AKU: An African Journal of Contemporary Research

This study examines the strategic implications of natural capital risk for corporate decision-making, with emphasis on integrating biodiversity considerations into business strategy. As nature loss increasingly emerges as a material risk factor, firms face growing exposure to disruptions arising from ecosystem degradation. Drawing on the natural capital framework and risk management theory, the study investigates how ecosystem dependency and risk exposure influence financial performance, and how firms can respond through biodiversity-informed strategic choices. Using an unbalanced panel of 1,850 publicly listed firms across 32 countries and 18,214 firmyear observations (2005–2022), built from Bloomberg, Refinitiv, GRI, and Sustainalytics data with a fully documented cleaning and variable-construction protocol, the study applies fixed effects and system GMM estimators to address endogeneity and unobserved heterogeneity. Firms with high ecosystem dependency face significant financial risks when biodiversity loss intensifies, particularly absent proactive mitigation, while firms integrating biodiversity into strategy demonstrate greater resilience and improved outcomes over time. Nature-related risks are increasingly priced into market valuations, an effect concentrated among directly extractive sectors, with the discussion extending to developing economies where ecosystem dependence is high but disclosure capacity remains limited. The study contributes to the emerging natural capital literature by positioning biodiversity loss as a core strategic concern rather than a peripheral environmental issue, presenting full regression output, variable-construction protocols, and diagnostic tests to support transparency and replication.

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