The Economic Case for Valuing Nature as an Asset Class
In a time of increasing climate risks, businesses and investors are being forced to reconsider their approach to sustainability. At Rebalance Earth, we believe the key to securing both economic resilience and environmental health lies in something long overlooked: Nature.
This episode’s guest is Eoin Murray, the incoming CIO of Rebalance Earth who we’re thrilled to announce will be joining us next year. Eoin is very well known in the finance world and has been working in investment funds for the last 34 years, from a quantitative analyst to a fund manager to more recently the Head of Investment at Federated Hermes. Currently helping to launch the SEED Index in Switzerland, a comprehensive all-in-one biodiversity index that makes it possible to score ecosystems based on biodiversity, he is also the Chair of the Exmoor Search and Rescue Team, a position that brings him incredibly close to the powerful effects of flooding and water risk.
In this follow-on post, we’ll dive deeper into why he thinks Nature must be recognised as a critical asset class—beyond carbon credits and biodiversity units—and how investing in it can deliver not only credible financial returns, but also profound environmental, social and wellbeing benefits also.
Nature as a Business-Critical Asset
We often think of infrastructure as roads, power grids, or bridges, but Nature is just as important. Healthy ecosystems provide services that benefit businesses daily: flood protection, water filtration, water supply and carbon sequestration, to name just a few.
Yet, unlike traditional infrastructure, Nature’s services are largely unaccounted for on balance sheets. As a result, we’ve neglected the assets that make business possible, and we’re continuing to extract from them with no thought for the maintenance of the things that we so heavily rely on.
But how can we invest something as broad and diverse as Nature?
Beyond Carbon Credits: Nature as an Investable Asset
For years, much of the focus on Nature-based investing has revolved around carbon credits or Biodiversity Net Gain (BNG) units. These are crucial markets, although tiny, and they only scratch the surface of the estimated £50 - £100 billion funding gap for Nature restoration (1)
At Rebalance Earth, we’re taking a broader approach by defining Nature as infrastructure—an asset that provides a host of services for which companies can and should pay to restore and maintain.
Eoin summarised this perfectly when he said, "We are not going to rely first and foremost on carbon and biodiversity markets, but instead look more broadly at other payments for ecosystem services," he said. "Nature-as-a-Service contracts specifically related to water, natural flood management, water quality improvement, and drought mitigation are where we see the most exciting opportunities."
Proving that Nature is an investible asset is vital to unlock the flow of capital needed to restore it, and for that to occur it needs to have three things:
Scarcity: in the case of rivers, over 90% of our rivers are artificially altered from their natural courses.
Utility: Returning rivers to their natural states increases water storage, meanders slow flows and reduce flooding, while allowing for greater filtration. Letting a river flood naturally on a floodplain means that it doesn’t occur downstream in high-impact areas.
Cashflow: Companies, cities and communities in the catchment pay for these reduced risks created by landscape-level catchment-wide restoration
An infographic to demonstrating how Nature can function as an asset class.
(Source: Rebalance Earth)
Nature Investments: Not Just ESG
Nature-based investments aren’t just about meeting ESG goals - they also offer solid financial returns. Asset managers, especially those in charge of pension funds and wealth portfolios, are starting to see Nature as an opportunity for steady, reliable returns.
Eoin believes that asset managers will likely allocate 3-5% of their portfolios to Nature, with the potential to increase to 5-10% as the market develops. While we firmly believe that a 2% allocation from UK Pension and Wealth Assets will be enough to cover the UK Nature Financing gap of £50 - £100 billion, once Nature is established as a viable and returns-creating asset, it will become increasingly attractive to asset managers.
The expected return on investment (ROI) for Nature projects is around 10-12%, similar to what you’d expect from traditional infrastructure investments like roads or energy. In our case, while up to 80% of the investment returns would come from Nature-as-a-Service contracts with companies, cities and communities, there would still also be returns from Carbon Credits and BNG units.
As Eoin explained, Nature investments offer both strong financial returns, while also helping businesses become more resilient to climate risks.
For asset owners, this is a chance to secure great returns while tackling the growing risks that climate change poses to investment portfolios. The fact that Nature as an asset sits outside the economic cycles of some asset classes makes it an even better option.
Conclusion: Join Us in Valuing Nature
Here at Rebalance Earth, we’re transforming how the world views and values Nature. By treating ecosystems as vital infrastructure, we can unlock the financial capital necessary to restore and protect the natural world. This isn’t just about protecting the environment—it’s about securing a sustainable, resilient future for businesses and investors alike.
As Eoin said, “Let's do what we can within the existing system, [but] then also let's give room for thought towards that bigger picture”.
We invite you to join us in investing in Nature, creating a future where businesses thrive, ecosystems flourish, and the economy is built on a foundation of sustainability.