Natural capital refers to the global reserves of natural assets, encompassing elements such as geology, soil, air, water, and all living organisms. Manulife Investment Management suggests that investing in natural capital can help in tackling climate change, safeguard biodiversity, and bolster resilience in ecosystems and communities.

“And since the idea of natural capital is most powerful when most broadly applied, it’s also possible to invest in nature indirectly through public asset classes by investing in companies with revenue exposure and sustainable operations, and through green fixed income instruments…,” writes Brian J. Kernohan, Chief Sustainability Officer, Private Markets at Manulife.

Brandon Lewis, Director of Sustainability for Timberland and Agriculture at Manulife, highlights investments in natural capital, such as timberland and farmland, have historically enjoyed robust demand fundamentals and diversification potential. These investments have consistently provided returns that act as a hedge against inflation, he adds. 

“High-quality carbon credits now offer a growing store of value, while sustainable management practices that support biodiversity, conserve water, and deliver climate benefits provide investors with further opportunities to enhance diversification, yield, and profitability while meeting their climate and nature commitments,” informs Lewis. 

Subsequently, Peter Mennie, Chief Sustainable Investment Officer, Public Markets at Manulife, asserts that effective management of natural capital assets requires expertise due to the complexity and variability inherent in these assets. 

He says that perhaps the biggest barrier to advancing natural capital investments is their long-term nature and the need for large upfront investments. Illiquidity, deal flow, and scale represent the most frequently encountered barriers to enabling the potential of natural capital investing, highlights the asset manager. 

“And while nature is increasingly incorporated into mandatory disclosures and regulations, the data collection for nature and biodiversity remains extremely difficult. Finding ways to measure nature and produce more consistent datasets will be key to allowing natural capital in­vesting to take off,” says Meenie. 

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