Natural capital is a catch-all term for “the value of everything that comes from nature — soil, air, water and all living creatures”19. It’s been around since the 1970s, credited to be popularised by British economist E.F. Schumacher in his book Small Is Beautiful: A Study of Economics As If People Mattered20. When we say “natural capital”, this means the world’s stock of everything natural, both renewable and non-renewable: soil, water, fisheries, minerals, biodiversity - you name it. This even includes fossil fuels. Schumacher objects to natural capital being treated as expendable income, when instead it should be seen as an economic asset. And on fossil fuels, capital that is being liquidated as we extract them from the ground. By thinking of nature financially, this creates a framework for investors to recognise the world’s resources are limited, and their misuse is costly; when a company pollutes the air, it unlikely pays for that pollution immediately, but other costs will befall. For instance, the socioeconomic cost of local communities falling ill and missing work.

Where natural capital describes nature as an asset, you may also come across “nature-based solutions”. This is another broad term for actions, technologies and solutions that protect ecosystems and deliver ecological, environmental and social benefits. In investment strategy, themes in nature are remarkably broad; it ranges across recycling fabrics and bio-based plastics, to water purification and irrigation.

Research at Imperial is contributing directly to society’s understanding of nature-related investment. In their 2026 study, Iva Koci and Pernille Holtedahl examine how public equity investors incorporate nature-related considerations into their investment strategies21. Drawing on a survey and interviews with nearly 100 investment professionals, their research provides valuable insight into how investors assess nature-related risks, the barriers to integrating these considerations into portfolio decisions, and the challenges of translating growing awareness into market action.

Koci and Holtedahl (2026) reveal a clear tension between investors’ recognition of nature-related risks and their integration into investment decisions. Some 43% of respondents reported that nature is typically incorporated into investment decisions through a risk-management perspective, while 72% agree that nature-related considerations help lower portfolio risk and 79% that they can protect corporate reputation.

Translating this awareness into actionable portfolio decisions, however, remains a challenge. Investors increasingly recognise the financial materiality of nature-related risk, and its impact on the financial performance and future cashflows of asset, company or product. However, these risks are not adequately reflected in global market pricing and valuations – a disparity between the full financial impact of nature-related risk, and what global market prices are accounting for. We face a paradox: Nature underpins the global economy, providing energy, clean air, water regulation, flood protection, and pollination. Yet it remains largely left out in economic and financial decisions; not because its value is insignificant, but because traditional financial models fail to accurately incorporate them.

Koci and Holtedahl (2026) refer to this concept as market materiality. Current conventional metrics attribute limited value to nature, and it is difficult for many investors to reconcile material nature-related considerations with traditional measures of financial performance. Alongside data gaps, like location-specific and asset-level data on natural resources, key challenges include uncertainty over how to value nature-related risks and opportunities, linking nature to financial returns, and a “constrained investable universe” in public markets, as many natural capital investments remain privately held, project-based or difficult to access through conventional investment vehicles.

A 2026 community paper, published by the World Economic Forum (WEF), concurs that natural capital integration into economic models are at nascent stages for both public and private sectors22. Difficulty persists as natural capital integration “is not rewarded by markets or regulators”, but notable international effort persists to develop natural capital initiatives. For example the UN’s System of Environmental-Economic Accounting (SEEA), first introduced in 1990, helps governments with a clear standard for decision-making in nature. As of 2024, 94 countries have executed SEEA and operate at least one natural capital account. While this marks a positive step toward integration, gaps remain on maximising the use of these accounts by businesses and local government agencies. China has also developed the Gross Ecosystem Product (GEP) indicator in 2012; this is analogous to SEEA and leverages market prices and economics to quantify the economic value brought by natural capital. This aims for tangible outcomes, such as providing a basis for investment decisions; for example, in 2021 the natural capital valuation of a nature reserve in Deqing county of Zhejiang province ($43 million) directly affected approvals for renewable energy projects in the reserve. Today beyond Chinese borders, GEP pilots are being commissioned in countries including Colombia, India, Sri Lanka and Sweden.

Notably the Nature on the Balance Sheet initiative is a coalition aimed to identify and further nature finance mechanisms able to scale nature investing23. Formed by Capitals Coalition, The Landbanking Group, Systemiq and the Center for Global Commons, it focuses on reflecting nature in accounting to include their value. To illustrate, Tasmanian company Forico tripled in value, as natural capital accounting enabled them to reveal ecosystem services contributed four-times higher than its conventional balance sheet.