Natural capital encompasses the stock of natural assets such as forests, rivers, wetlands, and biodiversity that generates services fundamental to sustainable development and long-term economic growth. In the Asia and Pacific region, ecosystems support various sectors of the economy, including agriculture, tourism, fisheries, and offset cost of production in other areas like water treatment and flood insurance. However, the immense value and contributions of natural assets are often undervalued, overlooked, or misattributed in traditional economic frameworks, leading to unsustainable practices and environmental degradation. This diminishes the valuable benefits that ecosystems provide and threatens the long-term prosperity and resilience of the region.
This article highlights the key insights from the Asian Development Bank (ADB) side event on Mainstreaming Nature in Policy and Investment Decisions during the 2024 United Nations Biodiversity Conference (CBD COP16). The session served as a platform to present the progress and findings from the People, Planet, Prosperity (3Ps) project–a collaborative initiative involving multilateral development banks, the Global Environment Facility, and Stanford University’s Natural Capital Project. The 3Ps project aims to demonstrate the importance of integrating natural capital valuation into policymaking and investment decisions across 16 pilot countries.
Quantifying the value of natural capital and ecosystem services is essential for governments to make more informed decisions that account for how ecosystem health contributes to economic growth, improve fiscal management, and support communities that depend on natural resources. These metrics also create opportunities to attract investments that jointly support fiscal sustainability, sustainable development, and long-term economic resilience by underscoring the economic benefits of nature.
Understanding the value of natural capital aids in assessing the economic viability of investments and enhancing ecosystem management. In the Cook Islands, the valuation of the benefits provided by the Muri Lagoon can guide investment decisions for proposed wastewater treatment plants. In the People’s Republic of China, efforts to estimate the value of the ecosystem services of the South Dongting Lake’s wetlands, a critical resource that supports tourism and livelihoods of millions, helped prioritize key interventions. Moreover, pilot ecosystem service accounts are being developed in many Asia Pacific countries such the Philippines, Armenia, and Sri Lanka to enhance watershed management planning.
Despite the growing recognition of the importance of natural capital assessment and accounting, integrating this approach into policy and investment decisions remains challenging for many countries. This difficulty stems primarily from the complexity and extensive data requirements involved in assessing ecosystem conditions. Valuing the services ecosystems provide is also challenging since these benefits are often not traded in markets and go unrecorded. In addition, natural capital assessment and accounting requires data and information across various agencies and sectors, making institutional coordination another significant challenge.
- Enhance natural capital valuation with advanced tools and data. Reliable natural capital valuation relies on science-based methodologies to map and quantify changes in the extent and condition of natural resources and ecosystems and connect them to the benefits they provide to people. Advances in data technology, computing power, and algorithms have accelerated breakthroughs in these valuations. The growing availability of satellite data can enhance existing tools and methodologies to address data limitations.
- Engage financial and planning agencies early. While data is often collected by environment ministries, effective integration of natural capital assessment and accounting requires early involvement and collaboration with financial and planning agencies. Their comprehensive oversight ensures that natural capital considerations are embedded into budget and financing decisions, rather than being treated as an afterthought. It is also important because these agencies are just as likely to hold the data that reveals how people are affected by changes in natural resources or ecosystems.
- Strengthen local capacity for sustainable implementation. Building the capacity of government stakeholders is essential not only for conducting natural capital assessments and developing accounts, but also for ensuring the sustainability and scalability of natural capital approaches across diverse ecosystems and regions. This approach ensures that natural capital assessments and accounting meets national needs and priorities by enabling local stakeholders to identify critical ecosystems and their benefits and incorporating these findings into national and subnational plans and investment decisions.
- Foster global and regional collaboration for consistency. Establishing global frameworks and tools is crucial for facilitating widespread adoption, while ensuring consistency and comparability across regions. This includes creating platforms for collaboration and knowledge sharing on best practices between countries and regions, covering not only data collection and compilation but also pathways for integration in policy and investment decisions. Harmonizing metrics and methodologies for natural capital accounting is also important to enable global comparability and reporting.
As countries develop and refine their strategies to measure and quantify natural capital values, fostering collaboration within and across countries and promoting innovation are essential.
Scaling efforts to mainstream natural capital assessment and accounting will require sustained investment in capacity development, data and data-sharing infrastructure, and institutional reforms to effectively embed natural capital into decision-making processes.
ADB Knowledge Events. 2024. People, Planet, Prosperity Project: Mainstreaming Nature in Policy and Investment Decisions (Conference Session).
The Natural Capital Project. Mainstreaming nature in decisions. Stanford University.
Dorothy's research focuses on environmental and natural resources, agricultural, and development economics. She obtained her master’s degree in International and Development Economics from the Australian National University in 2020 and worked as a technical staff for the Philippine government prior to joining ADB.
Dr. Fenichel’s innovative research bridges natural science, dynamical systems, and economics. He holds a Ph.D. from Michigan State University and joined Yale in 2012. Between 2021 and 2023, he served as the Assistant Director for Natural Resource Economics and Accounting at the White House Office of Science and Technology Policy.
Narayan Iyer’s areas of interest include the development of sustainable agribusinesses, the protection and growth of natural capital, and green financing. At ADB, he leads the development of a regional Natural Capital Lab focused on valuing nature, a concessional and catalytic Natural Capital Fund, sustainable and inclusive bamboo value chains, and supporting sustainable agri-food systems projects. He holds a bachelor’s degree in Technology (Mechanical Engineering) from the Indian Institute of Technology, Bombay, and an MBA from the Indian Institute of Management, Calcutta.
Martino is an applied economist with interests in environment, energy, and development economics. His work focuses on rural energy, transport infrastructure investments, natural disasters, and the valuation of nature. His research has been published in journals such as the Journal of Development Economics, Journal of International Economics, and European Economic Review.
Jindra is an environmental economist, managing research work on environmental and natural resources, agriculture, climate change, and country/thematic diagnostic studies. Her expertise spans economic analyses of investment projects and ecosystem services valuation. Before joining ADB, she served as a resource economist at the International Center for Tropical Agriculture (CIAT) and conducted research for local non-government organizations in the Philippines.
The Asian Development Bank is a leading multilateral development bank supporting sustainable, inclusive, and resilient growth across Asia and the Pacific. Working with its members and partners to solve complex challenges together, ADB harnesses innovative financial tools and strategic partnerships to transform lives, build quality infrastructure, and safeguard our planet. Founded in 1966, ADB is owned by 69 members—49 from the region.
