Biodiversity conservation incurs substantial economic costs. We investigate how financial markets price the risks such costs induce, exploiting the “Green Shield Action,” a major regulatory initiative launched in China in 2017 to enforce biodiversity preservation rules in national nature reserves. While improving biodiversity, the initiative led to significant increases in bond yields for municipalities with these reserves. The effects are driven by increases in local governments’ fiscal risk due to expected increases in transition costs resulting from shutting down illegal economic activities within reserves and additional public spending on biodiversity. Investors show little non-financial consideration towards endeavors counteracting biodiversity loss.