Every major financial crash has its blind spot. In 2008, it was hidden leverage in mortgage securities. Today, it’s hidden leverage in ecosystems. For decades, financial markets have treated nature as an externality—a free, limitless resource with no line item on the balance sheet. But in 2025, that paradigm is collapsing. The intersection of climate change, biodiversity loss, economic instability, and ever-growing claims on nature, has forced investors to confront a stark reality: natural capital—the world’s stocks of water, soil, air, and living systems—is not just an environmental concern; it is a core economic asset.
And yet, nature is still missing from our balance sheets. Its “book value” remains zero, while its liabilities—degraded soils, polluted waterways, collapsing ecosystems—are kept off-balance-sheet. In a market where the gap between book value (what assets are worth on paper) and market value (what investors are willing to pay) is widening, investors have seen this pattern before. And they know the uncomfortable result: volatility, corrections, and sometimes crashes when reality catches up. The “mark-to-market” moment will be catastrophic. Markets are already hurtling toward what economists now call “Nature’s Minsky Moment”—a sudden, disorderly repricing of assets once ecosystems cross irreversible thresholds.
The good news
Investors are waking up to nature’s value—and they are poised to become the major driving force for its recognition. But to turn awareness into action, three critical questions remain unanswered:
- How to invest in nature—so it drives long-term asset value and alpha?
- What modern methodologies to apply—to build a nature-inclusive balance sheet?
- How to quickly adopt these new capabilities—and help build the foundations across the investment sector?
How to invest in nature: turning ecological performance into value
Investing in nature is not charity — it’s sound balance-sheet management. When ecosystems are restored or protected, they strengthen existing assets, create new ones, and reduce future liabilities. In other words, nature directly drives enterprise value through the same mechanics that define any well-run business.
- Reprice Existing Assets: When land, forests, or soils recover, their economic life extends and their fair value rises. Restored wetlands reduce flood risk, fertile soil improves yields, and healthy catchments safeguard infrastructure — all tangible effects that show up in valuations and depreciation schedules. Investing in nature therefore increases the fair value of real assets and the productivity of capital already deployed.
Examples:
– Revaluation of land and property (IAS 16 / IAS 40): restored soils, vegetation, or water systems increase land productivity and resilience, raising fair values and extending useful life.
– Higher fair value of biological assets such as timber, crops, or fisheries (IAS 41): improved ecosystem health boosts growth rates and yields, enhancing the market value of living assets.
– Reversal of impairment losses where ecological recovery restores usefulness (IAS 36): sites once written down due to degradation can regain recoverable value as environmental conditions and production capacity improve. - Create New Assets: Nature also generates new asset classes. Verified improvements in ecosystem condition — carbon storage, biodiversity uplift, water retention — can be formalized into tradable rights and contracts. These qualify as intangible or financial assets once they have clear ownership, control, and measurable benefit. And increasingly, these take digital form. Such instruments make ecological performance investable, shifting nature from cost to capital and opening a market for digital nature-based assets.
Examples:
– Environmental credits, data, and ecosystem-service rights (IAS 38): tradable intangibles that capture measurable ecosystem benefits such as carbon storage, water purification, or biodiversity uplift.
– Nature-linked loans, bonds, and equity instruments (IFRS 9): financial products whose pricing or returns depend on verified ecological outcomes, rewarding performance rather than promises.
– Equity-like assets such as Nature Equity (NE), digital biodiversity tokens, or Nature Asset Companies (NACs): instruments that represent ownership or performance rights in verified ecological outcomes—bringing ecosystem integrity onto corporate balance sheets and allowing investors to share directly in nature’s financial returns.
– Long-term use rights, concessions, or PPPs for restoration (IFRS 16 / IFRIC 12): contractual rights to manage land or resources for defined environmental results, often structured like service concessions or leases.
– Nature-linked loans, bonds, and equity instruments (IFRS 9): financial products whose pricing or returns depend on verified ecological outcomes, rewarding performance rather than promises.
– Equity-like assets such as Nature Equity (NE), digital biodiversity tokens, or Nature Asset Companies (NACs): instruments that represent ownership or performance rights in verified ecological outcomes—bringing ecosystem integrity onto corporate balance sheets and allowing investors to share directly in nature’s financial returns.
– Long-term use rights, concessions, or PPPs for restoration (IFRS 16 / IFRIC 12): contractual rights to manage land or resources for defined environmental results, often structured like service concessions or leases. - Reduce Liabilities: Healthy ecosystems lower operating risk — and lower risk reduces provisions, insurance costs, and expected credit losses. Regenerative land use shrinks decommissioning obligations; natural buffers cut catastrophe exposure; resilient supply chains stabilize loan portfolios. These effects directly decrease liabilities, freeing up capital and improving creditworthiness.
Examples:
– Reduced restoration and remediation provisions (IAS 37): as verified ecosystem recovery lowers future cleanup or decommissioning obligations, companies can release provisions and strengthen earnings.
– Lower borrowing costs through improved collateral and covenant strength (IFRS 9): lenders reward nature-positive performance with tighter spreads and better terms when restored assets enhance repayment security.
– Declining insurance and guarantee expenses as natural risk buffers are verified: healthier ecosystems reduce exposure to floods, fires, or droughts, allowing insurers to price coverage more favorably and freeing capital for reinvestment.
Reprice, create, reduce — the mechanisms of nature investment can be embedded in existing accounting standards today. No new rulebook is needed. And the benefits of applying the rulebook are growing every day: When natural capital is measured and recognized, balance sheets become more accurate, risk pricing more rational, and markets more efficient. Nature extends asset life, generates new digital and physical assets, and removes costly risks — the three classic pathways to stronger enterprise value.
What modern methodologies to apply – the investor’s new toolkit
The idea that nature holds economic value and must be systematically accounted for is not new. The United Nations System of Environmental-Economic Accounting (SEEA), established in the 1990s and adopted in 2012, created a framework for integrating environmental assets into national economic accounts. While SEEA was designed to guide macroeconomic policy, more recent initiatives like the Nature Positive Initiative (NPI), the Taskforce on Nature-related Financial Disclosures (TNFD), and the Impact Accounting Project (IAPB) have expanded this foundation to include impact and dependency disclosure, as well as environmental attribute markets.
Now, the focus must shift from conceptual recognition to practical implementation. This requires translating global frameworks into financial accounting language, addressing two key questions: Where is the value captured—through higher payouts or lower risks? And how can this value be operationalized in a way that is immutable, auditable, and executable at low cost? The challenge is no longer about whether nature belongs in accounting, but about embedding it into the systems where financial decisions are made.
- Nature Mapping — Seeing What Nature Supports: The first step is discovery: understanding how natural systems underpin the assets you own or finance. Every farm, factory, pipeline, or data centre relies on ecosystems for inputs such as water, soil fertility, climate stability, and pollination. Traditional portfolio tools like ENCORE offer a high-level view of those dependencies, but real financial accuracy requires a bottom-up approach. That is where Nature Mapping comes in — using Ecological Integrity Index (EII) or other fully scalable ecological condition models to assess the actual condition of ecosystems connected to each asset. These models combine geospatial data, satellite imagery, bioacoustic sensors, eDNA sampling, IoT monitoring and even citizen-science imagery to build a precise picture of ecosystem integrity. The result is a portfolio-wide ecological x-ray: you can see where nature is stable, where it is degrading, and where it silently underwrites the productivity and resilience of your holdings. It is the foundation of due diligence or development in the age of natural capital.
- Nature Risk Pricing — Knowing What It’s Worth: Once you can see the condition of nature, the next question is around its economic worth. This is the quantify phase — where ecological information meets valuation models. Nature Risk Pricing (NRP) is the emerging discipline that does exactly that. It connects biophysical data to business outcomes through attribution models that trace how environmental changes affect cash flows, asset lives, or credit performance. Soil erosion becomes reduced yield; water scarcity becomes higher input costs; biodiversity loss becomes insurance volatility. In practice, NRP integrates seamlessly into existing accounting and risk systems. It translates EII data into monetary adjustments to expected losses, discount rates, or collateral values — a bottom-up price signal that auditors can recognise and CFOs can use. NRP turns nature from an unquantified externality into a priced financial variable, revealing which assets carry hidden ecological risk and which hold hidden resilience.
- Nature Performance Realisation — Turning Integrity into Income and Balance-Sheet Value: The final step is the recognise phase—not only acknowledging nature’s value, but monetising it. Here investors use methods such as the Integrity Value (IV) as a reference point: a top-down estimate of the economic potential of thriving ecosystems, the ceiling of what natural performance could be worth once fully valued by markets. With that benchmark in mind, investors can realise portions of that value through tangible financial channels, lowering costs through reduced insurance premiums, smaller restoration provisions and longer asset life; increasing revenues through verified biodiversity units, carbon credits and nature-linked contracts; and reducing risk as improved integrity strengthens collateral and credit ratings. Together these outcomes adjust both book value and market perception. Ecological improvement becomes a source of alpha, recognised in audited accounts and reflected in investor confidence. Nature moves from a narrative of responsibility to a cycle of performance—measured, priced, and rewarded. These three methodologies bring the WEF’s discover–quantify–recognise sequence to life for investors. They transform nature from an external dependency into a managed, monetisable asset — one that strengthens balance sheets, stabilises returns, and defines the next era of intelligent investing.
How to quickly adopt these new capabilities and help advance the investment sector
Clearly, challenges remain. The science, data, and technologies needed to measure and value nature have advanced faster than most people realise—but they are not yet fully aligned with the systems that govern finance. NatureTech can already track ecological change with remarkable precision, yet these capabilities still need refinement: calibration across regions, harmonised verification standards, entities of assurance provision and deeper integration into accounting and reporting frameworks. The methodologies exist; what is missing is broad adoption and standardisation. Acceptance is the next frontier. Regulators are only beginning to treat nature as financially material. Frameworks such as the ISSB, TNFD, NPI and IAPB are establishing common languages for disclosure and valuation, while the IASB and ISO explore how to recognise ecological assets within financial statements. Regulators in Japan, Singapore, and the EU have taken first steps toward mandatory nature-related reporting, but widespread acceptance by auditors, exchanges, and rating agencies will depend on real-world testing and investor demand.
Yet there is so much investors can already do—alone and together. Many of the tools are available now. Asset owners can map the nature dependencies and risks across their portfolios using geospatial data and ecological models; integrate nature-related variables into valuation, credit, and insurance models; and run pilot projects that link ecological improvement to asset life, operational costs, and collateral strength. Each test builds the evidence base and increases confidence that nature data are decision-useful, not decorative. Collective action can accelerate this progress. Investors can collaborate on open ecological data infrastructures, shared registries, and nature cadasters, pooling datasets that make measurement more consistent and transparent. Jointly funded reference projects—such as biodiversity-linked bonds or sovereign nature accounts—demonstrate what works and set precedents for auditors and regulators. Building these shared ledgers is not philanthropy; it is the infrastructure of a functioning market for natural capital.
A powerful new accelerant is the rise of agentic AI. Investment offices can now use systems that turn raw environmental data into actionable investment insight. Those that feed these models with high-quality ecological metrics will see AI translate nature performance into financial value. Early adopters will gain a decisive edge—and define the benchmarks others follow. The opportunity is, in effect, a race to the top. The investors who experiment, cooperate, and build shared data foundations will shape how markets price nature and how regulation evolves. They will not wait for perfect standards; they will prove them into existence. The tools are here. What remains is leadership—to use them, to share them, and to turn nature from an unpriced externality into a measurable source of enduring value.
