Natural Capital Accounting


There is no doubt that our natural endowments are of infinite value because without them, life on earth simply could not exist. The problems that come along with pricing and commodifying nature have been well documented. Nevertheless, measurements and meaningful (economic) valuation of our natural resources stocks and ecosystem services are critical and necessary to approach and influence policy process and decision makers. Only if we can measure and valuate your natural capital stock, we are able to monitor and manage them in a sustainable manner.

In this regard, ecosystem valuation and natural capital accounting represent the methodological backbone allowing us to bring natural capital into decisions making processes, promote green growth and sustainability. Natural capital accounting denotes the process of calculating and valuating the total physical stocks and flows of environmental goods and services in a given geographical space. This includes physical and monetary accounts for natural resources such as water, timber and mineral resources, as well as accounts for ecosystem assets and services such as terrestrial forests in their function of water flow and climate regulation, or mangroves in their function of storm surge protection and marine resources reproduction. These physical and monetary accounts help us to incorporate our natural capital in development planning, policy processes and economic decision making.

Valuation is the essence of decision making. In the context of nature, however, it is increasingly recognized that valuation in narrow market-based and purely monetary terms is not adequate to account for the centrality of natural capital to human and other life on the planet. Therefore, instead of attributing monetary values to nature, valuation should draw on the trade-offs we make in social, ecological and economic terms in development planning and policy processes. It is by recognizing these inevitable trade-offs that we avoid undervaluing or ignoring things like nature that are difficult to value.

Particularly due to these challenges in expressing nature in monetary terms, natural capital and the measuring of nature also face a wide variety of criticisms. It is for instance often argued that natural capital, rather than protecting nature, simply integrates our environment into the capitalist market system by commodifying it. An example of such critical perspective can be found in an article by Bram Büscher and Robert Fletcher.

Others, however, have decided to face the difficult task of developing tools to measure nature. Below, a list of initiatives working with the challenging question of how to account for natural capital is provided.