Natural capital - the world’s stock of natural resources, including water, forests, farmland and biodiversity - is gaining increasing recognition in the financial and corporate sectors. Despite this global shift, Latin America remains slow to embrace the repricing of these valuable assets. While European and US companies are actively exploring natural capital opportunities, Latin American markets have yet to follow suit. 

“The concept is truly interesting and innovative, but aligning financial and natural capital has been debated for decades,” a senior ESG consultant commented. “It requires additional pressure from regulators.” This urgency is highlighted by the World Bank’s projection that the depletion and degradation of natural resources could lead to economic losses of USD 90-225 billion annually from 2030, primarily due to biodiversity loss diminishing ecosystem productivity. 

Globally, investors are factoring natural capital into their financial models, understanding its role in long-term sustainability and economic resilience. In Latin America, however, “there has not been significant interest from local investors,” one ESG asset manager noted, contrasting sharply with Europe, where both retail and institutional investors are eager to explore natural capital. “In South America, this is not yet a topic of focus,” the manager added. 

One key reason for Latin America’s slow adoption is the absence of a historical pricing structure for natural capital. “It’s not really a repricing; it has never been properly priced. We’ve kept the figures more open, and only when something becomes more quantifiable do we conduct sensitivity scenario analysis,” explained a financial analyst. Without proper valuation methods, integrating natural capital into financial strategies remains challenging for companies. 

“It [natural capital] has never been properly priced. We’ve kept the figures more open, and only when something becomes more quantifiable do we conduct sensitivity scenario analysis.”

ESG team in an asset management firm, Peru

Latin American economies face more pressing socio-economic challenges, such as education, poverty and healthcare, often overshadowing environmental concerns. While some progress has been made in recent years, the region still lags behind Europe, where sustainability has been a priority for decades. 

Given these challenges, Latin America should prioritise transformation over mitigation. Unlike high-emission regions, LatAm’s relatively low carbon footprint makes it a lesser priority for investors looking to offset emissions. “A key stepping stone is assigning greater value and incentives to attract private capital toward clean initiatives,” said the consultant. For example, Brazil’s Ministry of Energy recently launched a public consultation to explore tax incentives for mineral projects focused on energy transition and decarbonisation-related minerals. “This is how you add financial value to natural capital assets,” the ESG expert added. 

“A key stepping stone is assigning greater value and incentives to attract private capital toward clean initiatives.”

Senior ESG consultant at a leading consulting firm, Brazil

Colombia stands out as the only Latin American country with a structured carbon offset system, requiring companies to either compensate for their emissions or pay a fine. This regulatory framework has driven some investment in natural capital, but on a smaller scale compared to Europe. “For those not legally required to offset emissions, they turn to the secondary market to purchase carbon credits and meet their targets,” noted the ESG associate. 

In Brazil, however, major financial players are beginning to recognise the value of natural capital. Financial incentives are driving progress, such as the USD 50 million trade loan closed by Citi and Banco do Brasil, which ties interest rate reductions to sustainability goals (the first of its kind in Latin America). Banco do Brasil is working to expand this initiative to USD 850 million in sustainability-linked loans, reflecting a growing appetite for natural capital investments. 

Companies like Anglo American and Vale are strengthening their environmental policies to avoid costly disasters. The senior consultant affirmed, “Markets value consistency, especially in a complex and dynamic market like Brazil.” 

Technological advancements in satellite imaging, artificial intelligence (“AI”) tools and remote sensing are helping improve data quality, making it easier for companies and investors to assess their exposure to natural capital risks. However, these innovations are still in the early stages and widespread adoption will, naturally, take time. 

Natural capital is becoming increasingly important in global finance, with Latin America remaining a largely untapped market. While European and US companies have already started integrating natural capital into their investment strategies, Latin American businesses and investors are still catching up. “In today’s political context where green is not ‘sexy’ anymore, natural capital aims to revise the focus on sustainability by making business opportunities the focal point,” concluded the senior consultant.