Can nature be placed on the balance sheet?

For much of humanity’s existence, the world’s rivers, oceans, and forests have been treated as free — and as resources to draw from without tallying their worth. In many countries, that’s meant a global economy built on nature’s extraction, where ecosystems are undervalued and overused in the pursuit of growth. But increasingly, the concept of natural capital is being used to flip that script — reframing nature not as an expendable resource, but as an asset class of its own. By assigning value to the services ecosystems provide, natural capital aims to shift economic decisions toward protection and restoration rather than depletion. The problem? No one has settled on a way to actually value nature, or to integrate that value into their balance sheets. And without doing so, attempts to integrate natural capital into economic planning risk inconsistency and misuse. “We’re a bit in the crunch point,” said Martine van Weelden, a director at Capitals Coalition, speaking during the Building Bridges conference in Geneva, Switzerland — a three-day event that brought nearly 2,000 people from the private and public sectors together to discuss sustainable finance. “On the one hand, we have the current economic system where pricing is what we do, and what we look at,” van Weelden continued. “And on the other hand, we see nature, and we see that our economic system doesn't adhere to the natural systems that provide us with the economy that we have.” The concept — and its challenges — came up perhaps more than any other topic at this year’s Building Bridges. Governments are advancing biodiversity finance plans — just this year, 92 countries have done so, according to UNDP — while investors are moving capital: From 2015 to 2024, biodiversity funds attracted €233 billion (about $273 billion) in investments, according to investment advisor Phenix Capital Group — and within the same time frame, the number of biodiversity-related impact funds grew by 234%. Marie-Laure Schaufelberger, vice chair of the Building Bridges Foundation, told Devex that rising interest in nature finance shaped this year’s program, prompting organizers to host more sessions on the topic than ever before. “People still don’t know how to tackle it,” said Schaufelberger, who is also the chief sustainability officer at wealth management firm the Pictet Group. “What metrics do we want to be using? What are the nature-based solutions that make sense? There are still a lot of early questions.” The role of the public sector Perhaps no country tells that story more than Brazil. The country hosts nearly 60% of the Amazon rainforest — though over the last 40 years, Brazil lost more than 18% of that rainforest to illegal logging, farming, and cattle ranching. “Nature has no value in the economy, so the way people address that is by actually replacing nature with other interventions,” Marcelo Furtado, head of sustainability at Brazilian conglomerate Itaúsa, said from the Building Bridges stage. The World Bank has attempted to estimate the Amazon’s estimated value, coming up with $317 billion each year — a figure that accounts for the rainforest’s natural climate regulation, rich biodiversity, and input toward South American agriculture and hydropower. Those figures were drawn from things that have value in the private sector, like timber, rubber and sustainable tourism, and agriculture; and things that have value for the region and the world, like carbon dioxide storage, biodiversity, and forest cover. “It is a shock absorber on the fiscal side, but it’s also the air conditioner and water pump of our planet, so we have a huge responsibility to deal with it,” said Furtado. That’s something that Brazil has tried to do, first through last year’s Group of 20, which was hosted by the South American country. The G20 Leaders’ Summit formally recognized the importance of nature, introducing several initiatives to protect it — including the Tropical Forest Forever Facility, a blended finance fund that incentivizes conservation; and the G20 Initiative on Bioeconomy, which set shared principles for using a nature-based economy to drive development. South Africa, which took over the G20 presidency from Brazil, has continued to push those ambitions forward — and other public institutions, from U.N. agencies to multilateral development banks, have launched initiatives to catalyze both public and private investment for nature-related aims. “The enabling environment with governments giving the setting is important, and we had the projects and society calling for it,” said Furtado. “But where’s the money coming from?” The private sector has yet to answer that question. Despite growing recognition that degraded ecosystems pose risks to supply chains, asset values, and long-term profitability, in 2022, UNDP found that governments paid for the bulk of nature-based solutions: 82% out of a total $200 billion, with the remainder — some $35 billion — from the private sector. “Amongst corporates, nature finance, at the moment, is not a huge capital markets play,” said Rhian-Mari Thomas, chief executive at Green Finance Institute, from the Building Bridges stage. “It’s not like infrastructure or project finance, where you can see the revenues, you can see the cash flows, you can see the returns. This is more nuanced.” That’s not the only challenge facing nature-based finance. Some warn that reducing forests, wetlands, or coral reefs to numbers risks ignoring their inherent value, turning nature into commodities to be bought and sold. Others say measuring nature’s worth is notoriously tricky, and oversimplified valuations could open the door to greenwashing. And still others worry about tying conservation to market forces, fearing nature could become vulnerable to shifting prices and priorities. It’s complicated, nearly every Building Bridges panelist agreed. But even so, ambivalence for the cause was largely absent in Geneva, where nature-keen corporates seemed to flock to the conference en masse. The role of the private sector For Peter Bakker, the president of the World Business Council for Sustainable Development, the reasons for the private sector’s interest in both nature and climate were obvious. “The physical risk of topics like climate, like water stress, like soil degradation, is now intensifying at such a pace that this will disrupt supply chains, disrupt countries, disrupt lives,” Bakker told Devex. “And in economic terms, that will have tangible damages.” More than half the world’s economy depends on nature, according to a recent report from the Royal Bank of Canada. But three of the biggest sectors drive biodiversity and ecosystem loss globally: food, land and ocean use; infrastructure development; and energy and extractives. According to the World Bank, integrating sustainable practices into these sectors could create $10.1 trillion in annual business opportunities, along with 395 million new jobs. “This is just a hardcore economic conversation that any financial individual or institution with the right mind will say, yeah, well, we better understand this,” Bakker said. Natural disasters have already affected critical industries: in 2022, for example, floods devastated Pakistani agriculture — a sector that employs 40% of the country’s workforce — causing economic losses of over $30 billion, according to the World Bank. And just last year, flooding led to widespread landslides, a dam collapse, and the displacement of nearly half a million people. “That was an incredible wakeup call. Three of our companies were underwater,” said Furtado. “Every single company stopped and started thinking about how important adaptation and nature, and climate risk assessment is for your business. And I think that this change of mindset is accelerating a lot of opportunities, including the opportunities of how the financial sector is looking at investment in adaptation.” Insurance companies have also stepped into the mix. NatureAlpha, a London-based intelligence firm, is using artificial intelligence to identify, assess, and calculate ecological risks, enabling users to zoom into a company’s location and receive a risk score for the area surrounding it. “Banks and insurers and other companies buy that data, because when they invest in these companies, they want to know where the risk lies, and what might affect their operations,” NatureAlpha’s chief executive officer Nick Hough-Robbins told Devex. “So they can sit down and say: Is this data center operating in an area of high water scarcity? And what they use this for is to have a conversation with the organization and say: What are you going to do to mitigate these risks?” Sometimes, the private sector is being brought in by U.N. agencies or multilateral development banks. Other times, companies are looking into nature on their own. The investment and insurance company Aviva, for example, has an entire segment of their company targeting natural capital. “From an insurance perspective, we’ve increasingly seen the physical impacts — the manifestations of climate change and aqua degradation in our core markets,” said Thomas Viegas, Aviva’s group nature lead. “That matters in terms of how much business we can have there or not, so it’s obviously in our interest to be supporting reducing that risk, and giving us a wider universe of clients that we could insure.” Viegas gave the United Kingdom as an example. There are several areas in the country that are becoming increasingly prone to flood risk, so Viegas described how Avivas was working with the U.K. government to implement Flood Re, a type of natural catastrophe insurance. As part of policy, households with high flood risk can obtain quotes from more insurance companies at a lower price, with 70% of those insurers offering a related scheme — Build Back Better — to households in the wake of a flood. Through that program, customers can install flood resilience measures up to the value of £10,000 ($13,400) when repairing their properties. For now, most experts agree the field is still in its infancy — and often, it’s been more experiment than established practice. But as the costs of ecosystem collapse become harder to ignore, those like Viegas feel the momentum to invest in nature is only going to accelerate. “For us, it’s business critical,” he added.