Ecosystem services are essential for life on Earth and ensuring their continued provision requires the protection and restoration of biodiversity. But the scale of financing needed to protect biodiversity far exceeds the capacity of the public sector making it necessary to attract private capital. Biodiversity-linked bonds, derived from ESG sustainability-linked bonds, could help channel the required capital to biodiversity conservation as their flexible payoff structures can accommodate the preferences of both issuers and investors. This paper proposes an option-pricing based valuation framework that addresses two key characteristics of biodiversity-linked bonds: first, the optionality embedded in the bond’s payoff structure, and second, the constraints on the family of stochastic processes suitable for modeling complex biodiversity dynamics. A standardized pricing framework could support scaling up biodiversity markets and help to narrow the existing funding gap.