Natural capital: the next big thing in financial services
Australia’s natural capital market is developing – fast. From supply to demand and all the enablers in between, we are on our way to building a viable market for investments that produce positive outcomes for nature as well as financial returns.
But what is natural capital, and can it really protect and restore our natural world? Here’s an introduction:
What is natural capital?
Natural capital is thinking about natural assets such as biodiversity, geology, soil, air and water in the same way as we think about other forms of capital such as labour or property – in financial terms.
By putting a dollar value on nature like we do other forms of capital, we give government and business a way to compare apples with apples when making decisions that will impact nature.
How natural capital helps nature
Accounting for nature can benefit the natural world by:
- Saving it from being an afterthought to other forms of capital that we already know how to account for.
- Giving the owner of the natural asset a financial incentive to focus on its restoration and growth, and others a way to fund that work through investments or offsets.
- Giving corporations, asset managers and super funds a credible way to assess and report on their financial risks as they relate to nature.
That last point is important for the financial services industry, particularly as firms work to determine their fiduciary duties and other obligations under policy changes such as the Taskforce on Nature-related Financial Disclosures.
Natural capital influencers in Australia
Big names are already getting on board. Among them are Westpac, Commonwealth Bank, BlackRock, UniSuper, NAB, Wollemi Capital, Bendigo and Adelaide Bank, HSBC, AXA IM ALTS - Real Assets, Nuveen Green Capital, Woolworths Supermarkets, Coles Group and many others.
Among the key influencers are Accounting for Nature, National Farmers Federation, ClimateWorks, Australian Sustainable Financial Institute, World Economic Forum, Australian Farm Institute and the Carbon Market Institute.
Federal and state governments are also making progress at introducing programs, funding and datasets to support the market, at varying speeds.
What will happen next?
As more investors, fund managers and super funds recognise the value in natural capital for their portfolios, shareholders and members, demand for natural assets to invest in will increase.
This will be supported by work done by environmental groups, governments and technology providers as enablers, to ensure the market is credible and has what it needs to be viable.
BlueChip is advising clients on natural capital as the market gains momentum. If you’d like to discuss how we can help you on your natural capital journey through research, stakeholder engagement, issues management or profile building, please contact us.
Get in touch here!