What is natural capital?
The concept extends beyond nature as a source of raw materials for production (e.g. timber) to include the role of the environment and ecosystems in supporting human well-being through the supply of such important goods and services as clean water, fertile soils and valuable genetic resources.
A 2023 analysis identified that over half (55%) of the world’s GDP is moderately or highly dependent on nature – and put the value of that dependency at $58 trillion.
The scary part is that we are consuming our natural resources at a pace far beyond that which the earth can replenish. As we continue to develop places and spaces for an evolving population, it’s integral that we pay close attention to the natural world.
Economists and policymakers are increasingly referring to the value of nature now as a form of capital because this “natural capital” supports economic prosperity in similar ways to the “financial capital” that is traded on Wall Street.
Natural capital is now known as one of the five capital considerations for any sustainable project. This also means that when we assess the value of a project, we must evaluate the impact (+/-) that an investment decision may have on the planet’s stock of natural capital, alongside consideration of the other capitals.
If you haven’t heard of biodiversity net gain (BNG for short) here’s the scoop.
BNG is an approach to real estate development. It means making sure that habitats for wildlife are left in a measurably better state than before the development began.
Faced with supply chain constraints and escalating costs, our industry needs to prioritize natural capital to avoid rising insurance premiums and lost investment opportunities.
Beginning to recognise nature as a form of capital means that we can better value the benefits it offers our societies and economies and therefore aim to protect and restore it.
Take a deep dive into the Five Capitals Model, and explore how different regions are embracing natural capital in our Drivers of Change thought piece, Capital growth, naturally.
