Forests are often described as the `lungs of the earth’ but oxygen generation is just one function they perform in their complex relationship with the atmosphere and people. They help regulate air quality, soak up rainwater and recycle it, prevent soil erosion, and maintain the climate by storing large quantities of carbon. Despite this multi-tasking, the value of forests is only measured in a country’s national accounts by the timber and fuel they provide. The total contribution of forests to other sectors of the economy is either invisible or undervalued.
Countries across the globe are now recognizing that their natural assets – forests, water, land, minerals and energy sources – contribute vast wealth to their economies, but because the services they provide traditionally go unaccounted for in measures like GDP, they are often overlooked and not managed well.
Now, an unprecedented number of countries have become energized and committed to undertaking Natural Capital Accounting (NCA) as a way of factoring nature’s services into economic decision-making. Government statisticians now have a new tool from the UN Statistical Commission, the System of Environmental and Economic Accounting that helps them calculate the total stock of natural assets in their countries and how these contribute to overall wealth.
"In the Philippines we are not issuing new mining contracts until we have a full account of our stocks of minerals," Ramon Paje, Secretary, Department of Environment and Natural Resources, the Philippines
Momentum is building. More than 35 ministers, vice-ministers and senior officials of finance, development and environment came together for a High-level Ministerial Dialogue on NCA on April 18, on the side of the World Bank-IMF Spring Meetings. They are part of a larger group of more than 60 countries, the ‘first-movers’ of NCA, who are sharing technical know-how and the set-up of institutions needed to move the agenda forward.
“Natural resources are the base upon which all wealth is built,” said World Bank Vice President for Sustainable Development Rachel Kyte, who chaired the Dialogue. “Countries recognize that they cannot make difficult choices on development or achieve green and inclusive growth without the data to show how economic growth depends on natural assets. Natural capital accounting provides the data needed at every Cabinet table to make these choices.”
The Dialogue included representatives from Botswana, Colombia, Costa Rica, Denmark, Finland, France, Gabon, Namibia, Kenya, Philippines, and Rwanda among others – all countries that are part of the growing global community of practice on NCA.
In many parts of the world NCA is already being used as a crucial tool in making smart economic decisions while in others, governments are just embarking on it:
- Kenya developed forest accounts to understand the contribution that forests make to GDP
- Canada, the Netherlands and Norway undertake annual energy accounts to plan for economic growth while reducing carbon emissions
- Botswana has compiled water accounts to help plan for the country’s economic diversification and growth. They show that 45 percent of the country’s water currently goes to agriculture, which provides just 2 percent in return to GDP
- Australia compiles water accounts to help it manage this scarce resource more effectively
Countries made strong statements in support of scaling-up work on valuing nature in a way that is understood by finance and development ministries. In the Philippines, the government has committed to taking stock of mineral assets before continuing business as usual: “In the Philippines we are not issuing new mining contracts until we have a full account of our stocks of minerals,” said Ramon Paje, Secretary, Department of Environment and Natural Resources.
Rwanda is set to launch the second phase of its Economic Development and Poverty Reduction Strategy and NCA is part of it. Namibia wanted to know the contribution of natural resources to their economy and have started work on wildlife and fishery accounts.
Ministers and policy makers agreed on ways to help them mainstream Natural Capital Accounting, including: working across ministries to ensure full government support; bringing in the public and private sectors; and supporting and exchanging information and challenges with each other through regional and annual gatherings.
"What is not counted doesn't count. We want to change this situation," Pascal Canfin, Minister for Development, Ministry of Foreign Affairs, France
Several countries restated their commitment to supporting NCA – both financially and technically. Pascal Canfin, Minister for Development, Ministry of Foreign Affairs, France said: “What is not counted doesn't count. We want to change this situation”.
The private sector is a key component of this work. IFC, a member of the World Bank Group, is launching a Natural Capital program to create new methodologies and tools in collaboration with private companies. These will allow the private sector to measure, manage, report, and potentially value natural capital.
"Sound natural capital management goes hand in hand with benefits for companies, communities, and the environment,” said Usha Rao-Monari, Director, Sustainable Business Advisory, IFC. “Companies that take natural capital into account can save on resource use, access markets and financing, and mitigate major environmental and social risks," she added.
The World Bank is supporting countries to mainstream natural capital into national accounts and development planning through a global partnership called WAVES (Wealth Accounting and the Valuation of Ecosystem Services).
The WAVES partnership includes the United Nations Environment Programme, the United Nations Development Program, and the United Nations Statistical Commission; Botswana, Colombia, Costa Rica, Madagascar, and the Philippines, which are implementing programs; as well as several counties that are providing technical and financial support (See all partners).
A global action plan on NCA that lays the framework for its wider uptake was discussed at the Dialogue. It includes intensive support from partners and aims to build on the work already being done at the country level.