- Natural Capital
- Human Capital
- Social Capital
- Manufactured Capital
- Financial Capital
They defined ‘Natural Capital’ as “any stock or flow of energy and material that produces goods and services.” This included natural renewable and non-renewable resources, natural sinks that can absorb, neutralise or recycle wastes and natural processes such as climate regulation. They declared that “Natural capital is the basis not only of production but of life itself!”
Today, a group of financial capitalists are making a fresh commitment to Natural Capital. So far 20 financial institutions have signed on to a new Natural Capital Declaration and more signatories are expected in the coming days. The signatories include Althelia Ecosphere, ASN Bank, Banco Pichincha, Caledonia Wealth Management, CIBanco, Cyrte, FIRA-Banco de Mexico, International Finance Corporation, Mutualista Pichincha, National Australia Bank, Oppenheim, Rabobank Group, Robeco, PaxWorld Management, Shenzhen Development Bank, Sovereign, Standard Chartered, UniCredit, Vision Banco, and Zevin Asset Management.
They have signed up to work with others from the private and public sectors “to create the conditions necessary to maintain and enhance Natural Capital as a critical economic, ecological and social asset.” Specifically they “call upon governments to develop clear, credible, and long-term policy frameworks that support and incentivize organizations – including financial institutions – to value and report on their use of Natural Capital and thereby working towards internalizing environmental costs.”
If financial organisations and others are going to value and report on Natural Capital, then a common understanding of what this term actually means is needed. In this regard, the Declaration proposes two revised definitions of Natural Capital as the “Earth’s natural assets (soil, air, water, flora and fauna), and the ecosystem services resulting from them, which make human life possible” or alternatively as “the stock of ecosystems that yields a renewable flow of goods and services.”
How do these revised definitions relate, for example, to the definition of biodiversity agreed in the Convention on Biological Diversity? Or how do they relate to the IFC’s (a Declaration signatory) Performance Standard 6 on Biodiversity Conservation and Sustainable Management of Living Natural Resources? The latter is particularly important because it is a key part of the Equator Principles, which currently has 76 signatories from the financial sector who hold 70% of the international project finance debt in developing countries.
With regard to such conceptual challenges, the Natural Capital Declaration wisely makes clear that “no methodology yet exists to adequately report or account for Natural Capital in the global financial system” and that its signatories have agreed to “support the development of methodologies that can integrate Natural Capital considerations into the decision making process of all financial products and services.” In so doing, it will, of course, be useful for this new initiative to build on the use of terms set out by the Convention on Biological Diversity. It will also be useful to link with well-established commitments to sustainable finance such as the Equator Principles.
With the Natural Capital Declaration set to launch at the approaching Rio+20 Conference, we have another new and exciting opportunity to align at least two capitals – natural and financial – to ensure the sustainability of prosperity. Yes, there is much to be done, but this initiative looks like one with the potential to add value. Follow them on Twitter.
