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What is natural capital?

Posted by on June 2, 2014

Daija Angeli, project officer in the Natural Capital Initiative (NCI), works with the term natural capital every day. When a member of NCI’s Steering Group mentioned that people don’t know what it means until you tell them about bumblebees and apple trees, she thought it was time to reflect on the term again.

Most of us will first think of the skyscrapers in the City of London when hearing the word capital. Financial capital, however, is only one input into the goods and services we use in our daily and not-so-daily lives. They also require other forms of input, or capital, including goods and services from to the natural environment. The concept of natural capital evolved to illustrate that we rely on our natural environment to improve the quality of our lives, and it allows us to place a value on what nature does for us.

Natural capital is an economic metaphor that has been used by ecological economists for over 30 years, but only recently gained popularity in the wider environmental and sustainability communities. It is a broad concept and many definitions have been used to describe it; it can mean different things to different people yet still provides a shared understanding. The concept facilitates dialogue between the natural scientist studying soil biota, the economist investigating the value of clean water and the policy maker implementing the Water Framework Directive.

At NCI (a special interest group of the Society of Biology), we are currently working with the definition of the Natural Capital Committee, a group of natural and social scientists that advises the Government. In their definition, natural capital refers to “the elements of nature that directly and indirectly produce value to people, including ecosystems, species, freshwater, land, minerals, the air and oceans, as well as natural processes and functions.” This definition includes many different components of the living and non-living environment. It also includes the processes, such as photosynthesis, and functions, such as nutrient cycling, which link these components.

To illustrate how natural capital extends the traditional economic view, let’s take a look at forests. Traditionally, we view a forest as a stock of trees which provides us with a flow of timber, wood fuel and employment. All of these have monetary value attached to it which makes it easy to figure out the value it contributes to our economy.

If we look at the forest with a natural capital lens, it does not only consist of a stock of trees but also encompasses, for example, the soil and the organisms that live in it, and the complex relationships that make up an ecosystem. In addition to timber, the forest provides ecosystem services ranging from climate regulation and natural flood defences to recreational opportunities. All these services provide benefits to society. However, in contrast to the goods mentioned above, these benefits are complex, difficult to measure and still largely ignored in our accounting systems. If you like visualisations, have a look at this infographic by the World Forum on Natural Capital which summarises this beautifully.

Natural capital is necessarily a reduction of the complex and diverse relationships that characterise our natural environment. However, it is a concept that resonates with decision makers in policy, business and civil society and helps to facilitate dialogue between different disciplines. As the second report of the Natural Capital Committee on the state of natural capital in England showed, in many cases the benefits we derive from our natural environment are at risk. Acknowledging the value of our natural capital and having a common language is important at a time when we need to find solutions to maintain and improve the natural assets that are crucial to our well-being and economic prosperity.

 

Share your thoughts on natural capital on the blog or on Twitter, #natcap2014. The Natural Capital Initiative will be hosting its second ‘Valuing our Life Support Systems’ summit on 6th & 7th November 2014, hosted by the British Library. Visit the Natural Capital Initiative website to learn more and email us at secretariat@naturalcapitalinitiative.org.uk  to register your interest in the event.

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