BACKGROUND AND DEFINITIONS
Natural capital has been defined as “the elements of nature that directly and indirectly produce value or benefits to people, including ecosystems, species, freshwater, land, minerals, the air and oceans, as well as natural processes and functions” (NCC, 2014, p.21). Natural systems are only ‘natural capital’ insofar as they produce goods and services for humans and can thus be understood in terms of the value they deliver.
One aspect of the utility of the natural capital concept is that it relates easily to the idea of sustainability, which is in turn at the heart of the notion of sustainable development embodied in the Sustainable Development Goals (SDGs). The use of capital of any kind, including natural capital, is only sustainable if the capital stock is maintained over time.
Policy in respect of natural capital requires a deep understanding of the natural systems and processes that, often in collaboration with humans, produce environmental goods and services (EGS), so that policy interventions to protect or enhance natural capital and EGS can be accurately and appropriately targeted.
THE GGKP RESEARCH PROGRAMME ON NATURAL CAPITAL
In 2018 GGKP set out an initial research programme on natural capital and green growth, grouped into three overarching themes of Data, Metrics and Policies. Under this programme five papers were commissioned. This note summarises the key insights of these papers.
DATA
Ross et al. (2020) listed 28 such platforms and tools and reviewed them across a number of criteria: Overview, Purpose, Versions, Access, Documentation, Data, Indicators, Ecosystem Services, Spatial Information and Temporal Information.
These platforms and tools have been developed by different actors (public, private, commercial and non-profit) for different purposes and scales at different times. The great majority produce quantitative outputs, and 12 of them produce monetary outputs (i.e. environmental outputs valued in monetary terms). There is open access to full functionality free of charge for 20 of the 28 platforms and tools. A number of data gaps were identified in the analysis with recommendations for filling the gaps.
Here is the breakdown of the full set of data platforms and tools with their advantages.
METRICS
Natural Capital Indicator Framework
Environmental data needs to be processed into indicators, which give relevant, acceptable, credible, easy and robust insights into the issue in question. There is now a huge number of environmental indicators developed for different policy purposes, but prior to this work for the GGKP there was no framework specifically for natural capital indicators. Developing such a framework was the objective of the paper by Fairbrass et al. (2020a).
The Natural Capital Indicators Framework (NCIF) developed in this paper draws heavily on such relevant frameworks as already exist, the most important of which are the System of Environmental Economic Accounts (SEEA) and the Common International Classification of Ecosystem Services (CICES). The structure of the framework follows the accepted understanding of natural capital: natural abiotic and biotic assets (which include ecosystems) produce biophysical flows which, often with inputs of human and physical capital, produce economic, social and environmental outputs, which include both benefits and residuals.
Fairbrass et al. (2020a) suggests a wide range of indicators in these categories and relates these indicators to other important indicator sets (e.g. the Aichi biodiversity targets).
Both the assets and the benefits may be measured in physical and monetary terms. The flows are measured in physical terms only. The residuals are first measured in physical terms, but, if they cause positive or negative impacts, they can also be measured in monetary terms.
As a next step, the GGKP is exploring opportunities to give a proof of concept by choosing between the different possible indicators and implementing the NCIF in a particular country.
Natural Capital and the SDGs
The SDGs summarise the UN’s aspirational agenda for 2030. Associated with them are 160 targets and 230 indicators. An increase in natural capital will be required from current levels in order to meet many of these targets. Markandya (2020) estimated the ‘natural capital gap’ between current levels of natural capital, or projected levels in 2030, and those required to meet selected SDG targets.
Markandya (2020) shows the upper bound and lower bound of the natural capital gap for a number of environmental issues that have close links to SDG targets and indicators. The paper shows that the total natural capital gap associated with the selected SDG targets is between USD 31.9 and USD 86.9 trillion, with the largest individual items (upper bound) being the gap associated with GHG emissions and deforestation. The upper bound is nearly 83% of the World Bank’s estimate of total global natural capital. It therefore seems that global natural capital will need to increase by up to 83% from today’s level (or the level projected for 2030 under current trends) in order for those selected SDG targets to be met.
Markandya (2020) also suggests that analysis in terms of changes in the capital stock (using cost-effectiveness analysis) may be preferable to assessing natural capital changes than conventional multi-criteria or cost-benefit analysis. With support from GIZ’s Economics of Land Degradation the natural capital and SDGs approach is now being used to assess terrestrial natural capital gaps to achieve SDGs targets in three countries, namely India, Kyrgyzstan, and Rwanda.
POLICY
Natural Capital in Policy Frameworks for Green Growth
The four founding partners of GGKP (GGGI, OECD, UNEP, World Bank) and a number of other GGKP partner organisations (among them the African Development Bank [AfDB]) have produced policy frameworks for ‘green growth’. Fairbrass et al. (2020b) enquires how natural capital is treated in these frameworks.
The World Bank explicitly includes natural capital as one of the categories of capital underlying its analysis of green growth. The concept is also prominent in the AfDB’s green growth analysis of Mozambique, produced in partnership with WWF. Otherwise the concept is more implicit than explicit in the green growth policy frameworks of these organisations and the term itself, where used, is not a central focus. Fairbrass et al. (2020b) recommends an ‘integration framework for mainstreaming natural capital in green growth policymaking’.
Applying this integration framework to the green growth policy frameworks of GGGI, OECD, UNEP and World Bank, Fairbrass et al. (2020b) finds varying levels of natural capital integration and makes the following recommendations for nature-based green growth:
- More comprehensive consideration of ecosystem assets and services;
- Identification of specific policy instruments appropriate to natural assets and services;
- Application of a systems approach to policy assessment that considers the relationships between natural assets, flows, human inputs, and outputs as per the NCIF;
- Provision of methodological advice to country teams to improve monitoring, implementation and impact of natural capital in green growth policies at national level.
Use of Natural Capital Analysis in Policy
The ultimate purpose of data and metrics relating to natural capital is to improve policy and decision making. Fairbrass et al. (2020c) reviewed use cases and evidence as to how the natural capital approach had been used in policy and with what results.
The literature search revealed that a natural capital approach has been applied in some way to decision making in 22 countries, most often in relation to ecosystems [117] and using natural capital accounting [78]. Perhaps the most surprising finding of this literature review, which covered 340 studies from leading natural capital and green growth organizations, is that only two papers reported on the policy impact of natural capital information. Also, very little literature was found on the application of natural capital indicators to decision-making.
The GGKP is working with partners in the Economics for Nature initiative supported by the MAVA Foundation to identify additional evidence on the decision-making impact of natural capital for green growth. We seek broad inputs on bodies of literature that may better evidence this impact than the selected literature for this paper. Second, the GGKP encourages the green growth community to build the evidence base for natural capital by encouraging decision makers to apply and report on policy impacts more widely.
