Natural capital

Sustainable land management activities can enable land managers to diversify their income.

Emerging markets and schemes for carbon and biodiversity, natural capital valuation, demand for premium, sustainable produce and increasing interest from the community in the environmental impacts of farming are driving opportunities for realising economic returns from the adoption of natural resource management (NRM) practices.

What is natural capital?

Natural capital refers to the world’s stocks of natural assets, which includes:

• soil and rocks
• minerals
• air
• water
• plants, animals and all living things.

The value of the natural resources, or natural assets, on your land, and the services those assets provide, including food production, drinking water supply, fuel, building materials and medicines, is known as your natural capital.

Natural capital recognises these benefits to individuals, groups and the broader community by assigning them economic, environmental, social and cultural worth, known as value.

Natural assets have services that flow from them, known as ‘ecosystem services’. As a landholder, you can benefit from enhancing the value of your land’s natural capital through environmental services and get a financial return for your actions through environmental market opportunities. This also helps to improve productivity that often comes from improving your farms natural assets.

Not only does building, preserving and managing natural capital improve the productivity and sustainability of the land we use, it helps to build resilience to climate change impacts. Natural capital offers valuable benefits to society, as it is vital to our health and livelihoods well into the future.

If you can demonstrate the benefits and value of your natural assets, ecosystem services and environmental services, you may be able to exchange natural capital for financial rewards through environmental markets.

Natural capital allows you to understand and demonstrate the value of your assets and land management practices. It allows governments to account for nature’s role in the economy, measure how humans affect nature and invest in nature. It also helps businesses, investors, banks and wider society to monitor their impact and make more informed decisions that promote sustainable land management and improve their environmental credentials.

Local Land Services is committed to supporting landholders to continue to manage natural capital on their land.

What are natural assets?

Natural assets are the world’s stock of natural renewable and non-renewable resources, including soils, air, water, trees, plants, animals, and all living things. You will likely have many different natural assets on your property.

The services these natural assets provide – such as food production, drinking water supply, fuel, building materials and medicines – are known as ecosystem services.

Natural assets and ecosystem services are essential for humans and other animals to survive, from the air, water and food we consume, to the wildlife that maintains healthy ecosystems and the forests that absorb carbon from the atmosphere and regulate climate.

Different types of natural assets. Source: Environmental Markets Leadership Course (2023). 

What are environmental services?

Environmental services are the activities that people do to protect, manage, restore or improve natural assets and ecosystem services. This includes activities like protecting native species, revegetation, regenerating topsoil or repairing damage to landscapes.

You’re probably already doing activities on your land that could be described as environmental services. Natural resource management, regenerative agriculture, environmental protection or sustainable land management are all on-farm practices that improve, protect and restore natural assets and ecosystem services, while also improving productivity. Payment for these services through environmental markets recognises the value and costs associated with these actions and contributions.

Combining environmental services with your existing primary production activities could add value to your business. Environmental services can also be separate from your primary production activities, such as on lifestyle or culturally managed properties, or other sections of your property.

What is an environmental market?

Environmental markets are a way for you, as a landholder, to receive financial returns for your investment in natural capital and environmental services. An environmental market is created when people are willing to produce, sell, buy and exchange natural capital and environmental services for a monetary value.

Read more about environmental market opportunities and how you can access them.

What are the benefits and risks of natural capital and environmental markets?

As a landholder, you play an important role in managing natural resources in NSW. As the world seeks to address environmental challenges, governments, businesses and communities are increasingly willing to reward landholders for protecting, restoring and improving those natural resources.

Read more about the benefits and risks for landholders.

Natural capital statement of intent

The NSW Government’s Natural Capital Statement of Intent sets the ambition for, and approach to, sustainably managing natural capital in NSW.

The Natural Capital Statement of Intent provides a framework for economic recognition and valuation of the State’s natural assets. It clarifies how government can help to create the conditions for natural capital markets that will be additional to our other roles in protecting and improving the environment and supporting economic development.

For land managers in NSW this means that the actions that they take to build and manage natural capital may have a dollar value for an investor who also wants to protect natural capital. Land managers may be able to get a return through environmental markets (for example by selling carbon and biodiversity credits, or through stewardship payments). Land managers can also add the natural assets that they manage to the balance sheet through natural capital accounting methods.

View the NSW Government’s Natural Capital Statement of Intent.

Natural capital examples

Our Natural Capital Service Finder has examples of natural capital programs and current opportunities for landholders in NSW.

Helping land mangers get a return from NRM

Carbon farming allows land managers to earn Carbon Credit Units by adopting land management strategies to reduce greenhouse gas emissions or capture and hold carbon in vegetation and soil.

The Environmental Markets Leadership Program supports land managers and farmers to achieve a return from sustainable land and natural resource management. The program launched in September 2022 and program helps identify, market and benefit from natural capital.

The information provided on this webpage is based on knowledge and understanding at the time of writing (August 2023) and may not be accurate, current or complete. The State of New South Wales (including the Department of Regional NSW and Local Land Services), and the author take no responsibility, and will accept no liability, for the accuracy, currency, reliability, or correctness of any information included here (including material provided by third parties). Readers should make their own inquiries and rely on their own advice when making decisions related to material contained in this publication.