- Natural Capital Accounts Explained: This series describes in simple terms what forest, land, and water accounts are, how they are produced, and their potential benefits.
- Natural Capital Accounting in Action: This series shows how accounts inform national policies and translate into action on the ground.
- Natural Capital Accounting and Global Issues: This set of policy briefs describes how NCA can be used as a tool to address issues such as sustainable development, poverty, and valuing marine and coastal ecosystems.
GDP looks at only one part of economic performance – income – but says nothing about wealth and assets that underlie this income. For example, when a country exploits its minerals, it is actually depleting wealth. The same holds true for over‐exploiting fisheries or degrading water resources. These declining assets are invisible in GDP and so, are not measured.
Wealth accounting, including natural capital accounting (NCA), is needed to sustain growth. Long‐term development is a process of accumulation and sound management of a portfolio of assets – manufactured capital, natural capital, and human and social capital. As Nobel Laureate Joseph Stiglitz has noted, a private company is judged by both its income and balance sheet, but most countries only compile an income statement (GDP) and know very little about the national balance sheet.
A major limitation of GDP is the limited representation of natural capital. The depletion of natural capital – including assets like forests, water, fish stocks, minerals, biodiversity and land – poses a significant challenge to achieving poverty reduction and sustainable development objectives. The issue is especially important in developing countries as shown in a World bank publication, The Changing Wealth of Nations 2018. Low-income countries depend on natural capital for 47 percent of their wealth. And yet, in several of these countries, natural capital is being depleted without any corresponding investments in human capital (such as education or health) or produced capital (such as infrastructure), leading to an overall decrease in wealth and a failure to improve standards of living among the poor.
Our goal is a world where measuring and valuing the environment leads to better decisions for development. We believe incorporating natural capital into national accounts can support better decisions.
Natural capital accounts (NCA) can provide detailed statistics for better management of natural resources that contribute to economic development. For example, land accounts can help countries assess the value of competing land uses. NCA can help countries rich in biodiversity to design a management strategy that maximizes the contribution to economic growth while balancing tradeoffs among ecotourism, agriculture, subsistence livelihoods, and other ecosystem services like flood protection and groundwater recharge.