Q&A with Adam Gibbon - Nature-Based Lead, BNP Paribas AM Alts

Natural capital investing focuses on the preservation and restoration of natural assets such as forests, water and biodiversity. As capital increasingly flows toward nature-positive strategies, investors are looking at how these assets can generate both measurable environmental outcomes and sustainable financial returns. In this Q&A, we speak with Adam Gibbon about how the market is evolving and how value is created in practice.

Adam Gibbon 

Nature-Based Lead

BNP Paribas AM Alts

Q: What first drew you to natural capital as an investment focus?

I have been investing in natural capital for around twelve years, but I worked in the field long before that – as a project developer, auditor and adviser. In total, I have been involved in the sector since 2008. Back then, it was increasingly clear to me that our economic system – one that converts natural capital into financial capital through extraction and transformation – was not sustainable. And while we are approaching planetary boundaries, traditional sources of funding directed at environmental challenges, such as philanthropy and government budgets, are limited and growing far too slowly.

That gap pointed to the need for private capital. The private sector represents an enormous pool of funding, but it requires investable strategies and viable business models. Over the past decade, one major development has enabled this shift: the emergence of a price on carbon. Once carbon emissions carry an economic cost, nature itself acquires measurable value to those making financial decisions. That, in turn, allows entirely new types of business models and investment structures to emerge. It’s these models and structures I’ve worked hard over the years to design and implement

Q: Which structural forces are most likely to drive natural capital investing over the long term?

The single biggest catalyst so far has been the collective global effort to address the climate crisis. Today, there is broad acceptance that carbon should carry a price. Polluters should pay for the damage they cause, while those who remove or avoid emissions should be rewarded through mechanisms such as carbon credits. That framework has helped create the early business models underpinning natural capital investments.

However, climate is not the only driver. Biodiversity loss is increasingly recognised as an economic risk on a similar scale to climate change. Meanwhile, water scarcity – and, in other regions, excess water and extreme weather events – is becoming a defining environmental challenge. What makes natural capital particularly interesting as an asset class is that it addresses all three simultaneously. Restoring ecosystems can sequester carbon or prevent emissions, protect biodiversity and stabilise water systems and local climates.

Many technological climate solutions address only one dimension of the problem. Nature-based solutions often deliver several benefits at once. They also tend to be significantly cheaper per unit of impact than engineered alternatives. For example, removing carbon through ecosystem restoration can be far less costly per tonne than technological approaches such as direct air capture and doesn’t require any technological breakthroughs.

Q: Has regulation helped or hindered the development of natural capital strategies?

Broadly speaking, the arc of regulation evolution has been positive , even though progress is uneven across countries and sectors. Historically, many natural capital investments have relied heavily on voluntary action rather than strict compliance markets. However, governments have increasingly introduced climate-related policies that create a more supportive environment for investment.

These include requirements for companies to measure and disclose their emissions or biodiversity impacts, as well as gradual moves towards carbon pricing and trading systems. Over time, these mechanisms push businesses to mitigate emissions and then offset what cannot immediately be reduced.

Q: What regulatory developments would most benefit natural capital investing?

Two areas matter most: demand signals and host country regulatory certainty for suppliers. On the demand side, stronger and nearer-term requirements for companies to neutralise their emissions would further accelerate demand tailwinds. The more that policy frameworks reinforce this process, the greater the demand for high-quality environmental credits.

On the supply side, host countries – often emerging markets where restoration opportunities are greatest – need clear and stable investment frameworks. Investors must understand how carbon credits generated within a country interact with national climate commitments, such as those made under the UN Framework Convention on Climate Change. Greater regulatory clarity makes it easier to generate, certify and trade credits. Many governments are now recognising the positive benefits of natural capital projects in terms of foreign direct investment, job creation, environmental and social co-benefits as well as tax revenues.

Q: What are the biggest misconceptions institutional investors still have about natural capital?

One common misunderstanding is that traditional forestry or agriculture investments are sufficient to achieve climate and biodiversity goals. These sectors certainly have a role in diversified portfolios, but business-as-usual approaches will not deliver the scale of carbon sequestration or biodiversity protection that is needed.

Another misconception concerns geography. Some investors assume it is best to invest locally. Yet if the objective is maximum environmental impact per dollar invested, the most compelling opportunities are often in emerging markets. These regions frequently face the greatest threats to ecosystems, but they also offer the greatest potential for restoration – often at significantly lower cost.

Interestingly, natural capital strategies can mitigate some of the risks typically associated with emerging markets. In many cases, the product being sold is not a physical commodity but a digital environmental credit. This removes some of the logistical and export risks associated with traditional agricultural or forestry investments. Revenues are also often denominated in hard currencies, reducing foreign exchange risk.

Finally, there is a persistent belief that investors must choose between financial returns and environmental impact. In well-designed natural capital strategies, that trade-off should not exist.

Returns are generated precisely by delivering measurable environmental benefits. If those benefits are not achieved, the revenues themselves are at risk.

Q: How do you evaluate risk in investments where returns depend on ecological outcomes?

We examine several layers of risk. The first is regulatory risk. We need confidence that the activities undertaken by a project are permitted within the host country and that the policy environment is stable.

Second is operational risk. Can the company deliver projects at scale and maintain high quality over time? That depends heavily on the strength of the management team, operational systems and environmental and social governance practices. Community engagement is particularly critical. Carbon and conservation projects require strong local participation and support. Without it, the project will not be sustainable in the long run.

Finally, there is market risk. Investors need assurance that the environmental products being generated – typically carbon credits – will find buyers. Encouragingly, demand has been rising steadily. In recent years, we have also seen the emergence of long-term offtake agreements for environmental credits, sometimes lasting 10 to 20 years. Historically, such contracts were rare. Today they resemble the long-term power purchase agreements seen in renewable energy markets.

These agreements significantly reduce market risk and also open the door to project financing and leverage, lowering the overall cost of capital and improving equity returns.

Q: Beyond financial returns, what does success look like in natural capital investing?

Financial performance remains important, but we track a comprehensive set of key performance indicators covering climate outcomes, biodiversity benefits and governance standards. Projects must demonstrate measurable progress against those indicators, often verified through independent audits.

Another crucial factor is scalability, we are not simply looking for isolated projects that deliver a one-off return. The goal is to build companies capable of repeating and expanding successful models. A good example would be companies that begin with a single restoration project but eventually develop a pipeline of similar initiatives across entire regions or ecosystems.

Q: How do you balance revenue streams such as carbon credits with benefits that are harder to price, such as biodiversity?

At present, most of the revenue in natural capital investing comes from carbon markets. Carbon credits are relatively well developed, with established standards and active buyers. However, interest in biodiversity credits and other ecosystem services is growing. As these markets mature and biodiversity gains clearer economic value, they may create additional upside for investors that is not yet fully captured in current financial models. In other words, biodiversity could represent a significant future revenue stream as markets develop.

Q: Looking ten years ahead, will natural capital remain niche or become a core portfolio allocation?

The trajectory suggests it will become increasingly mainstream. A recent study among UK investors that we supported found that 57% of institutional investors invest in natural capital already, and 41% of non-investors plan to make their first allocations within the next five years1. We also know that that once investors gain experience with the asset class, they often expand their exposure.

But for the asset class to reach scale, two things are essential. Investors need to take the first step and allocate capital, and asset managers must demonstrate credible track records with scalable strategies. As more success stories emerge and diversified portfolios mature, confidence in the sector will continue to grow.

Q: What developments over the past year suggest the sector is maturing?

We are seeing more long-term offtake agreements, which provide revenue certainty and enable project financing. Secondly, insurance products are beginning to emerge for environmental assets, helping manage risk. Thirdly, experienced project developers are expanding and diversifying their activities.

Another important sign is the growing adoption of advanced monitoring technologies. For instance, one of the companies we invest in, Chloris Geospatial, provide satellite-based data tools that measure forest biomass and carbon stocks and they are increasingly used by rating agencies, standards organisations and large corporates tracking supply chain emissions.

Together, these developments suggest that natural capital is evolving from a fragmented early-stage sector into a more structured and investable market.