Natural Capital
Natural capital refers to the global reserves of natural resources, which are fundamentally linked to ecosystem services. When evaluating the natural wealth of a specific area as assets or natural capital, it becomes feasible to identify and assess the services they provide.
These assets encompass biological systems such as forests, shrublands, grasslands, and agricultural lands; physical components like soils, underground aquifers, rivers, temporary watercourses, floodplains, dunes, and natural caves; and biodiversity elements such as pollinators, medicinal plants, and ancient trees that have supported other species for extended periods.
Depending on their ecological condition and levels of degradation, these assets may yield varying quantities of ecosystem services. For example, healthy soil can offer greater levels of soil stabilization, carbon sequestration, dust control, or water filtration compared to the ecosystem services provided by degraded soil.
Natural assets extend beyond mere physical ecosystem or biological characteristics. Human engagement with the environment generates a collection of cultural assets rooted in historical, social, and symbolic values. Although many cultural natural assets cannot be quantified spatially, they provide essential cultural ecosystem services, including identity, local heritage, aesthetics, education, recreation, and tourism.
Ecosystem Services
One approach to understanding ecosystem services is by grouping them into three main categories: provisioning, regulating, and cultural services.
- Provisioning services are the tangible products we obtain from nature such as food, fresh water, timber, and medicinal resources.
- Regulating services refer to nature’s ability to control environmental conditions, like forests storing carbon to regulate the climate, wetlands filtering water, or mangroves protecting coastlines from storms.
- Cultural services capture the non-material benefits ecosystems provide, including recreation, spiritual connection, cultural identity, and mental well-being.
An example of these services are:
| Natural Asset | Provisioning & Regulating Services | Cultural Services |
|---|---|---|
| Forests | – Timber, fuelwood, and medicinal plants – Carbon storage and air purification – Biodiversity habitat | – Sacred sites for Indigenous communities – Ecotourism – Nature-based recreation |
| Wetlands | – Water purification – Flood control and groundwater recharge – Habitat for fish and birds | – Birdwatching and nature photography – Cultural identity tied to landscapes |
| Oceans & Coral Reefs | – Fisheries and food supply – Carbon sequestration – Storm protection | – Tourism and diving experiences – Spiritual value in coastal traditions |
| Grasslands | – Livestock grazing – Soil retention and pollination – Carbon storage | – Cultural landscapes for pastoral communities – Traditional herding practices |
| Mangroves | – Coastal protection – Nursery habitat for marine life – Carbon capture | – Cultural identity for coastal populations – Educational and research value |
| Urban Green Spaces | – Air cooling and stormwater absorption – Improved air quality | – Mental well-being and relaxation – Community gathering spaces – Outdoor exercise |
| Mountains | – Freshwater sources – Soil stabilization and climate regulation | – Sacred peaks in many spiritual traditions – Hiking, tourism, and cultural symbolism |
Natural Capital Accounting
Natural capital accounting (NCA) seeks to treat nature as an asset that must be measured, maintained, and valued.
Natural capital accounting (NCA) is a way of systematically tracking how nature is being used, changed, and conserved. NCA treats nature as an asset that must be measured, maintained, and valued. It combines environmental data with economic indicators to create more comprehensive national or corporate accounts.
For example, it might show how forest depletion affects future water availability, or how declining fish stocks impact food security. One widely adopted framework is the UN’s System of Environmental-Economic Accounting (SEEA), which allows countries to report on natural assets alongside GDP. Companies are also adopting similar approaches to assess their environmental impacts and dependencies, helping them make more sustainable business decisions.
Illustrative NCA
To exemplify how NCA works, imagine an assessment of natural resources in a small rural town of 20,000 people. The town is surrounded by forests, wetlands, farmland, and a river that runs through its center.
The town decides to adopt natural capital accounting to better understand how nature supports its local economy and well-being. Here is how some of the town’s natural assets are valued:
| Natural Asset | Ecosystem Services | Estimated Annual Economic Value | Notes |
|---|---|---|---|
| Community Forest | – Timber & fuelwood (provisioning) – Carbon storage – Recreation and tourism | $1.2 million | Includes sustainable timber harvest, avoided CO₂ emissions ($50/ton), and park revenue |
| Wetlands | – Water purification – Flood control – Birdwatching | $750,000 | Estimated cost of artificial filtration and avoided flood damage |
| River System | – Irrigation & water supply – Fishing – Cultural value | $600,000 | Includes freshwater provision to farmers, local fishing, and community events on riverbanks |
| Farmland & Grassland | – Crop production – Pollination – Soil retention | $2.5 million | Pollination services alone valued at $400,000 based on crop dependence |
| Urban Green Spaces | – Cooling effect – Mental health – Property value uplift | $900,000 | Based on reduced air conditioning costs, mental health savings, and real estate premiums |
| Mangroves (coastal area nearby) | – Storm protection – Carbon capture – Fisheries | $1 million | Avoided storm damage and support for small-scale fisheries |
Total Estimated Annual Value of Natural Capital: $6.95 million
The natural environment contributes nearly $7 million per year in direct and indirect economic value, potentially more than the town’s largest employer. Without accounting for these services, they would have continued to go unnoticed and unprotected.
With this information, the town can plan smarter land-use policies, investing in wetland restoration, and applying for green funding to maintain and enhance its natural capital.
Check this post describing a regional-level natural capital accounting in Colombia.
The Environment Consultant 