Recognizing the Value of Natural Assets
Our natural world is the foundation upon which human civilization and economic prosperity are built. From the air we breathe to the water we drink, the ecosystems that surround us provide an abundance of essential services that sustain life. Yet, this natural capital – the stock of renewable and non-renewable natural resources that deliver a flow of valuable goods and services over time – has long been taken for granted, underappreciated, and undervalued.
As global biodiversity continues to decline at an alarming rate, the need to recognize, measure, and protect the true value of nature has never been more urgent. Target 3 of the Kunming-Montreal Global Biodiversity Framework calls for the effective protection and management of 30% of the world’s terrestrial, inland water, and coastal and marine areas by 2030. This ambitious goal reflects the growing awareness that safeguarding these vital ecosystems is crucial for human well-being and sustainable development.
Quantifying the Benefits of Ecosystem Services
Natural capital encompasses the soil, geology, air, water, minerals, and all living organisms that make up the natural world. These components work together to deliver a wide range of ecosystem services – the benefits that people obtain from nature. These include the provision of food, fiber, and fresh water, the regulation of climate and disease, the support of nutrient cycling and soil formation, and the creation of cultural, recreational, and spiritual opportunities.
Traditionally, the full value of natural capital and ecosystem services has not been recognized by economic systems. This oversight has led to the overexploitation and degradation of natural resources, as their worth is not adequately factored into decision-making processes. However, the tide is turning, as policymakers, investors, and the private sector increasingly recognize the need to integrate nature into economic considerations.
By quantifying the monetary value of ecosystem services, we can begin to understand the true cost of environmental degradation and the potential benefits of conservation and restoration efforts. For example, a recent study found that the economic value of ecosystem services provided by mangroves in the Philippines is estimated to be between $3,679 and $9,089 per hectare per year. These services include coastal protection, fisheries production, and carbon sequestration – all of which contribute to human well-being and sustainable development.
Harnessing Policy Tools and Economic Incentives
Once the monetary value of natural capital has been assessed, there are several policy instruments and economic tools available to increase investments in protecting and restoring nature. These include:
Green and Blue Bonds
Green bonds, which finance climate change mitigation projects, are increasingly being used to support nature-based solutions, such as improving water quality, protecting coastlines, and sustainable forest management. Similarly, blue bonds are designed to fund investments in marine and coastal ecosystem management and restoration.
Payments for Ecosystem Services (PES)
PES schemes provide a mechanism to pay land managers who deliver positive environmental externalities through nature-positive actions. For instance, in Vietnam, a national-level PES program was established to promote forest conservation and create sustainable livelihoods for local communities.
Incentives for Protecting Natural Capital
Initiatives like Reducing Emissions from Deforestation and Forest Degradation (REDD+) allow governments to support the enhanced maintenance and management of forests, while also leveraging them for carbon sequestration and climate change mitigation.
By utilizing these policy tools and economic incentives, policymakers and the private sector can work together to align their practices and investments with the protection and restoration of natural capital. This shift in mindset and approach is crucial for achieving sustainable development and ensuring a healthy, resilient future for all.
Embedding Nature into Economic Decision-Making
Integrating the value of nature into economic decision-making is a crucial step toward protecting natural capital and promoting sustainable development. This requires a fundamental shift in how we view and measure economic progress, moving beyond traditional gross domestic product (GDP) as the sole indicator of a country’s wellbeing.
GDP Limitations
While GDP is a useful metric for tracking economic activity, it fails to account for the depletion and degradation of natural resources, the negative impacts of pollution, and the loss of ecosystem services. A high GDP may mask the underlying erosion of natural capital, which can have devastating consequences for long-term economic and social stability.
Natural Capital Accounting
To address this shortcoming, natural capital accounting frameworks have been developed to measure the stocks and flows of natural assets and the services they provide. By incorporating these values into national accounts and decision-making processes, policymakers can better understand the true costs and benefits of their actions, and make more informed choices about the use and management of natural resources.
Private Sector Engagement
The private sector also has a crucial role to play in valuing and protecting natural capital. By understanding the impacts of their operations on local ecosystems and communities, businesses can make more sustainable decisions, mitigate risks, and identify new opportunities for investment in nature-based solutions. Integrating nature-related reporting into corporate sustainability frameworks and disclosures can help drive this change.
Conclusion: Toward a Sustainable Future
Recognizing the value of natural capital and embedding it into economic decision-making is a critical step toward protecting and restoring the ecosystems that sustain life on our planet. By utilizing a range of policy instruments and economic tools, policymakers, investors, and the private sector can work together to align their practices with the long-term preservation of natural assets.
As we strive to achieve the Sustainable Development Goals and the global biodiversity targets, it is essential that we shift our mindset and recognize the intrinsic value of nature. Only by valuing and safeguarding our natural capital can we ensure a resilient and prosperous future for all.
