Biodiversity risk exposure and corporate credit ratings

In this study, we examine the impact of biodiversity risk exposure on corporate credit ratings using a sample of Chinese listed companies from 2010 to 2023. We employ a biodiversity risk exposure index using machine learning-enhanced seed word expansion and risk term co-occurrence analysis. A significant negative association is found between biodiversity risk exposure and corporate credit ratings, channelled through operational risks and financial constraints. Heterogeneity analysis further indicates that high internal control quality, stable bank-enterprise relationships, and high environmental disclosure quality mitigate these effects, emphasizing the role of the risk resistance capability of firms. Overall, we find that credit rating agencies consider biodiversity risks when assessing corporate creditworthiness.