University of Miami, USA

This paper quantifies the value of natural capital for weather disaster mitigation and the impact of protected areas on local economies. Specifically, I investigate how shocks to local natural capital affect municipal bond markets. Using 313 natural capital loss events and extreme weather events, I show that counties with protected areas face lower natural disaster damages and lower cost of debt. The additional damages from natural disasters are estimated at between $9 and $23 million. Moreover, the additional cost of debt related to the loss of natural capital can be as high as $620,000 for an average bond. Lastly, the results show one of the social costs related to the loss of natural capital: population migration. Overall, this paper provides evidence supporting nature conservation and highlights the important role of nature as a shield from natural disasters.

Biography

I am Claudio Rizzi and I am a fourth-year Ph.D. student in finance at the University of Miami, Miami Herbert Business School. My research focuses on the interdisciplinary connection between environmental sustainability, climate change, and finance. Specifically, I focus on the asset pricing implications of nature conservation and natural capital’s importance for local economies, as well as the relationship between nature and executives’ environmental preferences.