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Challenges and limitations of using the natural capital approach

Natural Capital is defined as the world's stocks of natural assets from which humans derive a wide range of services. Find out more on this course.
A businessman pushing a large stone up a hill.

A key challenge with natural capital is the current lack of any robust market valuation of assets.

Instead it focuses on the use of modelling and principles-based methodologies. As a result, one key requirement of any analysis is the clear presentation of any uncertainties or methodological limitations to allow consideration and scrutiny. The act of valuation may also potentially offer unfair comparisons in terms of the value of an ecosystem service compared to the value of an intervention (such as an infrastructure development). Thus, it may be used to demonstrate that the economic benefits outweigh the loss of natural capital whilst ignoring the wider effects to associated natural systems, and potentially to wider society.

Equally caution is needed in the interpretation of any insights offered by natural capital valuation. Focusing on single-issue elements within the wider framework of natural capital could result in scenarios where management considers one factor to the detriment of others in the system. Any successful use of natural capital must include the principal benefit of management that promotes ecosystem function and resilience. Natural capital assets will grow where management allows for ecosystem function. Any management system that imposes constraint on ecosystem processes to augment a singular element, can reduce the overall value and quality of the wider ecosystem, which can lead to degradation and loss of overall service provision.


An example of this could be the expansion of tree cover in the UK for the purposes of carbon sequestration. To mitigate climate change, one option available is to identify the single tree species that could most quickly affect greenhouse gas (GHG) emissions and create monocultural plantations. Overall, this could promote a disadvantageous strategy, as such an approach would neglect to create resilient ecosystems with all the wider benefits that provides. In other words: whilst it would sequester carbon, it wouldn’t promote ecosystem function, soil health, or general biodiversity. Such an approach could also be considered as short-termist on the basis that the potential life of a forest of conifers compared to a functioning mixed woodland is considerably shorter – thus ultimately limiting the potential for carbon storage over the longer term.

There are also scenarios where tree planting could do more harm than good, such as where soils are primarily organic. In such instances, the potential carbon loss from soil would outweigh the potential sequestration benefits. Similarly, if the push for tree cover expansion is to the detriment of other priority habitat, such as species rich grassland, heath, or peatland environments, then this may adversely influence the beneficial services derived from these ecosystems

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Sustainability: An Introduction to ESG (Environmental, Social and Governance)

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