Location: Global

Lead Partner: NINA

Involved stakeholders:

• Partnership for Biodiversity Accounting Financials (PBAF)/CREM
• UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC)
• Taskforce on Nature-related Financial Disclosures (TNFD)
• Kommunal Landspensjonskasse (KLP)
• Capitals Coalition
• Eika Gruppen AS

Investors play a crucial role in fostering sustainable development through Environmental, Social, and Governance (ESG) investment strategies. However, psychological factors, particularly cognitive biases, may influence decision-making and limit capital allocation toward biodiversity-positive investments. Our study systematically examines the existing literature on cognitive biases in ESG investing, with a primary focus on biodiversity considerations, aiming to identify psychological barriers that may hinder investors from committing to financial products and services designed to protect and restore nature.

As part of the PLANET4B project, funded by the EU Horizon programme, we employed a structured review methodology using the PICO (Population, Intervention, Comparison, Outcome) framework and Boolean search terms. Our systematic search yielded 4,066 academic papers, which were screened using Rayyan software. Following a rigorous selection process, we identified around 40 articles that were contextually relevant or had the potential to address our research question on cognitive biases in biodiversity-related ESG investments.
In addition to the literature review, we conducted document analysis and semi-structured interviews with our Stakeholder Board, which were instrumental in directing the research focus. The Stakeholder Board provided us with many helpful documents that we were able to study in detail, enriching the depth of our analysis.

Our review results highlight the scarcity of direct research on biodiversity-specific biases, emphasising the need for further interdisciplinary studies at the intersection of behavioural finance, psychology, and conservation science. By synthesising existing knowledge, this study provides valuable insights for policymakers, financial institutions, and conservation practitioners to design interventions that mitigate cognitive biases and enhance investment flows into biodiversity-positive financial products. Addressing these biases is essential for aligning private capital with global biodiversity targets and ensuring a more sustainable and resilient financial system.

EXPECTED IMPACTS

Institutional level

• At the institutional level, addressing cognitive biases in ESG investing can improve the accuracy and depth of investment decisions, leading to more capital being directed toward biodiversity-positive projects.
• Financial institutions may develop more targeted strategies for integrating biodiversity considerations into their portfolios, ensuring alignment with sustainability goals and global biodiversity targets.
• Reducing biases can help institutional investors manage risk more effectively, recognizing the long-term value of protecting and restoring natural ecosystems for future returns.
• Institutions will likely strengthen their ESG frameworks, enhancing transparency and accountability, and meeting growing regulatory and stakeholder demands for biodiversity-positive investment practices.
• By investing in biodiversity restoration, institutions can position themselves as leaders in the green economy, attracting both public support and private capital, thereby boosting their reputation and competitiveness.

Individual level

• On an individual level, recognising and mitigating cognitive biases will allow investors to make more rational, informed decisions, resulting in greater personal commitment to biodiversity-positive investments.
• By understanding how biases like loss aversion and short-termism influence their choices, individuals can better align their investment portfolios with their environmental values.
• As more individuals invest in biodiversity-focused financial products, a collective shift in investment behavior will drive broader market change, prioritising environmental sustainability.
• Overcoming biases may increase individuals’ confidence in long-term sustainable investments, leading to more consistent participation in green financial markets.
• Investors who are aware of these biases may also influence peers, creating a ripple effect that encourages more widespread adoption of biodiversity-positive investment strategies.

Biodiversity

• Increased investment in biodiversity-related projects can lead to tangible improvements in conservation efforts, such as habitat restoration and the protection of endangered species.
• Financial flows into nature-positive initiatives will directly contribute to the restoration of critical ecosystems, enhancing biodiversity and supporting natural resilience against climate change.
• As investments align with global biodiversity targets, ecosystem services such as clean water, air, and carbon sequestration will be preserved, benefiting both people and nature.
• The scaling of biodiversity-focused investments will foster the development of innovative financial products designed specifically to address environmental degradation and biodiversity loss.
• Ultimately, a well-funded conservation landscape, driven by both institutional and individual investments, will help reverse the biodiversity crisis, contributing to a more sustainable and balanced global ecosystem.

Working approach

• Literature review
• Document analysis
• Semi-structured interviews with stakeholder board