We investigate how investors assess transition risks arising from the regulatory mandates for nature conservation. We focus on the UN Biodiversity Conference in Kunming, China, a policy shock signaling heightened political commitment to biodiversity protection. During the conference, firms exhibited negative abnormal stock returns on average. Using a machine learning approach, we identify historical nature-related subsidies to capture firm-level variations in expectations of mandated conservation engagement, beyond measuring corporate environmental (ecological) impacts. This metric negatively correlates with returns during the conference, particularly for firms with high operational volatility, and those in regions with limited fiscal flexibility and stringent conservation pressures. Investor concerns primarily stem from policy uncertainty, with non-profit expectations from conservation. Our findings underscore the role of regulatory discretion in shaping nature transition risks.
