Accounting for Natural Capital

Nature provides a multitude of benefits, yet many of these benefits are ignored by conventional markets even though all economic activity, in one way or another, impacts or depends on nature.

Indicators used to measure market activities (in company financial accounts or national accounts for countries) largely ignore the value of nature’s contribution to profits and economic growth, and the cost of biodiversity loss, climate change, and environmental degradation.

Natural capital accounting systematically collates and analyses economic, environmental, and social data about our impacts and dependencies on nature and presents the data and insights in formats familiar to decision makers. The objective is to make it easier for decision makers to use the insights when making policy and investment decisions.

We have over 100 projects in which we accounted for the benefits of nature, showing how benefits can be maintained or enhanced and how the impacts of economic activity can be measured and monitored.

Our clients include private, public, and NGO landowners and managers, investors, and local and national governments.

Why Natural Capital Accounting?

The short answer is why not?! Businesses account for the financial, physical, human capital they own, manage, and depend on, why not natural capital?

Our clients commissioned natural capital accounts because they enable them to manage their businesses better and ensure they are financially sustainable. The accounts reveal:

• Their impacts and dependencies on natural capital
  • What natural capital assets they own or manage
  • What benefits they receive from those assets
  • How they impact those assets and their ability to provide benefits
• Their risks and opportunities from
  • Implications of different land use / management options
  • Delaying / speeding up investments
  • Climate change, biodiversity loss, and macroeconomic changes that are not within their control yet affect their sustainability

Natural capital accounting is also an input for investment and nature market strategies for both sellers and buyers (or investors). For example, Asset Register helps to identify which assets to invest in, Physical and Monetary Flow accounts show what market and non-market returns to expect from investment, and statements of Enhancements and Deteriorations help monitor and verify the returns to investment or credits sold. All these terms are explained below and you can see some of them in action in the examples provided. 

NatCap Statements^TM for natural capital accounting

For private or public organizations - we have developed NatCap Statements^TM which include a Natural Capital Balance Sheet and a Natural Capital Income Statement.

A Natural Capital Balance Sheet shows the dependencies of an organisation and its value chain on nature over an appropriate future accounting period by answering the following questions:

Some of our work stops at identifying the natural capital assets and valuing their benefits – we usually call these natural capital assessments.

A Natural Capital Income Statement shows the impacts of an organization and its value chain on nature during the financial year to date by answering the following questions:

As part of preparing NatCap Statements, we also undertake materiality assessment to help clients identify which assets, benefits, impacts are material for their decisions and for nature, and risk assessments that highlight pressures on natural assets to develop scenarios for managing such risks and financing that management.

For regional and national governments, we prepare natural capital accounts that are aligned to the United Nations System of Environmental Economic Accounting (UNSEEA) guidelines.

Standards

As the leaders in our field, we have also been involved in the development of standards:

• ISO 14008: Monetary valuation of environmental impacts and related environmental aspects – our CEO, Ece Ozdemiroglu was one of the UK experts developing this international standard.
• BSI 8632:2021: Natural Capital Accounting for Organizations – our CEO, Ece Ozdemiroglu is the Chair of the BSI’s Assessing and Valuing Natural Capital Committee that published this standard.
• ISO 14054: Natural Capital Accounting for Organizations – our CEO, Ece Ozdemiroglu is the Convener of the international Working Group preparing this standard building on the BSI8632
• BSI Natural Investment Standards – one of our Directors, Ian Dickie, is the Technical Author for the Principles Standard in this package of standards that are coming out for the benefit of nature markets.

Some of our clients for this service include:

Department for Environment, Food & Rural Affairs (Defra), Natural England, Natural Capital Finance Alliance, United Utilities, London Borough of Barnet, World Wide Fund for Nature (WWF), Forest Enterprise England and Coillte

Our Natural Capital Accounting Portfolio by Organisation Type

Our Portfolio by Sector:

Contact Person: Ian Dickie