Natural capital comes of age: Part two: Why not all natural capital revenue streams are created equal

Natural capital revenues should be assessed by their investment readiness, because environmental importance does not by itself make future cashflows financeable.

• Revenue certainty depends on three factors: observable market evidence, contractual cashflows and a record of repeated commercial delivery.
• Timber and agriculture rank near the mature end because they have long transaction histories, established financing structures and deep markets, while many biodiversity and nature-based outcome markets remain early-stage.
• Long-term offtake agreements can substitute counterparty risk for market risk; this model helped finance renewable energy before power markets were fully mature and is now emerging in natural flood management.
• Aviva Investors’ nine-level framework ranges from conceptual ecosystem-service payments at IRL 1 to fully mature timber and agriculture markets at IRL 9; voluntary biodiversity credits and emerging ecosystem payments are rated IRL 1-2, while compliance carbon is rated IRL 7-8.
• The framework’s suggested ratings vary by geography, policy, project structure, counterparty quality and downside protection, and emerging markets may expose investors simultaneously to biological, execution, regulatory, liquidity and market-creation risks.

Takeaway: Investors should match return expectations to the maturity of each revenue stream and can combine mature timber or agricultural cashflows with higher-risk emerging environmental markets, rather than treating all natural capital as equally investable.