Biodiversity loss as a global concern requires drastic shifts in conservation efforts that carry substantial costs. We investigate how the financial market prices such conservation costs, exploiting the “Green Shield Action” (GSA) — an unexpected regulatory change aimed at preserving biodiversity in national nature reserves in China — as an exogenous shock to local public financing. We document that GSA, while improving biodiversity, augments the yields of municipal corporate bonds by around 24 basis points. The effects are more pronounced for bonds with shorter maturities and for local governments in weak fiscal positions. The increased cost of public capital can be largely attributed to transition pressure resulting from preexisting economic activities within reserves and the growth in local public spending on biodiversity following the reform. Investors show little consideration beyond financial payoffs towards endeavors counteracting biodiversity loss. Our findings also point to the role of investor education and policy interventions in closing the financing gap for biodiversity conservation.