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Picture this: You own a few hundred acres near a growing town that your family has been farming for generations. Turning a profit has gotten harder, and none of your children want to take it over. You don’t want to sell the land; you love the open space, the flora and fauna it hosts. But offers from developers who would turn it into subdivisions or strip malls seem increasingly tempting.
One day, a land broker mentions an idea. How about granting a long-term lease to a company that values your property for the same reasons you do: long walks through tall grass, the calls of migrating birds, the way it keeps the air and water clean.
It sounds like a scam. Or charity. In fact, it’s an approach backed by hardheaded investors who think nature has an intrinsic value that can provide them with a return down the road — and in the meantime, they would be happy to hold shares of the new company on their balance sheets.
Such a company doesn’t yet exist. But the idea has gained traction among environmentalists, money managers and philanthropists who believe that nature won’t be adequately protected unless it is assigned a value in the market — whether or not that asset generates dividends through a monetizable use.
The concept almost hit the big time when the Securities and Exchange Commission was considering a proposal from the New York Stock Exchange to list these “natural asset companies” for public trading. But after a wave of fierce opposition from right-wing groups and Republican politicians, and even conservationists wary of Wall Street, in mid-January the exchange pulled the plug.
That doesn’t mean natural asset companies are going away; their proponents are working on prototypes in the private markets to build out the model. And even if this concept doesn’t take off, it’s part of a larger movement motivated by the belief that if natural riches are to be preserved, they must have a price.
Beyond Philanthropy
For decades, economists and scientists have worked to quantify the contributions of nature — a kind of production known as ecosystem services.
By traditional accounting methods, a forest has monetary value only when it has been cut into two-by-fours. If a forest not destined for the sawmill burns down, economic activity actually increases, because of the relief efforts required in the aftermath.
When you pull back the camera, though, forests help us in many more ways. Beyond sucking carbon out of the air, they hold the soil in place during heavy rains, and in dry times help it retain moisture by shading the ground and protecting winter snowpack, which helps keep reservoirs full for humans. Without the tree-covered Catskills, for example, New York City would have to invest much more in infrastructure to filter its water.
Natural capital accounting, which U.S. statistical agencies are developing as a sidebar to their measurements of gross domestic product, puts numbers on those services. To move those calculations beyond an academic exercise, they need to be factored into incentives.
The most common way to do that is the social cost of carbon: a price per ton of emissions that represents climate change’s burdens on humanity, such as natural disasters, disease and reduced labor productivity. That number is used to evaluate the costs and benefits of regulations. In some countries — notably not the United States, at least on the federal level — it is used to set taxes on emissions. Efforts to remove carbon can then generate credits, which trade on open markets and fluctuate with supply and demand.
But carbon is just the simplest way of putting a price on nature. For the other benefits — wildlife, ecotourism, protection from hurricanes and so on — the revenue model is less obvious.
That’s what Douglas Eger set out to address. He wanted to work for an environmental group after college, but on his conservative father’s advice he instead made a career in business, running companies in pharmaceuticals, tech and finance. With some of his newly built wealth, he bought a 7,000-acre tract northwest of New York City to preserve as open space.
He didn’t think philanthropy would be enough to stem the loss of nature — a seminal 2020 report found that more than $700 billion was needed annually to avert a collapse in biodiversity. Government wasn’t solving the problem. Socially responsible investing, while making progress, wasn’t reversing damage to critical habitats.
So in 2017, Mr. Eger founded the Intrinsic Exchange Group with the goal of incubating natural asset companies, NACs for short. Here’s how it works: A landowner, whether a farmer or a government entity, works with investors to create a NAC that licenses the rights to the ecosystem services the land produces. If the company is listed on an exchange, the proceeds from the public offering of shares would provide the landowner with a revenue stream and pay for enhancing natural benefits, like havens for threatened species or a revitalized farming operation that heals the land rather than leaching it dry.
If all goes according to plan, investments in the company will appreciate as environmental quality improves or demand for natural assets increases, yielding a return years down the road — not unlike art, or gold or even cryptocurrency.
“All of these things, if you think about it, are social agreements to a degree,” Mr. Eger said. “And the beauty of a financial system is between a willing buyer and seller, the underlying becomes true.”
In discussions with like-minded investors, he found an encouraging openness to the idea. The Rockefeller Foundation kicked in about $1.7 million to fund the effort, including a 45-page document on how to devise an “ecological performance report” for the land enrolled in a NAC. In 2021, Intrinsic announced its plan to list such companies on the New York Stock Exchange, along with a pilot project involving land in Costa Rica as well as support from the Inter-American Development Bank and major environmental groups. By the time they filed an application with the S.E.C. in late September, Mr. Eger was feeling confident.
That’s when the firestorm began.
The American Stewards of Liberty, a Texas-based group that campaigns against conservation measures and seeks to roll back federal protections for endangered species, picked up on the plan. Through both grass-roots organizing and high-level lobbying, it argued that natural asset companies were a Trojan horse for foreign governments and “global elites” to lock up large swaths of rural America, particularly public lands. The rule-making docket started to fill up with comments from critics charging that the concept was nothing but a Wall Street land grab.
A collection of 25 Republican attorneys general called it illegal and part of a “radical climate agenda.” On Jan. 11, in what may have been the final straw, the Republican chairman of the House Natural Resources Committee sent a letter demanding a slew of documents relating to the proposal. Less than a week later, the proposal was scratched.
Unexpected Headwinds
Mr. Eger was dismayed. The most powerful forces arrayed against natural asset companies were people who wanted land to remain available for uses like coal mining and oil drilling, a fundamental disagreement about what’s good for the world. But opponents also made spurious arguments about the risks of his plan, Mr. Eger said. Landowners would decide whether and how to set up a NAC, and existing laws still applied. What’s more, foreign governments can and do buy up large tracts of land directly; a license to the land’s ecological performance rights would create no new dangers.
There is also pushback, however, from people who strongly believe in protecting natural resources, and worry that monetizing the benefits would further enrich the wealthy without reliably delivering the promised environmental upside.
“If investors want to pay a landowner to improve their soil or protect a wetland, that’s great,” said Ben Cushing, the director of the Sierra Club’s Fossil-Free Finance campaign. “I think we’ve seen that when that is turned into a financial asset that has a whole secondary market attached to it, it creates a lot of distortions.”
Another environmental group, Save the World’s Rivers, filed a comment opposing the plan partly because, it said, the valuation framework centered on nature’s use to humans, rather than other living things.
To Debbie Dekleva, who lives in Ogallala, Neb., the prospect that a natural asset company could enroll large tracts of land seems like a very real threat. For 36 years, her family has worked to commercialize milkweed, a wild plant that produces a strong fiber and is the only thing that the caterpillars of imperiled monarch butterflies will eat. Ms. Dekleva pays local residents to collect the pods from milkweed stands with permission from friendly landowners, and then processes them into insulation, cloth and other products.
That sounds like a type of business that might contribute to a NAC’s value. But Ms. Dekleva suspects that she wouldn’t be part of it — faraway investors and big companies might lock up the rights to milkweed on surrounding land, making it harder for her to operate.
“I think that whoever writes the rules wins,” Ms. Dekleva said. “So let’s say Bayer is doing regenerative agriculture, and they’re going to say, ‘And now we get these biodiversity credits, and we get this, and we get this, and we get this.’ How does someone like me compete with something like that?”
Such opposition — the kind that stems from deep skepticism about financial products that are marketed as solving problems through capitalism, and questions about who is entitled to nature’s gifts — may be hard to dislodge.
Mr. Eger said he built safeguards into the proposed rule to guard against concerns like Ms. Dekleva’s. For example, each company’s charter is supposed to include an “equitable benefit sharing policy” that provides for the well-being of local residents and businesses.
For now, Intrinsic will seek to prove the concept in the private markets. The company declined to disclose the parties involved before the deals are closed, but identified a few projects that are close. One is attached to 1.6 million acres owned by a North American tribal entity. Another plans to enroll soybean farms and shift them to more sustainable practices, with investment from a consumer packaged goods company that will buy the crop. (The pilot project in Costa Rica, which Intrinsic envisioned as covering a national park in need of funding to prevent incursions from arsonists and poachers, stalled when a new political party came to power.)
And the concept remains attractive to some landowners who’ve managed to wrap their heads around it. Take Keith Nantz, a cattle rancher who has been trying to build a vertically integrated, sustainable beef operation across the Pacific Northwest. He and a few partners would like to move to less chemically intensive grazing practices, but banks are hesitant to lend on a project that could reduce yields or jeopardize crop insurance coverage.
A natural asset company could be a piece of his financing puzzle. And to Mr. Nantz, the opposition comes mostly from a place of fear.
“There’s nothing being forced by a government or state or organization to be a part of this or not,” he said. “We can choose to be a part of this, and hopefully it’s a great opportunity to bring some capital.”
Catrin Einhorn contributed reporting.
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