What is Natural Capital, and Why Does It Matter More Than Ever?

Natural capital is the stock of natural resources - geology, soil, air, water, and living organisms that underpin human existence and economic activity by delivering essential ecosystem services. These services range from carbon storage and water purification to flood regulation and biodiversity support. In recent years, natural capital has moved to the forefront of environmental and economic discourse, driven by escalating crises such as anthropogenic climate change and biodiversity loss (https://www.galbraithgroup.com/our-services/natural-capital/).

In Scotland and the wider UK, this recognition has sparked a paradigm shift. Natural capital is now seen as a critical asset for climate mitigation, particularly through the carbon sequestration potential of peatlands and woodlands (https://www.galbraithgroup.com/our-services/about-natures-carbon/generate-carbon-credits/)(https://www.galbraithgroup.com/insights-news-and-events/insights/natural-capital-update-carbon-market-comes-of-age-with-woodland-code/ ).

Beyond carbon, these natural systems enhance biodiversity, improve water quality, and protect communities from flooding. This evolving understanding is influencing government policies, attracting new streams of funding, and spawning innovative markets that value and invest in natural assets (https://www.galbraithgroup.com/insights-news-and-events/insights/natural-capital-update-good-news-on-environmental-improvement-but-how-to-achieve-it/ ).

 

The Changing Attitudes Toward Peatlands in Scotland

Historically, Scotland’s peatlands were often regarded as barren wastelands, barriers to agriculture or sources of fuel and construction materials, often to be drained, ploughed or planted with productive conifer. However, the 21st century has brought a profound transformation in perception, fuelled by scientific advances highlighting peatlands as among the planet’s most important terrestrial carbon stores and unique biodiversity hotspots.

This shift is driven by the urgent need to combat climate change and halt biodiversity loss, poor condition peatland produces carbon rather than storing it. Conservation and restoration efforts, supported by Scottish Government funding and innovative tools like the Peatland Code, are gaining momentum. The international recognition of the Flow Country as a UNESCO World Heritage Site further elevates the status of peatlands, underscoring their global ecological significance. (https://www.galbraithgroup.com/insights-news-and-events/insights/natural-capital-update-changing-attitudes-towards-peat-in-scotland/)

 

Carbon Codes: Unlocking Private Investment in Natural Capital

Carbon codes such as the Woodland Carbon Code and Peatland Code provide robust frameworks for measuring, verifying, and certifying carbon sequestration from natural capital projects. These standards ensure transparency and credibility through rigorous criteria, including additionality, demonstrating that carbon savings are genuine and would not exist without the project.

By generating independently verified carbon credits, these codes enable businesses and investors to offset their emissions or meet ESG targets, channelling private finance into nature restoration. This mechanism not only helps landowners make projects financially viable but also accelerates progress towards national climate goals (https://www.galbraithgroup.com/insights-news-and-events/insights/natural-capital-update-a-key-weapon-in-resource-stewardship-carbon-codes-are-part-of-a-much-bigger-armoury/ ).

Galbraith has a proven record in developing woodland creation projects for the generation of carbon credits and our expert team work to register, validate and verify these units, as well as providing advise to owners on internal use vs the open market.

 

Beyond Carbon: Broadening the Scope of Natural Capital

While carbon sequestration remains a headline focus, other natural capital benefits are gaining increasing recognition and investment. Enhancements in biodiversity, water quality, flood mitigation, and community wellbeing are vital ecosystem services that contribute to resilient landscapes and healthier societies.

Valuing these benefits is complex, as many lack developed liquid markets like carbon credits. However, initiatives such as Biodiversity Net Gain (BNG) in England are pioneering ways to monetize biodiversity improvements by mandating net positive impacts from development projects. Meanwhile, many projects rely on baseline valuations to justify land-use changes and management costs, with growing interest from corporations seeking to bolster their ESG profiles through verifiable natural capital gains. (https://www.galbraithgroup.com/insights-news-and-events/insights/natural-capital-update-biodiversity-net-gain-and-why-it-matters/ ).

At its heart agriculture is an industry which uses natural capital to generate commodities from which income can be realised. Galbraith remain abreast of ongoing changes to agricultural support schemes, which often patchy in supporting natural capital through SFI funding and a remodelling of the Scottish basic payment scheme (https://www.galbraithgroup.com/insights-news-and-events/insights/natural-capital-update-priorities-for-future-farming-support-in-scotland-unveiled/, https://www.galbraithgroup.com/insights-news-and-events/insights/natural-capital-update-stunned-farmers-ponder-outlook-after-sudden-sfi-withdrawal/ ). Looking ahead the public funding which has supported past progress in on farm environmental enhancement seems increasingly unstable.

 

Private Finance: The Future Engine of Natural Capital in Scotland

With public funds constrained, private finance is emerging as indispensable for scaling nature-based solutions in Scotland. Government-backed initiatives such as the Peatland Code and the Facility for Investment Ready Nature in Scotland (FIRNS) are designed to attract and support private investment. (https://www.galbraithgroup.com/insights-news-and-events/insights/natural-capital-update-markets-emerge-to-target-nature-recovery/ https://www.galbraithgroup.com/insights-news-and-events/insights/natural-capital-update-funding-programmes-bring-wide-range-of-options-for-nature-projects/ )

FIRNS, for example, encourages collaborative projects that deliver environmental and community benefits, aiming to channel long-term private capital into natural capital. This shift empowers landowners to develop bespoke projects while enabling businesses to showcase tangible environmental impact, reducing reliance on traditional public subsidies.

Galbraith have worked on projects involving river restoration, community wealth building and salt marsh enhancement all funded via FIRNS and building projects with multiple stakeholders interests, landowners and complex governance structures. (Listen to our podcast here)

 

Evolving Land Markets and Buyer Trends

The initial surge in demand for land focused predominantly on carbon capture has matured into a more nuanced market. Buyers increasingly conduct rigorous due diligence, such as soil testing, ecological surveys, and hydrological assessments to align land acquisition with specific natural capital objectives, including peatland restoration, woodland creation, and biodiversity enhancement.

Demand remains robust across a diverse buyer base: corporations, investment funds, institutions, and private individuals motivated by environmental and financial returns. Traditional landowners in agriculture and sporting sectors also engage actively, often integrating natural capital management into their existing practices, reflecting a broadening understanding of sustainable land stewardship. (https://www.galbraithgroup.com/insights-news-and-events/news-and-events/scottish-estate-sales-boosted-by-diverse-range-of-buyers/ )

The development of ‘natural capital’ in the consciousness of those considering land purchase has generated evidence for the value placed on natural capital assets, which in the past were mainly theoretical, now realised in buyers offers for estates on the basis of potential for woodland creation and peatland restoration (https://www.galbraithgroup.com/insights-news-and-events/insights/natural-capital-update-positive-projects-advance-as-land-managers-see-environmental-opportunities/ ).

 

The Rise of Partnership Projects: Collaboration as a Catalyst

The natural capital market is increasingly embracing partnership projects collaborations between funders, landowners, local communities, researchers, and government bodies. This approach leverages local knowledge and existing initiatives, shares financial risks and rewards, and strengthens governance through stakeholder involvement (https://www.galbraithgroup.com/insights-news-and-events/insights/natural-capital-update-the-state-of-the-natural-capital-market/ ); but requires people and project management skills to integrate multiple visions, objectives and considerations with the constraints of funding, existing schemes and governance.

Galbraith have been involved in developing projects focussing on biodiversity, carbon sequestration and regenerative agriculture through FIRNS funding and farm clusters

bringing to the table a lengthy list of skills from estate management and agricultural consultancy, which have provided a useful backdrop for developing new and innovative projects.

Partnership projects promise more sustainable and impactful outcomes by integrating ecological restoration with rural economic development and social benefits. They represent a holistic model that balances environmental ambition with community resilience. Galbraith has recently launched three biodiversity based projects which are seeking sponsorship, all of which provide exciting stories to be a part of. (https://www.galbraithgroup.com/our-services/natural-capital/natural-capital-consultancy/)

 

Conclusion

Natural capital is no longer an abstract environmental concept but a tangible, investable asset essential to Scotland’s, and the UK’s, response to climate change and biodiversity crises. Through evolving policies, innovative market mechanisms, and growing private sector engagement, the country is pioneering a path toward a more sustainable, resilient future where nature’s value is fully recognized and harnessed.