Understanding natural capital

Natural capital refers to the world’s stock of natural resources, including soil, air, water, and biodiversity, which provide essential ecosystem services for human and economic activity. This report highlights that over half of global GDP depends on nature, yet natural capital is underpriced and undervalued. Since 1992, natural capital per capita has declined by 40%, while produced capital has doubled. This imbalance creates incentives for the depletion of nature. A key challenge is to reverse this decline and develop mechanisms to account for nature in economic decision-making.

Unlocking finance for natural capital

Innovations in technology, financing instruments, business models, and new investors are helping unlock finance for natural capital. Emerging technologies like the Internet of Things (IoT), artificial intelligence (AI), and environmental DNA (eDNA) are revolutionising nature monitoring. Satellite imagery and drones now allow for real-time ecological monitoring, improving data accuracy for investors, while AI analyses complex environmental data to predict changes and optimise conservation strategies. Blockchain enhances transparency, especially in supply chains, ensuring sustainable resource management. These technological advances not only create new investment opportunities but also improve the monitoring, reporting, and verification (MRV) of ecological projects.

New financial instruments, such as biodiversity credits and nature asset companies (NACs), are providing innovative ways to support ecosystem services beyond traded goods. These instruments help monetise natural resources, addressing the current financing gap. The World Economic Forum estimates that natural capital investments could generate $10 trillion annually and create 400 million jobs. However, the nature-financing gap remains substantial, with a shortfall of $711 billion annually until 2030. Addressing this gap requires blended finance and innovative vehicles to scale up capital allocation to nature-positive projects.

Nature-positive business models are expanding in areas such as regenerative agriculture, ecotourism, and mine rehabilitation. The Forum has identified more than 60 business models that could contribute $10.1 trillion in economic value by 2030. These models align financial returns with ecological impact, creating income streams for local communities. However, scaling these models faces challenges such as limited access to finance, market barriers, and weak regulatory enforcement. Collaboration between governments, investors, and civil society is essential to create enabling environments for these businesses to grow.

The combination of these innovations is attracting a broader spectrum of investors, including traditional asset managers, venture capitalists, impact investors, and private equity firms. Nature-focused investment funds, such as Mirova Natural Capital and HSBC’s Pollination/Climate Asset Management joint venture, are examples of growing investor interest in the space. However, there remains a need for more patient capital, as nature-based projects often require longer time horizons to deliver returns. Ultimately, these innovations are helping to shift finance from extractive to regenerative approaches, providing new opportunities for long-term, sustainable investments in natural capital.

Spotlighting innovations in natural capital

Case studies presented in the report demonstrate practical applications of these innovations. For example, companies like Pivotal are aggregating biodiversity data for investors, enabling better decision-making. ARC Marine is developing reef cubes® made from recycled materials to support marine biodiversity around offshore wind farms, creating a potential market for carbon and biodiversity credits. These innovations illustrate how technology, finance, and business models can align to create positive outcomes for nature while delivering financial returns.

Conclusion

Investing in natural capital is both essential and feasible. Technological advances, innovative financing, and new business models are paving the way for scalable, impactful investments. However, to meet the global targets for nature restoration and biodiversity protection, significant collaboration between public and private sectors is required. Multistakeholder approaches will be critical to ensuring that natural capital is integrated into financial systems, unlocking the potential for long-term economic and environmental sustainability.