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What is Natural Capital?
Natural capital refers to the world’s stock of natural assets (including air, water, soil, forests, minerals, and biodiversity) that provide essential ecosystem services supporting human life and economic activity.
These natural systems supply renewable and non-renewable resources and enable critical ecological functions such as climate regulation, water purification, pollination, and carbon storage.
Definition
Natural capital is the collective value of natural resources and ecosystem services that support human well-being, economic production, and environmental sustainability.
Key takeaways
- Foundation of economies: Provides raw materials, energy, and ecological stability.
- Includes ecosystems and biodiversity: Not just physical resources.
- Supports ecosystem services: Such as pollination, water filtration, and climate regulation.
- Finite and vulnerable: Subject to depletion, pollution, and climate impacts.
- Essential for sustainability: Protecting natural capital ensures long-term economic resilience.
Components of natural capital
1. Natural resources
- Minerals, oil, gas
- Water and soil
- Timber and biomass
2. Ecosystems
- Forests
- Oceans
- Wetlands
- Grasslands
3. Biodiversity
- Species richness
- Genetic diversity
- Healthy ecological interactions
4. Ecosystem services
Provisioning services:
Food, water, raw materials
Regulating services:
Climate regulation, flood control, carbon sequestration
Supporting services:
Soil formation, nutrient cycling
Cultural services:
Recreation, tourism, spiritual value
Why natural capital matters
Economic importance:
- Provides essential inputs for agriculture, industry, and energy
- Reduces production risks
- Drives sectors such as tourism and fisheries
Environmental importance:
- Maintains climate balance
- Preserves biodiversity
- Supports clean air and water
Social importance:
- Supports livelihoods, especially in rural communities
- Enhances quality of life
Threats to natural capital
- Deforestation
- Pollution and waste
- Overfishing and biodiversity loss
- Soil degradation
- Climate change impacts
- Unsustainable extraction
Natural capital accounting
Used by governments and firms to measure:
- Resource depletion
- Ecosystem health
- Economic value of environmental assets
Examples of tools:
- System of Environmental-Economic Accounting (SEEA)
- Natural Capital Protocol
Natural capital vs. manufactured capital
| Aspect | Natural Capital | Manufactured Capital |
|---|---|---|
| Origin | Ecosystems and nature | Human-created assets |
| Renewal | Can regenerate (if renewable) | Requires maintenance |
| Value | Ecological + economic | Economic only |
| Vulnerability | High (depletion, climate change) | Medium (wear, obsolescence) |
Examples of natural capital use
- Forests supplying timber and storing carbon
- Wetlands purifying water
- Oceans providing fisheries
- Pollinators supporting agriculture
Related concepts
- Ecosystem services
- Sustainability
- Environmental economics
- Natural resource management
- Biodiversity conservation
Sources
- United Nations SEEA Framework: https://seea.un.org/
- World Bank – Natural Capital Project: https://www.worldbank.org/
- Natural Capital Coalition: https://naturalcapitalcoalition.org/
Frequently Asked Questions (FAQ)
1. Is natural capital the same as natural resources?
No. Natural capital includes ecosystems and services, not just raw materials.
2. Can natural capital be measured?
Yes, through natural capital accounting frameworks.
3. Why is natural capital declining globally?
Due to unsustainable extraction, pollution, and climate change.
4. How can businesses protect natural capital?
Sustainable sourcing, conservation investments, and reducing emissions.
5. Does natural capital have monetary value?
Yes, many ecosystems provide measurable economic benefits.
