Natural Capital and Its Value to the Economy

When you think of capital, you probably think of money or investments. But at its core, capital is anything that:

• Stores or confers value
• Generates benefits
• Grows in value over time

We’re all familiar with financial capital—the money and resources that drive economies. But much of that comes from nature—things like timber, water, and minerals. So, if the products we get from nature have value, doesn’t nature itself?

That’s where natural capital comes in. It’s the idea that resources like:

• Forests that absorb carbon
• Rivers that supply fresh water
• Wetlands that prevent floods
• Oceans that regulate climate

These natural capital assets are just as valuable as financial assets. And like any other form of capital, natural capital needs careful management to keep delivering or even grow its benefits for the future.

So, what is natural capital, and why does it matter? Let’s take a closer look.

What is Natural Capital?

Natural capital refers to the world’s stocks of natural resources—things like our:

• Forests
• Wetlands
• Freshwater ecosystems
• Soil
• Minerals
• Fisheries
• Wildlife

Natural capital includes all the resources nature provides—vital for our survival, well-being, and prosperity. When ecosystems aren’t healthy, its natural capital starts to degrade, and the benefits that we receive from them, the ones that sustain us, begin to break down.

However, it’s important to distinguish natural capital from ecosystem services. 

Natural Capital vs. Ecosystem Services

When I use the term, natural capital, I’m more or less referring to the stocks of physical resources that exist in nature.  Ecosystem services on the other hand are the benefits that flow from these resources. I find that it helps to think of natural capital as the money in your savings account, and the ecosystem service as the interest that you draw from it.

For example:

• A forest would be considered natural capital
  • Its ecosystem services would be certain benefits that it offers society like sequestering carbon and/or providing a nearby communities with a constant source of timber.
• A river is another example of natural capital
  • Its ecosystem services would include things like drinking water and recreational opportunities.

The quality of any ecosystem service also highly depends on the quality of its natural capital.  A healthy river or forest will provide many more higher quality benefits than an unhealthy one.

Natural Capital Once Thought to be Limitless

Natural capital as a pure concept really first started picking up traction in the 1970s when ecological economists like Kenneth Boulding and Herman Daly began advocating for the inclusion of nature’s value in economic systems.

They challenged the prevailing view of the time that natural resources were unlimited—a belief that was the gospel among nearly all of the mainstream economists at the time. Instead, Boulding and Daly preached that natural resources should be seen as finite and valuable.  They likened them to assets that were critical for the planet and society to function, and they had to be managed sustainably or else, once depleted, we might not be able to get them back. 

While this idea may seem obvious today, it marked a hefty departure from the earlier “myth of inexhaustibility”. For those born in the late 1800s and earlier, the world felt vast, and the notion that humanity could consume more than the planet could provide likely seemed just as unimaginable.  For anyone interested in those early days I highly recommend Boulding’s 1966 beautifully written essay “The Economics of the Coming Spaceship Earth”.

Dollar Amount Placed on Capital

In the late 1990s, the concept of natural capital took a big step forward. Robert Costanza and other top ecological economists wrote a paper that tried to put a price tag on the Earth's resources. The study took a global look at the value of the planet's natural capital and ecosystems.

Published in the scientific journal Nature in 1997, Costanza and his peers estimated that the value of ecosystem services was in the range of trillions of dollars annually–more than the combined GDP of every nation on earth at the time.

The study provided a much-needed wake-up call for the governments of the world to recognize the massive economic value of nature, and how vital natural capital is to the functioning of our economies.  As of today, this article has been cited nearly 40,000 times by researchers.

Since then, the concept of natural capital has gained traction in many fields such as:

• Ecological economics
• Agriculture
• Forestry
• Environmental policy
• Sustainable business

These days, organizations like the United Nations and the World Bank have fully embraced the concept of natural capital. They actively encourage governments and businesses to include nature in their economic and policy decisions. Natural capital has become a key part of global sustainability efforts, influencing major initiatives like the UN's Sustainable Development Goals (SDGs), which aim to tackle social, economic, and environmental challenges and create a more sustainable, equitable world by 2030.

While lots of progress has been made in integrating natural capital into decision-making, a few challenges remain that are holding back wider adoption in the business world—especially when it comes to fairly valuing it.  Since everyone shares a stake in protecting the environment, it’s crucial that natural capital is properly valued in economic and policy decisions for everyone, regardless of access or privilege.

Is Land and Freshwater Conservation an Investment in Natural Capital?

At Unique Places to Save, we’re all about protecting and improving natural capital, both on land and in freshwater ecosystems. Our work focuses on key projects like:

• Preserving wetlands

• Restoring rivers

• Removing outdated dams

• Conserving forests and grasslands

Through these efforts, we’re not just safeguarding natural capital, we’re actually improving its quality, which means better ecosystem services for future generations.

For example, when we remove old, non-functioning dams, we restore the natural flow of rivers, helping fish populations recover, improving water quality, and revitalizing habitats. Similarly, conserving forests boosts carbon storage, supports wildlife, and helps regulate the climate, making these natural assets even more valuable.

By improving the quality of natural capital, we’re also enhancing the ecosystem services it provides—like cleaner water, healthier ecosystems, and more resilience to climate change. In short, investing in natural capital means ensuring that nature’s essential services keep working better for both people and the planet.

Conserving land and freshwater ecosystems are essential for protecting our planet’s natural capital, and you can help make a difference. By supporting Unique Places to Save, you’re directly contributing to the protection of natural resources that benefit all of us. Your efforts help ensure these natural systems continue to provide clean water, fertile soil, and habitats for countless species.