Phrases like “accelerating a green and blue economy,” “natural capital,” and “nature-positive growth” are often used as abstract, jargony buzzwords. While a news article might spotlight an innovative “blue bond” or a breakthrough in “nature-based finance or accounting,” it often skips how these mechanisms actually work.
For us, the “how” is not a single method but rather a range of tools and practices we often refer to as the natural capital approach, a process of integrating nature’s benefits to people into policy and finance decisions.
Over the coming months, we’ll explore the scientific, spatial, and economic tools behind this work, tracing how they connect to support planning, valuation, and trade-off analysis in real-world policy and government settings. Below are a quick-and-dirty set of key terms we return to often. We hope this glossary will be a useful reference point for posts to come!
NATURAL CAPITAL — NUTS & BOLTS
Natural capital is the world’s stock of natural assets, encompassing the living and non-living components of ecosystems—including soil, air, water, and all living things—that contribute to generating a range of goods and services of value to people.
Traditional market systems often overlook the essential contributions ecosystems make to economic productivity and human well-being. A natural capital approach addresses this gap by reframing forests, wetlands, oceans, and other ecosystems as productive assets that deliver measurable services such as water filtration, climate regulation, coastal protection, and cultural or spiritual benefits to people.
By mapping natural capital stocks, flows, and value of the benefits they generate, decision-makers can see where ecosystems are improving or declining and understand how these changes affect social and economic outcomes over time. This information can then help decision-makers embed nature into the same planning and accounting systems used for financial and built capital. This is the basis of “a natural capital approach.”
Often, the most productive demonstrations of natural capital approaches use a co-development approach, whereby key actors and stakeholders are engaged with technical experts from the beginning of an engagement, helping to articulate a vision for the future that is based on local political, social, and cultural values and priorities. We rely on early and continuous collaboration among government agencies, businesses, academia, civil society, and communities. The goal is to link science, policy, and finance within a shared evidence-based framework, with the goal of helping diverse stakeholders develop a common understanding of how ecosystems support people and economies.
However, the steps needed to actually move from science to policy involve substantial (and often non-trivial) technical and political labor: data assembly and analysis, spatial and economic modeling, community engagement, valuation and beneficiary assessment, trust-building, and the alignment of institutions across sectors.
For a full searchable archive of Natural Capital Alliance publications, see our Zotero library.
Key Terms
Natural capital: The Earth’s natural assets – its lands, waters, and biodiversity — upon which all life depends.
Ecosystem services: The material, spiritual, cultural, communal, and other benefits that ecosystems provide to people. Examples of ecosystem services include everything from food, fuel, fiber and the provision of clean water, to protection from flooding and coastal storms, to nature-based recreation and tourism, to a sense of place and cultural identity. Ecosystem service benefits can be quantified in many different ways, including biophysical terms (e.g., tons of eroded sediment avoided), monetary terms (avoided water treatment costs), and other indicators of human wellbeing.
Beneficiaries: The specific people, groups, sectors, or organizations that receive ecosystem services.
Natural Capital Approaches: Science-based approaches that make explicit nature’s benefits to people so they can be incorporated into decisions and can motivate investments in ecosystems, improving the well-being of both people and nature. This includes both natural capital assessments, natural capital accounting, valuation, and more. In practice, natural capital approaches quantify and map stocks of natural capital and the flows of benefits to people, often comparing alternative management options or future climate and development scenarios.
Natural capital assessments: Natural capital assessments quantify and map both natural capital stocks (e.g., water-purifying wetlands) and the ecosystem services flowing to people (e.g., safe drinking water) to provide quantifiable – and often, spatially explicit – metrics of those services, whether monetary, biophysical, or social/cultural. Natural capital assessments can be used to guide and evaluate cross-sectoral policy, planning, and finance to meet integrated sustainable development aims.
Natural capital accounting: Natural capital accounts track current stocks of natural capital, flows of ecosystem service benefits and their change over time using a standardized, replicable approach. In practice, natural capital accounts are built through a combination of biophysical data (on land cover, ecosystem condition, and service flows) and economic valuation (in biophysical and/or monetary terms). This is helpful for designing, monitoring, and evaluating policies and investments.
Valuation: A component of many natural capital assessments focused on providing estimates of values for the relevant ecosystem services. These values can be monetary or non-monetary. A natural capital assessment could evaluate the potential supply of ecosystem services (e.g., where water flows on the landscape); it can evaluate supply as well as quantify the service (e.g., how much water flows to specific communities); or it can estimate values (e.g., what is the monetary value created by that water for that specific community? Or how many people have changed access to drinking water?). This third step is the valuation component.
Gross Ecosystem Product (GEP): Gross Ecosystem Product (GEP) is an index modeled after Gross Domestic Product (GDP) that provides a clear signal of the value of nature’s contribution to human wellbeing. GEP measures the aggregate value of ecosystem goods and services produced within a given area – be it a city, country, or even the world. Developed and piloted from city to national scales in China, GEP has been officially adopted by the United Nations Statistical Commission as part of the UN-SEEA system of ecosystem accounting.
The United Nations System of Environmental-Economic Accounting (SEEA) and Ecosystem Accounting (EA): (SEEA EA) constitutes an integrated and global statistical framework for organizing data about habitats and landscapes, measuring the ecosystem services, tracking changes in ecosystem assets, and linking this information to economic and other human activity. Endorsed by the United Nations Statistical Commission, SEEA provides standardized concepts, definitions, classifications, and accounting rules that allow countries to measure how the environment interacts with the economy.
Some other key terms:
Biome: large-scale ecological regions classified by climate, vegetation, and animal life.
Biodiversity: the variety of life on earth—including genetic, species, and ecosystem diversity.
Biosphere: the large, interconnected system where energy and matter cycle through various ecosystems, representing the entire zone of life on Earth. It includes all living organisms and their interactions with the atmosphere, lithosphere (Earth’s crust), and hydrosphere (water bodies).
Climate mitigation: Refers to efforts to reduce or prevent net greenhouse gas emissions that contribute to global warming. Activities can include curbing emissions in responsible sectors (transportation, energy, etc), capturing emissions using new technologies, or reducing net emissions by increasing carbon sequestration through the expansion and protection of ecosystems that store and sequester carbon.
Ecological resources: all living organisms and their habitats within an ecosystem, including not only the tangible components like plants and animals, but also the less tangible aspects like water cycles, nutrient cycling, and pollination, which are essential for the ecosystem’s functioning
Ecosystem: the functional units of nature, where living organisms interact with each other and their surroundings.
Ecosystem functions: the natural processes– biological, chemical, and physical–occurring within an ecosystem that enable it to sustain life.
Ecosystem structure: the physical components of an ecosystem, and how they are arranged spatially
Environment: refers to external conditions (natural or human-made) that influence organisms.
Habitat: the natural home or environment of an animal, plant, or other organism within a given ecosystem.
Nature: the broadest term, covering all living and non-living things in the natural world
Externality: a side effect or consequence of an activity that affects other parties without this being reflected in the cost of the goods or services involved, such as pollution of a river from a factory (negative externality) or the pollination of surrounding crops by bees kept for honey (positive externality).
Market failure: Occurs when the distribution of goods and services in a free market is inefficient (e.g., too little or too much of something being demanded or provided), leading to a loss in total economic welfare and negative consequences for society, the environment, or individuals.
Natural resources: refers to the subset of ecosystem services that we consume or harvest - namely, raw materials we extract or use directly from nature, such as timber, minerals, water, fuel, plants, and wildlife.
Non-excludable: It’s difficult to prevent anyone else from using or benefiting (e.g., clean air, open ocean fishery)
Non-rival: One person’s use does not reduce the amount available for others (e.g., streetlights, scenic view)
Public good: A commodity or service that every member of a society can use (non-excludable) without reducing its availability to all others (non-rival). Examples of public goods include a town road, park, or school.