by Jonny Hughes
Chairman, the Scottish Forum on Natural Capital, and CEO, Scottish Wildlifr Trust
ON November 27 and 28, Edinburgh will host the World Forum on Natural Capital for the third successive time. For the uninitiated, natural capital is defined as the world’s stocks of natural assets which include geology, soil, air, water and all living things that make human life possible.
At the World Forum, hundreds of people from across the globe, including foreign government representatives, senior figures from NGOs and international agencies, including the UN, and leading business figures, will discuss the importance of natural capital and the need for it to be better represented on the balance sheets. With increasing financial instability arising from environmental degradation around the world, there is an increased focus on natural capital with a growing number of people and organisations recognising a need to move beyond our over-reliance on traditional measures of Gross Domestic Product.
At the 2015 event, our First Minister recognised this trend saying that “the basic concept behind natural capital – the idea that economic growth cannot be sustained if it comes at a continuing and unsustainable cost to our natural resources – is one which is more urgent and more important than ever before”. In support of this perspective, calculations have been carried out to highlight some of the financial aspects of natural capital. Insect pollination, for example, is estimated to be worth €153 billion to agriculture globally while the cost of existing ocean asset mismanagement been set at $428 billion in lost profits by 2050.
Under the Natural Capital Protocol, a global standard for natural capital accounting, more businesses, especially larger corporations, are getting to grips with the need to put these factors at the heart of their decision-making. The protocol provides a standardised framework to identify, measure, and value impacts and dependencies on natural capital.
This enables businesses and society to better optimise the value we can gain from our land and seas. A sustainably managed hectare of farmland, for example, may produce a slightly lower yield of beef or wheat but the “profits” from carbon gains, amelioration of flooding and water quality benefits alone will more than outweigh the difference in reduced yield.
Adhering to this standard is therefore not only good ethical practice. It also gives businesses several advantages, ranging from reduced volatility in supply chains, de-risking of regulatory compliance to potentially easier access to finance. Several major lenders including National Australia Bank now request that borrowers understand natural capital risks before providing finance.
In a world where population is increasing and available resources decreasing, the focus on natural capital is greater than ever. It’s therefore encouraging to see Scotland playing a leading global role. In its Economic Strategy, the Scottish Government has made enhancing natural capital a key priority. Scotland was also the first country in the world to publish a natural capital asset index which monitors annual changes in the stock value of the natural environment and by extension its ability to provide goods and services to society.
With Edinburgh set to host the forthcoming world forum, we will have an opportunity to share this success and benefit from the wider international developments in measuring and safeguarding our most important asset – our natural environment.
For more details, visit: www.naturalcapitalforum.com.
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