How Natural Capital Delivers Financial Yield and Environmental Impact

Natural capital is emerging as the financial mechanism poised to define the future of sustainable finance.

It demands that we view nature’s assets, like forests, soil, and oceans, as essential capital that is just as valuable as human or produced capital.

The core premise is deploying sophisticated investment vehicles to capitalize on large-scale, high-integrity environmental projects.

Currently, a United Nations vote on the global carbon tax is being postponed. However, many countries have already instituted a carbon tax and emissions trading system. This means that natural capital investment is firmly on the rise.

This strategic approach was recently detailed by Phoebe Scott, Investment Associate at Climate Asset Management and an alumnus of the Imperial College London MSc Climate Change, Management, and Finance program. Climate Asset Management, a partnership between HSBC and Pollination with over $1 billion in investments, serves as a prime example of this financial model in action.

The Natural Capital Mechanism

Natural capital investment operates through focused partnerships between a sophisticated investment firm and the specialized workers on the ground.

The primary financial goal is to generate verified environmental outcomes, which can then be monetized through different financial instruments. For example, let’s say a major corporation purchases verified carbon credits through Climate Asset Management. Through the firm’s extensive partnership network, these funds are directed to finance high-quality reforestation projects in key regions like the redwood forests of California.

Unlike traditional environmental spending, this model provides investors a variety of structures for participation, including:

• Bonds

• Equities

• Real Assets

• Carbon Credit Instruments

• Sustainably Sourced Commodities

Climate Asset Management’s Three Investment Vehicles

Climate Asset Management utilizes three distinct vehicles, demonstrating how the asset class can be tailored to meet varied investor mandates, from financial return to pure carbon offsetting.

1. Developed Market Land Assets

This focuses on investing in land-based assets like sustainable timberland management and certain regenerative agriculture initiatives. It delivers both financial returns and positive impact for institutional capital like insurance companies, pension funds, family offices, foundations, and other asset managers.

2. Carbon Credit Solutions

This is investing exclusively in nature-based solutions, like reforestation or avoided deforestation projects, in exchange for high-quality carbon credits. It helps corporates explicitly focused on fulfilling net-zero commitments that require verifiable offsets.

3. Blended Portfolios

This is a hybrid strategy that merges the characteristics of the other two vehicles. It provides both financial returns and the generation of carbon credits. Projects overwhelmingly concentrate on regenerative agriculture, sustainable forestry, and sustainable land use.

Market Traction and the Financial Rationale

The rise of natural capital is propelled by a compelling financial thesis. Portfolios in this space offer a strategic combination of cash yield, low demand elasticity, and diversification.

This is driving a shift in capital allocation. A recent survey noted that 73% of asset owners in the UK plan to invest in natural capital as a mechanism to support climate adaptation.

We are already observing significant, large-scale deployment across the US market:

In April 2025, Microsoft purchased 1.4 million tons of carbon credits to reforest former mining communities in Appalachia.

Then, Netflix entered a 15-year agreement in September 2025 to reforest thousands of acres across the Southern United States.

These transactions demonstrate that natural capital investing is moving out of the theoretical realm and into the high-volume execution phase. It provides a valuable, scalable method to finance large-scale local and regional projects that protect the environment while meeting the fiduciary duties of investors.