Natural Capital,
Climate & Biodiversity

Natural capital is fundamental to addressing two great challenges of our time: the climate crisis and the global species extinction (biodiversity) crisis. They cannot be addressed in isolation – effective solutions to the climate crisis require us to think about the interconnection between natural capital and biodiversity. Equally, to preserve and restore biodiversity, we need to address the climate crisis while building natural capital. But biodiversity, natural capital and climate are not the same thing.

Chapter 01

Natural Capital & Climate Change

The link between natural capital and climate change is inextricable.

We will only achieve net zero emissions with actions that build natural capital (and biodiversity). We cannot build natural capital while consuming resources (non-renewable and renewable) at a rate that maintains or exacerbates the climate crisis. This interdependence is simultaneously the greatest risk to the planet and the potential solution.

Nature-based strategies are the key to fighting both the climate and biodiversity extinction crises through:

Reducing emissions

Sequestring carbon

Growing our natural capital asset base

Such actions are usually mutualistic—building natural capital increases carbon sequestration and vice versa— but care is needed to guard against perverse outcomes where this may not occur.

Businesses must recognise and respond to this inter-dependence.

To do so, they need to explicitly document their climate and nature-related dependencies and impacts and understand the links between the two. Importantly, failure to consider and include natural capital in climate strategies will ultimately be ineffective in improving their climate position and expose the business to significant climate and nature-related risks.

Moving forward, continuous research, policy development, and innovative business practices are crucial to better incorporate natural capital into climate strategies.

Balancing economic growth with environmental sustainability and biodiversity conservation is a pressing challenge that demands collaborative and proactive solutions.

Key insights about natural capital & climate change

Chapter 02

Natural Capital & Biodiversity

Biodiversity has a special relationship with natural capital.

Biodiversity is part of natural capital, benefits from other aspects of natural capital, and is fundamental to generating many of the ecosystem services that flow from natural capital. It is at once a subset of natural capital, while also being fundamental to growing natural capital and generating ecosystem services.

Natural Capital

Natural capital encompasses all Earth's natural resources and ecosystems, including living (biotic) and non-living (abiotic) components.

Biodiversity

Biodiversity is the variety of all life forms on Earth, encompassing genetic diversity, species diversity, and ecosystem diversity.

Biodiversity builds natural capital through processes like:

The process by which plants, algae, and certain bacteria convert light energy into chemical energy in the form of glucose, using carbon dioxide and water, and releasing oxygen as a byproduct.

The continuous movement of water on, above, and through the Earth's surface facilitated by plants and microbes through processes such as respiration, transpiration, evaporation, infiltration, and runoff.

The process by which rock is broken down into smaller particles and mixed with organic material over time, creating the layered structure of soil through physical, chemical, and biological processes.

However, natural capital is more than just biodiversity.

Natural capital includes the emergent properties that arise from the interaction of species and the combination of ecosystem and abiotic resources.

Examples of natural capital, biodiversity and beyond

Ecosystem services such as pollination, pest control, and the production of food and fibre depend directly on biodiversity.

Natural capital encompasses not only biodiversity but also the structures, functions, and processes of ecosystems that support human well-being and economic activities.

We need to protect both natural capital and biodiversity for sustainability

Protecting biodiversity is crucial for maintaining natural capital and ensuring ecosystems remain resilient to environmental changes. Sustainable management practices must balance biodiversity conservation with the responsible use of natural resources to support long-term environmental and economic sustainability. Biodiversity is measured through attributes such as the number of species, genetic variability within populations, and the diversity of species that perform similar ecological functions—all of which serve as indicators of ecosystem resilience.

However, biodiversity is under severe threat:

Biodiversity Loss: Around 1 million species are currently at risk of extinction, driven largely by habitat loss, climate change, and pollution.

Pollinator Decline: Over 75% of the types of food crops we grow depend on animal pollinators, which are experiencing rapid population declines.

Water Scarcity: By 2025, it is projected that 1.8 billion people will be living in areas facing absolute water scarcity, underscoring the pressing need for sustainable water management.

These figures highlight the urgent need for integrated approaches that prioritise biodiversity protection, sustainable resource use, and resilience to future environmental challenges.

Key insights about natural capital & biodiversity

Learn more about dependencies and impacts in the industry use cases chapter.

Industry Use Cases