Executive summary

Nature is foundational to global economies, providing essential services like clean air, water, and biodiversity. However, its contributions remain largely invisible in capital markets. Degradation of natural assets is creating systemic economic risks while offering significant opportunities for growth.

The business case for nature is threefold:

• Resource constraints: Companies face increasing limitations on natural assets.
• Consumer demand: Preferences are shifting toward nature-friendly products.
• Emerging opportunities: New industries, such as nature-based solutions and nature markets, are emerging.

Globally, investors remain polarised:

• 49% focus on opportunities.
• 46% focus on risks.
• Only 18% address both, highlighting the early stages of engagement.

What is nature to investors, and what should it be?

Nature underpins economic value, with US$44 trillion of GDP dependent on it. Historically under-valued and largely free, natural assets—like land, water, and biodiversity—are under severe pressure due to human activity.

Key insights include:

• Nature groups: Natural assets can be grouped into atmosphere, freshwater, land, flora/fauna, and oceans.
• Growing visibility: Tools like TNFD and ISSB frameworks are increasing scrutiny of businesses’ nature impacts and dependencies.
• Valuation challenge: A lack of standardised natural capital valuation remains a significant barrier to scaling investments.

Existing climate tools, such as the LEAP framework, can guide investors in understanding and managing nature risks.

How are investors engaging with nature today?

A survey of 557 investors across six countries reveals key trends:

Focus areas:

• 49% prioritise opportunities, particularly nature-based solutions (50%) and nature markets (49%).
• Australian investors lead with 61% exposure to nature-based solutions.

Regional differences:

• Singapore: Highest engagement; 61% embed nature into governance frameworks.
• Japan: Focuses on impact outcomes (70%), while Singapore emphasises returns (71%).
• US: Surprisingly active; 45% integrate nature into risk frameworks.
• France: Identifies fewer risks across sectors, indicating potential under-assessment.

Sector risks:

• Sectors like Property & Construction, Energy & Mining, and Food & Agriculture are most exposed.
• Regional variations exist: 44% of UK investors see risks in Property, while only 11% of French investors agree.

Nature as an asset class:

• 58% believe natural capital will evolve into a distinct asset class.
• Larger investors (AUM US$500bn+) are most inclined toward this view, while French investors prefer classifying only subsets of nature investments.

What should investors do next?

Investors are advised to take a structured, phased approach to integrate nature into their strategies:

• Start where materiality is highest:
  • Prioritise high-risk sectors (e.g., Food & Agriculture, Forestry, and Regenerative Agriculture) and tangible exposures.
• Tailor by asset class:
  • Use bottom-up, site-specific approaches in private markets.
  • Begin with top-down assessments in public markets, while building granular data capabilities.
• Engage with investees:
  • Push for stronger transition plans, improved disclosures, and rigorous project integrity to avoid greenwashing.
• Build capabilities:
  • Develop data infrastructure to track location-based risks and supply chain impacts.
  • Focus on skills development to handle nature-related complexities.
• Balance returns and outcomes:
  • Investors should combine short-term financial goals with long-term improvements in natural asset conditions.
• Adopt transition plans:
  • Pivot portfolios away from high-risk sectors while increasing exposure to nature-enabling solutions.

Final thoughts

Nature integration is a medium-term journey, requiring incremental steps to build awareness and competence. Investors should start with material exposures, leveraging existing tools and frameworks, such as TNFD.

While systemic nature-positive outcomes are the long-term goal, investors can achieve immediate progress by reducing portfolio risks and investing in scalable solutions. This will enable capital markets to drive both financial returns and measurable improvements to natural assets.