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A discussion on how natural capital accounting could help address urgent challenges of biodiversity loss.
William Nicolle explains how natural capital accounting could help to address the urgent challenge of global biodiversity loss. It’s clear that the world needs new tools to sustainably manage environmental resources for the long term.
The UN’s goal to halt and reverse biodiversity loss by 2030 is an ambitious target that looks increasingly unrealistic as the deadline approaches. Biodiversity is diminishing at an alarming pace, in the process exposing the world’s nature-dependent global gross domestic product (GDP)—about 55% of the total—to disruption. It’s increasingly clear that the world needs new tools to sustainably manage environmental resources for the long term.
Natural Capital Accounting (NCA) could be an integral part of the solution. First introduced in the 1970s, it is an economic approach that weaves the value of natural assets into decision making throughout markets—enabling organizations to account for their impact and dependence on natural capital (and therefore biodiversity) every time they make an economic or financial decision.
But despite being almost half a century old, NCA has struggled to mainstream. Natural assets continue to be excluded as a core component of GDP calculations. Instead, they are compiled in separate, secondary accounts. Few nations heavily invest to create complete natural capital accounts, and as a result the NCA figures that exist are often disregarded by companies, financial institutions, and investors. NCA as it stands today has little impact on biodiversity trends.
The failure of the framework to gain more traction is largely down to slow top-down attempts by governments and multilateral institutions to adopt NCA. A combination of factors—including the relative youth of these frameworks, the difficulty of translating, tallying, and then converting environmental data into monetary value—prevents NCA solutions from being broadly adopted.
This report argues NCA can only contribute to the UN’s 2030 goal through more concerted mainstreaming efforts by ‘bottom up’ organizations, such as financial institutions and investors, corporates, and non-governmental organizations. If these organizations can be persuaded of the merits of taking NCA seriously, they can help to supply the statistics and refine the methods necessary to generate reliable figures. Their engagement could provide important pressure on governments and regulators to meet and enforce NCA requirements more seriously.
The paper presents five strategies with case studies to provide private sector organizations with inspiration: proving the business case for NCA; providing governments with data; establishing its methodological credibility; ensuring the future of sustainability reporting; and innovating within standardized frameworks. The paper concludes with an idealized roadmap out to 2030 for how NCA could be brought into the mainstream of economic accounting.
It should be underscored that NCA presents a diagnosis for biodiversity loss rather than a cure. But, if it can be broadly introduced, the framework would enable governments, financial institutions, investors, corporates, NGOs and more to calculate both the state of local and regional ecosystems and the economic cost if they are further damaged—helping organizations identify and implement the most effective countermeasures.
The UN’s 2030 biodiversity reversal target could already be out of reach, but it remains important for the world to coalesce around a natural capital quantitative process as soon as possible, so that we can quantify the problem of biodiversity loss and begin to reverse it.
