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natural capital

What is natural capital?

The foundation on which a society is built

The goods and services that ecosystems provide us, like regulating the climate, providing us with food, clean water, clothing, or fuel, are the foundation on which societies and economies are built. However, this natural capital is reducing at an accelerated rate due to human activity. Promoting more sustainable lifestyles is an essential strategy to contribute to the recovery of nature, as the way in which we behave, produce, and consume has a strong impact both on the use of natural resources and on greenhouse gas emissions, and therefore on biodiversity and the effects of climate change.

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What is the natural capital of a country?

Natural capital is the set of renewable and non-renewable natural resources of an ecosystem. These biological systems provide us with goods such as water, wood, construction materials, energy, medicines, and genetic resources.

In addition, they provide us with a series of services free of charge, like the regulation of the climate, processing of pollutant substances, water purification, acting as carbon sinks or erosion prevention, amongst others.

In the last fifty years, human action has transformed ecosystems more rapidly and extensively than in any other period of time in human history, mainly to solve the growing food, fresh water, wood, fiber, and fuel demands. This has resulted in a considerable, and largely irreversible, loss of the planet's diversity. Driven by the United Nations, the scientific program of the Millennium Ecosystem Assessment constitutes the greatest international effort carried out to assess the state and trends of the planet's ecosystems and analyze the consequences of their changes on human well-being.

Natural Capital Accounting (NCA) plays a crucial role when assessing the progress towards the Sustainable Development Goals (SDGs). The SDGs, amongst other goals, seek to eradicate poverty and put all countries on a sustainable development path by 2030. This enormous challenge requires having better and more integrated information about how the economy, environment, and society interact. The natural capital balance sheet contributes to facilitating the achievement of the SDGs by highlighting the links between economic development and the natural environment, enabling decision-making, activating sustainable policies, and monitoring their progress.

Differences between natural capital and biodiversity

a person holding compost with a plant growing

Although sometimes the use of these terms suggests that they are equivalent, in reality they aren't.

  • The expression "biodiversity" covers all living things on the planet, the environment where they live (ecosystems), and the relationships that are established among them.
  • The meaning of "natural capital" refers to all natural resources of a space that provide benefits to human beings.
solar panels on a roof

Relationship between physical capital and natural resources

As we have just seen, every economic system rests on the foundations of nature.

  • Ecosystems are the source of all materials and the energy processed throughout the production system until their transformation into consumer goods or services.
  • For its part, physical capital is the set of material goods (such as infrastructures, ships and business premises, IT equipment, and machinery) that allows economies to increase their productive capacity and human well-being.

Types of natural capital

The examples of natural capital that exist can be classified into the following categories:

circuito cerrado de energía eléctrica dinámica

Renewable

Those resources that can be restored by natural processes at a faster rate than the consumption of living beings and are inexhaustible (such as solar radiation, tides, and wind).

electricidad estática entre el pelo y un cepillo

Non-renewable

They are those natural resources of which there are limited deposits or whose regeneration is very slow and, therefore, may run out (for example, coal, oil, and minerals).

energía electromagnética por medio de imanes

Recoverable

It is made up of drinking water, fertile soils, and the ozone layer.

compost de lombriz

Cultivated

It covers all areas and systems of agricultural and forestry production.

Actions to protect natural capital

The involvement of all actors is essential in the path towards the ecological transition. Public powers must provide the regulatory framework and the impetus that society needs to transform its concern for the environment into real behaviors that contribute to preserving nature:

Combat climate change

Climate change and the loss of biodiversity are closely related processes.

  • On the one hand, climate change is one of the main causes in the reduction in the number of species and loss of biodiversity.
  • On the other hand, healthy ecosystems are key to addressing climate change, both from the mitigation point of view, because of its capacity to absorb CO2, and from the adaptation point of view.

Favor nature-based solutions

Nature-based solutions like the services provided by the ecosystems themselves are key to their conservation and recovery. The application of solutions such as reforestation, protection, and restauration of wetlands, peat bogs, and marine environments increases climate resilience. On the other hand, the development of urban green spaces and the installation of green roofs and walls counteracts CO2 emissions and improves air quality in cities.

Promote the circular economy

The changes in the way we produce and consume towards more sustainable models favor the conservation and recovery of nature and promote the ecological and fair transition. Specifically, the circular economy is an economic and social system that involves a change of mentality to make the best use of available resources through the reuse of materials, recycling of products, and reduction of waste.

Encourage contribution from the private sector to the ecological transition

Companies can also contribute to the conservation of natural capital through the identification of innovative solutions, the promotion of behavioral changes of their professionals, the promotion of transformations in their value chain, and the adoption of long-term commitments that stimulate concrete and positive actions towards nature.

In this line, Repsol was the first company to set the goal of being net zero emissions by 2050. With the focus placed on this commitment, the company has established a demanding roadmap that includes ambitious emissions reduction targets, circular economy projects, promotion of renewable energies, progress in the development of renewable fuels, CCUS technological developments, and nature-based solutions.