"Natural Capital" - Not S or G.

What BlackRock’s Natural Capital Approach Means for Middle-Market Companies and What They Should Do About It

What’s Happening?

BlackRock, one of the biggest investment companies in the world, is focusing on something called natural capital—which includes land, water, and wildlife. They believe businesses that depend on these natural resources should take better care of them to stay profitable in the long run.

Why Should Middle-Market Companies Care?

1. How You Run Your Business Matters
2. Laws and Customers Are Changing
3. Investors Are Watching

What Should Middle-Market Companies Do?

• Check Your Impact
• Make Sustainability a Part of Your Business
• Work with Others

Has BlackRock Always Supported Sustainability?

BlackRock has talked a lot about Environmental, Social, and Governance (ESG) issues in the past, saying they help businesses succeed in the long run. However, in recent years, they’ve been more careful about how they push companies to be environmentally friendly.

For example:

• In 2021, they supported almost half of all environmental proposals at company meetings.
• In 2024, they only supported 4% of these proposals because they worried about business costs.
• In 2025, they paused some of their ESG efforts to see how new U.S. government rules on climate reporting would affect companies.

This means BlackRock still believes in sustainability, but they are being more selective in how they push for it.

How Is BlackRock’s Natural Capital Approach Different from Sustainable Finance?

BlackRock’s focus on natural capital is related to sustainable finance, but they are not the same thing.

1. What Is Natural Capital?

• Natural capital refers to the Earth’s resources—like land, water, forests, and wildlife—that businesses rely on to operate.
• BlackRock is saying that companies should protect and manage these resources wisely because running out of them or harming them could hurt business profits in the future.
• This is about how businesses interact with nature and how investors like BlackRock consider those risks when deciding where to invest.

2. What Is Sustainable Finance?

• Sustainable finance is about how money is invested and used to support businesses that take environmental and social issues seriously.
• It includes green bonds, ESG investing, and impact investing—which direct money toward companies that are helping fight climate change, reduce pollution, or improve social issues.
• Governments, banks, and investors create financial products and rules to push businesses to operate in a more sustainable way.

Key Differences:

Natural Capital (BlackRock's Approach) Sustainable Finance Focuses on nature-related risks and business dependency on natural resources Focuses on financial strategies that support sustainability Examines how land, water, and biodiversity affect long-term business success Includes investments, loans, and financial tools that promote sustainability BlackRock is engaging with companies to improve natural capital management Governments, banks, and funds create financial products and policies to drive sustainable investment More about how nature impacts business performance More about how finance can promote sustainability goals

How Are They Connected?

Both natural capital and sustainable finance aim to reduce financial risks from environmental problems and help businesses adapt to a changing world. However:

• Natural capital is a business issue—companies must understand how their dependence on land, water, and biodiversity affects their operations.
• Sustainable finance is a money issue—investors and governments use financial tools to reward or push companies toward greener practices.

What Should Middle-Market Companies Do?

• If you depend on natural resources, start managing them better (BlackRock’s natural capital approach).
• Look for financing and investment opportunities tied to sustainability (Sustainable finance).
• Show investors you are reducing environmental risks—this can help attract funding and avoid penalties.

In short: Natural capital is about the risks and opportunities businesses face due to nature, while sustainable finance is about how investment and money support sustainability efforts.

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