What is natural capital?

Traditionally, natural capital has been defined in biophysical terms:

“The stock of natural assets including geology, soil, water, land, air and all living things.”

This definition captures the foundation of ecosystems, the building blocks of life and the environment.

But it misses a critical point: people are part of the system and importantly, people control how the system is managed. From an anthropocentric view, natural capital isn’t just about assets in the ground or in the air, it’s about the values and outcomes those assets create for society.

That’s why we use a broader definition to embrace the ecosystem services provided by natural capital:

“Natural capital is the stock of natural assets including soil, water, land, air and all living things from which we derive environmental, economic, social and cultural value.”

This distinction isn’t just semantics, it changes how we measure, manage and invest in natural systems.

Why go beyond the biophysical?

1. Ecosystem services are experienced by people
   Clean water, fertile soils and healthy biodiversity underpin not just environmental health but also economic productivity, community wellbeing and cultural identity. To ignore these human dimensions is to miss half the picture.
2. Investment decisions require multiple lenses
   A restoration project that improves water quality may also:
   • Create local jobs (economic outcome)
   • Strengthen community resilience (social outcome)
   • Protect Indigenous cultural sites (cultural outcome)

   If we only measure water quality, we undervalue the project’s true benefits.

3.  Social outcomes drive adoption
   Landholders and communities are more likely to engage with natural capital projects if they see benefits for their livelihoods, culture and wellbeing, not just for abstract environmental indicators.
4. NRM organisations already understand this
   Across Australia, NRM organisations routinely embed economic, social and cultural outcomes in their strategic planning. Their priorities extend beyond protecting biophysical assets to maximising the broader values ecosystems deliver to communities. Truii’s adoption of economic, social and cultural ecosystem services as part of the Natural Capital Suite web apps reflects what NRM organisations have long recognised.
5. Markets and reporting frameworks demand it
   Emerging standards—including ESG frameworks, the Taskforce on Nature-related Financial Disclosures (TNFD), the Global Biodiversity Framework (GBF), Sustainable Development Goals (SDGs) and the Australian Agricultural Sustainability Framework (AASF)—all recognise that nature is interlinked with people.

For natural capital to be investible, it must capture this full spectrum of value. Investors and regulators increasingly require reporting across environmental, economic, social and cultural outcomes.

Natural capital as a system of value

By incorporating economic, social and cultural outcomes alongside environmental measures, natural capital accounting becomes more than a ledger of natural assets. It becomes a system of value that reflects the lived reality of landscapes and the communities connected to them.

This matters because:

• Communities gain recognition for their stewardship and connection to Country.
• Investors gain confidence that their funds deliver broad, enduring benefits.
• Decision-makers can balance trade-offs across multiple outcomes, not just biophysical metrics.

Investors are empowered to direct capital toward outcomes that reflect their broader environmental, social and cultural priorities—not just isolated indicators like water quality.

A note on autocorrelation

We did quite a bit of hand-wringing over the inclusion of economic, social and cultural outcomes as independent metrics of natural capital based on the argument that they are in-part, dependant on biophysical indicators, and hence could double count biophysical measures. Our conclusion: it’s better to acknowledge potential autocorrelation than risk excluding these outcomes altogether.

Healthy ecosystems are preconditions for positive social, cultural and economic outcomes, but they don’t automatically deliver those benefits without deliberate design.

These benefits often require active consideration in nature repair program design. For example:

• A project that improves biodiversity may not create local employment unless using local suppliers is built into the project.
• Soil restoration might increase agricultural productivity but may not strengthen cultural values without explicit recognition of Indigenous priorities.
• Connection to Country isn’t maximised unless First Nations people are actively involved in program design and delivery. 

Closing thought

Natural capital is more than the soil beneath our feet or the trees on the horizon. It is the economic, social and cultural value we derive from those assets and it must be understood in that holistic way if we are to make wise, fair and lasting investments in the future of our landscapes.