What is natural capital?

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As the word itself suggests, natural capital refers to the set of goods and services that biodiversity provides. But, if we are talking about capital, should we put a value on them? And if so, how ca we measure it?

Natural resources, from water to soil or living organisms are a crucial part of our economy and livelihood. However, for too long we have put much of the world’s biodiversity in danger, with some of its consequences being irreversible. 

It is in this context that we start to wonder how can we protect it the way it deserves, as well as the way we need for our own future. In other words, how can we value it properly? Can we put a price to it? Should we put a price to it? 

Natural capital in the economy

Almost by definition, we need to talk about the role natural capital plays inside the world economy, in order to understand what is it we are actually talking about and what is it that we so desperately need to protect.

In this regard, we have to talk about natural capital from two distinct perspectives: the relation between natural capital and governments, and the role of companies in valuing and protecting natural capital. 

From an administrative or governmental point of view, protecting and designing a sustainable use of natural capital should be a no brainer. 

It just makes sense to assess a country’s or region’s natural resources in order to develop economic or social activities accordingly; this is, in a way that is respectful, sustainable, prevents risks, and can ultimately be enjoyed and celebrated by people.  

natural capital and governments

Another key point to discuss is that of the relation between natural capital and companies. The latter cannot escape their responsibility towards nature, as they are either highly and directly dependent on natural capital, or they have huge potential to either damage or protect biodiversity. 

Furthermore, these complex relationships can overlap, meaning companies should consider natural capital as a top priority, as its degradation can affect their profit, reputation and the credibility of their corporate governance. 

Can we measure the value of natural capital?

This is a difficult question that for the most part is still pending. How can we value or measure the value of natural capital? To some, it seems rather farfetched to put a price to it, but in terms of our economic system, it almost feels necessary to do so. 

We can understand the value of natural capital as that of the market. This is, a tree is worth as much as the wood or paper it can end up producing. But it would be naive to suggest that is all a tree is for.

the value of natural capital

Trees help keep the air clean, they are crucial for capturing carbon in the atmosphere, they are home to many living creatures and organisms, and they are a source of enjoyment for many people. So the question remains, can we measure the value of all of this?

Some experts suggest it is indeed possible to put a value to it, as long as we come up with a way to quantify its value, not only for the market, but to society, the planet and its livelihood. And while some aspects of nature are difficult or even impossible to quantify, biophysical elements  could give us an answer. 

The problem with the economic value of natural capital

Unfortunately, sitting under the shade of a tree and admiring a forest is far from being valued or measured in any way that is quantifiable. But, following what we just analyzed, there seems to be a somewhat accurate way to measure the economic value of natural capital.

The first step is to transform biophysical metrics into economic value. For example, water use, carbon capturing capacity, CO2 put into the atmosphere, other services that a given ecosystem can provide etc. 

So what is the problem, you may ask. Well, as most thing concerning the world of sustainability, there is a lack of data, particularly, economic data.

The latter derives from a lack of standardized tools, mechanisms and methodologies to measure or quantify the biophysical elements we mentioned earlier. 

natural capital
Raising awareness of natural capital

The bottomline is that measuring the value of natural capital should be part of our duty to the environment, society and the economy. But as we find our way towards those standardized mechanisms that can help us assess what we have in front of us, there are still actions we can take to accelerate the process. 

Raising awareness about the value of our biodiversity and natural resources is crucial to the advancement of regulations, policies and even quantifiable methodologies that could put an end to reckless and dangerous natural exploitation. 

This is the perfect time to put natural capital in the center of discussions, and give it the platform and attention it needs. Protection and conservation efforts could be much more nuanced and help restore our planet for the wellbeing of future generations.

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