A bird's-eye view: firm costs and the limits of habitat protection

The current draft is available on request — please email me.

The U.S. Endangered Species Act protects threatened species by designating critical habitat: mapped areas whose protections reach private firms through federal permits and project approvals, including for activities outside the boundary that may affect the habitat within it. This paper asks how far the ecological effects of industrial facilities extend, and what habitat protection costs the firms that operate nearby.

To measure ecological reach, I combine facility locations from the EPA’s Toxics Release Inventory with millions of citizen-science bird observations from eBird and construction dates inferred from satellite imagery. Difference-in-differences estimates show that within 18 km of a new facility, bird abundance falls by 6–9% and species richness by 3–5%. The declines begin at construction and persist.

The costs of protection are far more local. When critical habitat is designated within 3 km of a firm’s facility, its cost of goods sold rises by 1.53 percentage points of sales, about $31 million a year for the median firm, and its operating margin falls by 1.81 points. Protected-area designations that carry no new obligations have no such effect. Costs rise most for firms with more of their pollution near the habitat, especially highly leveraged ones, and designation brings more enforcement and a shift toward less toxic chemicals.

This spatial mismatch limits what protection achieves: bird populations near designated habitat recover only partially. Voluntary ESG reports, 10-K filings, and biodiversity footprint scores largely fail to identify the exposed firms, which limits the scope for investors to complement regulation.

An earlier version of this work circulated as “Firm operations, biodiversity loss, and corporate disclosure”, which received the Best PhD Paper Award at the Global Research Alliance for Sustainable Finance and Investment (GRASFI) 2025.