern about biodiversity risk. He called for collaboration in addressing these challenges and encouraged researchers to contribute to this emerging field.

More than 120 faculty members, students, alumni, and individuals from various sectors attended the lecture. Engaging discussions and exchanges with Karolyi on biodiversity data collection, government policies, and industry incentives. Karolyi emphasized the nascent nature of biodiversity finance research and urged more researchers to join this evolving field to advance knowledge and contribute to biodiversity conservation.

The Tsinghua PBCSF Global Academic Leader Forum is a platform for public lectures focused on the financial industry. It invites renowned scholars, domestic and foreign regulatory agency senior executives, experienced finance professors, and accomplished economists to share their insights, foster academic exchanges, and create opportunities for students to interact with finance experts.