Over half of global GDP – around $44 trillion – is moderately or highly dependent on nature and its services, making natural capital a foundational pillar of the global economy. But in many areas, nature, and the value we derive from it, is under threat.
We use natural capital either in its own right or by combining it with other forms of man-made capital to deliver ecosystem services, such as energy, medicines and food. It's no secret that we have used up many non-renewable resources already.
The ultimate resource, when it comes to natural capital, is that which we classify as renewable. This type of resource can be continuously renewed – but only if we use it sustainably. Treat these assets well and they are our most valuable. Unfortunately, they are more often overexploited.
Among the damaging repercussions of unsustainable consumption of natural resources are climate change and biodiversity loss, which represent huge risks to human civilization, including economies and markets.
Recognising this, an increasing number of companies and countries are pledging to do their bit to address the problem, such as by reducing their own consumption of natural resources, and by cutting greenhouse-gas emissions. But decarbonisation of economies is a challenging process.
This fact, along with growing awareness of the wide-ranging risks associated with nature loss, has fostered increasing interest in nature-based solutions: efforts to protect and restore natural capital through activities such as afforestation or wetland restoration. Such projects can improve nature's ability to perform carbon sequestration, the process whereby ecosystems trap carbon from the atmosphere.
New opportunities are emerging for companies to contribute to the renewal of nature and thereby offset their emissions. For example, the growth of voluntary carbon markets enables investors to purchase carbon removal credits, which certify the removal and sequestration of CO₂, via nature-based schemes such as forestry projects, or engineered removals. Such credits can contribute to net-zero targets.
But it is also possible to invest directly in in nature-based solutions, such as forests, peatland or mangroves, in order to access the carbon credits they generate and gain more control over the outcomes of the project. Well-managed nature-based solutions can rehabilitate habitats for wildlife, enhance soil and water quality, and even mitigate flood risk.
The credits can be sold on to other investors or retired to offset emissions from elsewhere in an institution's portfolio. They can act as a useful hedge against rising carbon prices in the future.
Investments to help safeguard and replenish natural capital can therefore yield important sustainability benefits and the prospect of financial returns.
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