"Natural capital is the sum of our ecosystems, species, freshwater, land, soils, minerals, our air, and our seas. These are all elements of nature that either directly or indirectly bring value to people and the country at large. They do this in many ways but primarily by providing us with food, clean air and water, wildlife, energy, wood, recreation, and protection from hazards.
Approximately 60% of the ecosystem-services mentioned above are being degraded, through loss of biodiversity, pollution, climate change and poor land use. Based on a study from The Economics of Ecosystems and Biodiversity (TEEB), it is calculated that the economic impact of the degradation of natural systems to approximately 2 to 5 trillion USD per year.
Governments and business alike are beginning to recognise the critical importance of natural capital as the foundation of all economic productivity and the associated benefits from valuing it, such as greater transparency over supply chain security and a deeper understanding of the risks to business continuity. Natural capital is very often a core input into an organisation’s business model, and some companies are beginning to account for the impacts of their operations on natural capital through their operations, products, and services.
With financial capital, when we spend too much we run up debt, which if left unchecked can eventually result in bankruptcy. With natural capital, when we drawdown too much stock from our natural environment, we also run up a debt which needs to be paid back, for instance by replanting clear-cut forests, or allowing aquifers to replenish themselves after we have abstracted water. If we keep drawing down stocks of natural capital without allowing or encouraging nature to recover, we run the risk of local, regional, or even global ecosystem collapse.
Poorly managed natural capital therefore becomes not only an ecological liability, but a social and economic liability too. It is important to understand the economic value of nature’s benefits which will enable smarter decisions that account for nature in the economic systems and ensure that it can sustain us. Working against nature by overexploiting natural capital can be catastrophic not just in terms of biodiversity loss, but also catastrophic for humans as ecosystem productivity and resilience decline over time and some regions become more prone to extreme events such as floods and droughts. Ultimately, this makes it more difficult for human communities to sustain themselves, particularly in already stressed ecosystems, potentially leading to starvation, conflict over resource scarcity and displacement of populations. Furthermore, sustainable management of natural capital delivers sustainable businesses and economic sustainability which has direct impact on costs (fewer resources such as carbon or water are used).
It was estimated in the “Living Planet Report 2018: Aiming Higher” (2018) by WWF that the contribution of nature to the global economy is worth more than $125 trillion annually. Yet, according to – “The Economics of Biodiversity: The Dasgupta Review” (2021), current estimates of financial investments in natural capital are still only about 0.1% of global GDP (about US$78–143 billion per year). In addition to this government spending, private finance directed at biodiversity ranges from about US$6.6 billion to US$13.6 billion including spending on biodiversity offsets, sustainable commodities, forest carbon finance, payments for ecosystem services, water quality trading and offsets, private contributions to conservation non-governmental organisations (NGOs), and private finance leveraged by bilateral and multilateral public development finance. However, to put this in proportion, at the same time, global governments spend around US$500 billion on activities, such as subsidies and investment, that can be considered harmful to biodiversity.
The Natural Capital Protocol is a decision-making framework that enables organisations to identify, measure and value their direct and indirect impacts and dependencies on natural capital. A key stage in the application of the protocol is to determine how a business is contributing to changes in the state of natural capital and what can be done to reduce their impact. Measurement is a crucial step on the path delivering on a natural capital strategy. Considering the above challenges, the objective of this ESA Kick-Start initiative is to foster new state-of-the-art services combining space-based assets to enhance the natural capital management and monitoring."