Natural capital and sustainable development

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  • Need to re-imagine the country’s natural ecosystems as its ‘natural capital’
  • Natural capital, if managed suitably can maximize the benefits of economic growth and development for any Nation.

What is natural capital?

  • Natural capital is world’s stocks of natural assets which include geology, soil, air, water and all living things.
  • Natural capital provide for a wide range of services, often called ecosystem services, which make human life possible.
  • The most obvious ecosystem services include the food we eat, the water we drink and the plant materials we use for fuel.

Why is natural capital an issue?

  • Just like Financial capital, natural capital too needs to be managed well.
  • Exploiting too much stock from our natural environment, leads to debt which needs to be paid back
  • Exploiting the stocks of natural capital without allowing recovering run the risk of local, regional or even global ecosystem collapse.
  • Poorly managed natural capital becomes an ecological, social and economic liability.

Is natural capital really valuable in financial terms?

  • There have been many studies that have calculated natural capital’s value in financial terms.
  • The financial value of India’s forests is estimated to be $1.7 trillion.
  • Mexico’s mangrove forests provide an annual $70 billion to the economy through storm protection, fisheries support, and ecotourism
  • Street trees in California provide $1 billion per year through atmospheric regulation and flood prevention

How crucial is natural capital for any nation’s development?

Vast economic contribution

  • India is one of the 17 most ecologically diverse countries, boasting 11% of the world’s flora and fauna
  • With increasing economic activity, natural capital assets are on the decline affecting
  1. The quality of life
  2. Potentially giving rise to future inefficiencies in the economy

Earth Overshoot Day

  • A figurative calendar date when total annual resource consumption exceeds the earth’s capacity to regenerate it.
  • This year it was observed on August 2.

Limits of natural capital stocks

  • Nine earth systems have been identified which mark the safe zones, beyond which there is a risk of ‘irreversible and abrupt environmental change’.
  • Four of these boundaries have now been crossed
  • Climate change
  • loss of biosphere integrity
  • land system change
  • altered biogeochemical cycles

What are the steps that should/must be taken to ensure balance in our ecosystem?

  • Business needs to consider measuring its impacts and dependencies as it would have a direct impact on capital assets
  • There is the need for a comprehensive evaluation system that takes undesirable side-effects of economic activities into account
  • It is necessary that we are aware of the limitations of natural capital and its role as a primary support system for the economy.

Risk mitigation

  • Natural capital thinking can also create opportunities to innovate and adopt newer, more efficient technologies.
  • Companies can consider environmental stress tests for issues such as natural disasters, air pollution, resource scarcity and climate.
  • Making natural capital thinking the norm requires a strong policy push
  • Adoption of valuation frameworks such as the Natural Capital Coalition’s Natural Capital Protocol
  • Integrating natural capital assessment and valuation into our economic system is critical in a truly sustainable future for India
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