NACs CONVERT NATURAL ASSET VALUE TO FINANCIAL CAPITAL IN ORDER TO:
Generate the funding needed to manage, protect, and restore healthy ecosystems around the world and bring us closer to achieving a truly sustainable, circular economy.
Create financial value for natural asset owners and local stakeholders.
Create job opportunities and sources of wealth for local communities that incentivize working with nature rather than just extracting from it.
Establish price signaling for the true costs and benefits of producing goods and services (by pricing in the externalities).
Provide investors with a new portfolio allocation tool that allows for direct investment in nature.
CREATING NATURAL ASSET COMPANIES
ISSUERS & INVESTORS
The issuer is the Natural Asset Company, which may be formed by natural asset owners including:
Governments
Private landowners
Farmers / Ranchers
Corporations seeking to improve the sustainability of their supply chain
NACs are designed to generate a market return that appeals both to investors focused on socially responsible, impact, or sustainable opportunities and those with broader investment mandates. Investors in NAC equities could include:
Institutional investors (e.g., pensions, sovereign wealth funds, endowments, foundations)
Family offices
Multilateral development banks
Retail investors
VALUES CAPTURED IN A NATURAL ASSET COMPANY
Natural Asset Companies are designed to capture the full value of natural assets including, but not limited to, the following:
Commercial Production – The use of natural resources, built assets, financial capital, and labor to produce goods and services as reported under US Generally Accepted Accounting Principles (“GAAP”) or International Financial Reporting Standards (“IFRS”). This includes ecosystem services that are monetized (i.e., generating revenue) by a NAC (e.g., ecotourism, food production).
Production of Ecosystem Services – The production of ecosystem services that are not monetized by a NAC (e.g., pollination or flood risk reduction), which will be captured within a NAC’s ecological performance reporting.
Nature’s Non-Use Value – The less tangible inherent value of nature, including people’s value for species and ecosystems in and of themselves. This category includes:
Bequest Value – the value of preserving nature for future generations
Existence Value – the value people place to ensure the continued existence of ecosystems and/or the species that live within them
Option Value – The value of having the option to use or access a natural resource or ecosystem service now, and in the future (this includes the value for ecosystem services not yet identified or quantified).
Store of Value – A NAC’s equity is a store of value like any other security or asset, and includes the stocks of water, timber, biodiversity, soil, carbon, fish, and other natural assets that make life on Earth possible.
Risk Mitigation – By recognizing positive and negative externalities and a broad spectrum of ecosystem services, nature-based risks may be revealed, mitigated, and, in some cases, converted into an asset/income stream. Additionally, financial, operational, litigation, and reputational risks may be managed through any resulting improvements in land management practices.
Uncorrelated Asset – The production of ecosystem services is not dependent on systemic economic or business cycles.
Increased Competitiveness – As policy and regulatory environments evolve to manage climate change, biodiversity loss, and other natural resource pressures, NACs may be able to demonstrate the value of nature-positive impacts and capitalize on developing new markets that may emerge for ecosystem services.
NATURAL ASSET COMPANY ACCOUNTING
Using the NAC Reporting Framework, a NAC is able to set forth:
Traditional financial statements to capture cashflows where they exist (e.g., ecotourism revenue or carbon credit sales on natural lands, or commodity crop production on working lands), as well as
Ecological Performance Report (“EPR”) – A report with statistical information on the ecological performance of a NAC, including sections with data on (i) Natural Production, (ii) Natural Assets, and (iii) Underlying Asset Condition. This Report is unique to NACs and will be provided in addition to traditional financial statements.
Values for ecosystem services are calculated based on a Technical Ecological Performance Study, which is the study conducted to characterize, measure, and value the ecosystems managed by a NAC. The information collected in this study is used to populate a NAC’s EPR.
The NAC Reporting Framework is grounded in the guidelines outlined in the United Nations System of Environmental and Economic Accounting – Ecosystem Accounting Framework (SEEA EA) and builds on it to include a wider array of potential economic values and valuation approaches. The NAC Reporting Framework is designed to estimate the total economic value generated by a NAC’s ecosystems through the production of ecosystem services.
PROCEEDS OF CAPITAL RAISE
NACs are designed with a fundamentally different purpose than traditional companies in that their primary business is to maximize ecological performance (i.e., the value of natural assets and the production of ecosystem services). Either through a private placement or an IPO, funding will be generated to protect, grow, and restore the natural assets and the ecosystem services they produce.
NAC GOVERNANCE & LISTING REQUIREMENTS
A NAC’s corporate charter must state that:
The purpose of the company is to actively manage, maintain, restore (as applicable), and grow the value of natural assets and their production of ecosystem services, with the objective of maximizing ecological performance.
NAC funds must be used primarily to meet the company’s responsibilities with respect to the natural assets under its control. Funds may also be used to support community well-being, provided that any such uses do not cause any material adverse impact to the natural assets for which the NAC is responsible.
NACs will be governed as other traditional listed companies, with several additional requirements, including adopting:
An Environmental and Social Policy that articulates the objectives and principles that will guide the NAC to achieve sound environmental and social performance.
A Biodiversity Policy that articulates a commitment to achieving no net loss, and where possible a net positive impact on biodiversity.
A Human Rights Policy that articulates a commitment to human rights, consistent with the United Nations Guiding Principles on Business and Human Rights.
An Equitable Benefit Sharing Policy that requires sharing equity in the NAC and other economic benefits with communities and stakeholders, providing a financial incentive to protect and restore nature as an alternative to extractive activities.