When we think about capital, it is usually in the economic sense of wealth in the form of money or other assets. And when we think about nature, we usually don’t think about economics but rather about the plants and animals and landscapes and seascapes of the physical world. There is, however, a growing movement of people and organisations that link nature and economics in a formal way with the concept of Natural Capital.
Most people accept there is a link between humanity, our economy and the natural world – mostly in the sense that our economy depends on nature, even if we don’t seem to value it very much! In an attempt to value nature in a more economic sense, and therefore hopefully encourage us to account for nature in economics, the concept of natural capital has been proposed. Natural capital is defined as the world’s stocks of natural assets which include geology, soil, air, water and all living things.
Natural Capital is a controversial concept, with some people questioning whether we should describe nature with standardised measurements and place a financial value on it, arguing that in doing this we are just further succumbing to monetary infrastructures.
Despite those aesthetic and ethical objections, there is a growing movement to establish a suitable framework for valuation of natural assets and their application to business operations. There are also global financial institutions committing to natural capital initiatives, influencing investment decisions and disclosures of environmental impact. According to the United Nations, valuing natural assets will form an integral part of establishing a sustainable economy. Appropriate valuation will allow natural capital to be objectively assessed in broader activities including policy, regulation and resource management. Steps could also be taken to account for Natural Capital in determining national wealth.
By highlighting financial value and immediate remuneration from natural assets, we can understand the benefits of a healthy ecosystem and address potential consequences of loss. WWF in their Living Planet Report value ecosystem services – the things that natural capital does for us – at almost $200 trillion per year! Or put another way, if our biosphere collapsed, that would be the cost of otherwise providing those services we now get for ‘free’.
But what are these ecosystem services? The Millennium Ecosystem Assessment – a major assessment of the human impact on the environment undertaken by the UN – defines three major categories of ecosystem services: provisioning, which includes biomass, water and fibre; regulation and maintenance, which includes elements of carbon absorption, climate regulation and soil composition; and cultural services, which defines the physical and spiritual interactions of humanity with the natural world. By having a definition, we can begin to understand the scope of benefits we receive from nature and therefore the importance of preserving them.
While past economic systems may have been drivers of wealth, productivity and innovation, a sustainable future requires a circular economy – an economic system that is ideally a closed-loop that minimises the use of natural resources while also minimising waste, pollution and carbon emissions. Sustainable supply of the natural world should define the economy, rather than just consumer demand.
Most of us aspire to generate healthy levels of capital for a reasonable quality of life. A reasonable quality of life – and perhaps life itself – now depends on us generating not just economic capital but maintaining healthy levels of natural capital.
Ben Goddard is the chair of the local branch of Forest and Bird. For more information on natural capital, search for the natural capital forum or ‘The Start of a Conversation on the Value of New Zealand's Natural Capital’ (a discussion paper from NZ Treasury).