FAQ
Find answers to frequently asked questions about Natural Asset Companies and Intrinsic Exchange Group.
ABOUT INTRINSIC EXCHANGE GROUP
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IEG is a financial innovation company that develops market-based solutions to enable nature, people, and economies to thrive. IEG advises on the formation and structuring of Natural Asset Companies (NACs); develops proprietary NACs; and identifies investment opportunities in synergy with NACs.
NATURAL ASSET COMPANY OVERVIEW
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NACs are a new type of company specifically structured to restore and grow the value of natural assets through long-term stewardship and regenerative management. Capital invested in a NAC finances conservation, restoration, natural infrastructure, and nature-based solutions at scale. NACs align the interests of natural asset owners, investors, and communities who become shareholders. All stakeholders can financially benefit from the restoration and growth of healthy ecosystems.
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IEG created Natural Asset Companies (NACs) as a market-based structure to channel private capital into the conservation and restoration of natural systems that underpin economic stability, human well-being, and biodiversity. NACs explicitly value the intrinsic worth and productive capacity of ecosystems, reward responsible stewardship of these assets, and address the long-standing market failure that has left nature underfunded by trillions of dollars.
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While credit-based instruments, such as carbon and biodiversity credits, have been successful in driving nature-based investments, there are challenges that have kept them from scaling. NACs expand on this groundbreaking work with important additions that overcome design aspects that limit other approaches. NACs build on the net-zero/offset model to include direct investment in nature, climate solutions, and human and social capital. The value of a NAC is not reliant on credit pricing or policy-driven demand.
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Each NAC is formed as a new corporation that licenses the ecological attributes of a defined geography. The license grants rights (Ecological Rights) to the benefit from the ecosystem services that nature produces. A NAC is governed by a charter (see question below), a management agreement, and policies that address biodiversity, human rights, environmental and social considerations, and equitable benefit sharing.
Like any traditional company, there is a management team and board of directors, which formalize the governance structure, develop business plans, and manage the natural asset in accordance with the charter. Investors provide capital to finance the conservation, restoration, and growth of the natural assets.
HOW NACs WORK
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NACs are companies built to maximize the ecological performance of the geographical area under management. Each NAC has a management team, investors, and a board of directors. NACs license the rights to the value of natural assets and the ecosystem services they produce. Each NAC manages a specific land area with the goal of growing the value of those natural assets. NACs have an equity capital structure: their value includes traditional cash flows and the value of the nature and ecosystem services under their management. NACs are designed to generate financial returns and broader benefits for natural asset owners, investors, communities, and corporate supply chains.
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A NAC’s management team focuses on improving ecological and financial performance. Increasing the health of natural assets increases the quality, quantity, and longevity of ecosystem services production. As ecological health is restored, the natural assets appreciate and can produce ecosystem services in greater quantity and quality. NACs can generate revenue from the sale of ecosystem services, protecting infrastructure, enhancing farm and ranch profitability by transitioning to regenerative agriculture practices, and implementing other activities designed to improve resilience and reduce risk.
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Natural asset owners have equity ownership in a NAC, which gives them rights as shareholders, including voting rights. Owners, who may have a role in management of a NAC and/or representation on the board of directors, retain authority on how the natural asset is managed. NACs reward asset owners who share in the financial benefits as the ecological health of their land improves.
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NAC reporting has two components. Goods and services that generate cash flows, such as carbon credits, biodiversity credits, or the sale of crops grown on working lands, are accounted for under standard financial reporting: U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). The value of nature that is currently beyond the scope of traditional financial reporting, such as ecosystem service production value, is captured in an Ecological Performance Report (EPR).
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NACs can be a versatile tool for natural asset owners and the investors who commit capital to finance the conservation and restoration of natural areas at scale and across generations.
NACs based on natural areas focus on protecting, expanding, and restoring natural terrestrial and marine ecosystems. Examples include forests, grasslands, wetlands, and coral reefs.
NACs based on working lands focus on converting agricultural production practices to regenerative methods. Examples include farms, ranches, and sustainably managed forests.
NACs based on hybrid landscapes focus on increasing ecological performance across multiple land use types, including nature, working lands, and built infrastructure. A representative example is a NAC focused on improving the health of a bay, with a watershed that could include agricultural lands, residential neighborhoods, parks, and towns that possess their own natural asset values.
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Each NAC is governed by a charter that stipulates the purpose of the company is to actively manage, maintain, restore, and grow the value of natural assets and their production of ecosystem services. Funds must be used primarily to meet a NAC's operational and long-term needs to fulfill its purpose. The charter also has provisions for reporting ecological performance (EPR), standard financial reporting (GAAP), and equitable benefit sharing, which requires the distribution of a NAC’s equity to communities that have ties to, and derive livelihood or cultural values from, the area under management.
STAKEHOLDER BENEFITS
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NACs are a versatile tool designed to deliver benefits across society.
Landowners: Stewards of natural assets have had few options to finance and profit from conservation, land restoration, and regenerative practices. NACs provide incentives and financial resources for land stewards and owners seeking to improve the ecological health of their land. LEARN MORE ❯
Investors: For investors, NACs are a direct, nature-positive investment with a measurable impact on climate, biodiversity, resiliency, and social outcomes. Investors may earn financial returns through asset appreciation, cash-flow generation, growing market acceptance, and increased investor participation, driven by confidence in NACs’ long-term value, ease of trading, and greater liquidity. LEARN MORE ❯
Corporations: Companies, from food and fashion to consumer products, have regarded environmental, climate, and supply chain resilience initiatives as an expense, or as philanthropy. NACs are a way to turn sustainability and supply chain resilience costs into investment opportunities that can reduce financial exposure and offer potential long-term returns from capital appreciation. LEARN MORE ❯
Communities: A defining attribute of a NAC is an equitable benefit sharing requirement that articulates the commitment for sharing benefits with communities. The goal is that communities that depend on nature will be stakeholders in the enterprise: shareholders in a NAC and beneficiaries from the improved quality and quantity of ecosystem services produced. Communities also benefit from job creation and economic stability tied to ecological health. LEARN MORE ❯
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As with any equity investment, NAC investors seek to benefit from asset appreciation. For NACs, asset value is driven by active management focused on increasing the quality and quantity of ecosystem services and cash-flow generation from the sale of ecosystem services. Asset value may also appreciate as market acceptance for ecosystem services and NAC asset valuations grows, and capital inflows increase.
Demand may also be driven by regulatory pressures, expanded corporate resilience and supply chain efforts, rising demand for ecosystem services, and increasing need for direct investments in nature that provide a market rate of return.
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NACs serve as a key tool in transitioning from the traditional net-zero/offset model to direct investment in nature, climate solutions, and human/social capital. Unlike existing carbon, biodiversity, and water quality credits, a NAC investment is not reliant on credit pricing and policy-driven demand.
NACs also offer a way to turn sustainability and supply chain resilience costs into investment opportunities. By structuring their environmental initiatives within a NAC, companies can manage projects to generate long-term returns from capital appreciation tied to ecological health improvements. This structure also reduces their financial exposure.