Climate change will have a major negative impact on global biodiversity. Our review of integrated assessment models (IAMs) show that biodiversity damage costs are not included or incompletely captured. We provide improved damage cost estimates of species loss based on (i) a recent global biophysical assessment of impacts on species, (ii) transfer of economic values from a global Delphi contingent valuation study of households' willingness-to-pay, and (iii) benefit transfer techniques. The new damage cost estimates are implemented in FUND 3.9. The numerical simulations suggest that both the expected physical global species loss and the associated damage costs are higher than initially predicted. Hence, IAMs with incomplete assessment and valuation of species loss could greatly underestimate the social cost of carbon, and lead to underinvestment in greenhouse gas mitigation measures. Even if the knowledge is incomplete, IAMs should include nonmarket environmental damage costs scenarios to better inform climate policy designs.