Overview
Natural Capital is an economic concept that views the natural environment (forests, soil, water, air, biodiversity, etc.) as "capital (stock)" that supports corporate and social activities. Like factories and machinery (manufactured capital) and human resources (human capital), nature is also viewed as "an asset that deteriorates if not maintained and cannot produce returns (ecosystem services)," and should be properly managed and invested in.Theoretical Background
The Dasgupta Review (2021)
The report "The Economics of Biodiversity: The Dasgupta Review" published by the UK Treasury established the importance of natural capital. Stating that "our economies are embedded in nature," it warned that degradation of natural capital undermines the very foundation of economic growth. This elevated biodiversity from mere "environmental protection activities" to a "core economic and financial issue."Detailed Explanation
Stock and Flow
Natural capital is viewed as "stock (asset balance)," and the benefits derived from it as "flow (interest/dividends)."- Stock: Forests, wetlands, coral reefs, groundwater systems, etc.
- Flow (Ecosystem Services)
Until now, the economy has consumed only the flow for nearly nothing while ignoring the decline in stock (eating into principal) when calculating GDP. In natural capital management, maintaining and restoring stock is considered an "investment" rather than a cost.
Integrated Reporting and IIRC
In corporate "integrated reports," the importance of not just financial capital but non-financial capital (including natural capital) is emphasized. We are entering an era where companies that deplete natural capital are evaluated as losing their ability to generate future cash flows, causing stock prices to decline.Critical Examination
Difficulty of Valuation
There are technical difficulties and ethical criticisms of converting nature's value into monetary terms (e.g., "this forest is worth 1 billion yen"). The criticism is that "putting a price on priceless nature becomes an indulgence that permits destruction as long as you pay." However, since the biggest factor of destruction is currently treating the price as "zero," its significance as a means to "visualize invisible value" is emphasized.What IKIMON Can Do
IKIMON is a dashboard that visualizes the "State" of hard-to-see natural capital stock.- Asset Registry: Listing the "organisms" on corporate sites and managed land is essentially an "inventory of natural capital" that the company holds and manages.
- Detecting Deterioration: Early detection of invasive species intrusion or species decline through monitoring becomes risk management to prevent capital degradation.
- Return on Investment: Quantitatively demonstrates how much "investments in natural capital" like biotope development have actually restored biodiversity—the return on investment.
References
- Dasgupta, P. (2021). The Economics of Biodiversity: The Dasgupta Review. HM Treasury.
- Helm, D. (2015). Natural Capital: Valuing the Planet. Yale University Press.