This study investigates whether biodiversity loss is internalized through market pricing or government intervention. Empirical results reveal that emissions from toxic facilities increase lead concentrations and decrease animal populations within a 12-kilometer radius. The US equity market ignores this biodiversity loss, as firms emitting pollutants near biodiverse regions attract no additional risk premium and face economically small penalties from regulatory action. A moral hazard issue likely drives these observations: firms located near ecologically sensitive areas underreport their environmental impacts both in financial disclosures and to regulatory oversight bodies.
