Key Findings from the Report
- While 19 out of the 20 countries experienced a decline in natural capital, six also saw a decline in their inclusive wealth, putting them on an unsustainable track, Russia, Venezuela, Saudi Arabia, Colombia, South Africa and Nigeria were the nations that failed to grow. The remaining 70 per cent of countries show IWI per-capita growth, indicating sustainability.
- High population growth with respect to IWI growth created unsustainable conditions in five of the six countries mentioned above. Russia’s lack of growth was due largely to a drop in manufactured capital
- 25 per cent of countries which showed a positive trend when measured by GDP per capita and HDI were found to have a negative IWI per capita. The primary driver of the difference in performance was the decline in natural capital
- With the exception of France, Germany, Japan, Norway, the United Kingdom and the United States, all countries surveyed have a higher share of natural capital than manufactured capital, highlighting its importance
- Human capital has increased in every country and is the prime capital form that offsets the decline in natural capital in most economies
- There are clear signs of trade-off effects between the different forms of capital
- Technological innovation and/or oil capital gains (due to rising prices) outweigh decline in natural capital and damages from climate change, moving a number of countries – Russia, Nigeria, Saudi Arabia and Venezuela – from an unsustainable to a sustainable trajectory
- Estimates of inclusive wealth can be improved significantly with better data on the stocks of natural, human and social capital and their values for human well-being.
While inclusive wealth has increased for most countries, the report shows that an examination of natural capital is crucial for policy makers.
Even though a reduction in natural capital can be offset by the accumulation of manufactured and human capital, which are reproducible, many natural resources such as oil and minerals cannot be replaced. As a result, a more inclusive definition of wealth that will secure a legacy for future generations is urgently needed in the discussion of sustainable economic and social development.
The report, which will be produced every two years, makes the following specific recommendations:
- Countries witnessing diminishing returns in natural capital should invest in renewable natural capital to improve their IWI and the well-being of their citizens. Example of investments includes reforestation and agricultural biodiversity.
- Nations should incorporate the IWI within planning and development ministries to encourage the creation of sustainable policies.
- Countries should speed up the process of moving from an income-based accounting framework to a wealth accounting framework.
- Macroeconomic policies should be evaluated on the basis of IWI rather than GDP per capita.
- Governments and international organizations should establish research programmes to value key components of natural capital, in particular ecosystems.
UN Under-Secretary General and Rector of the United Nations University, Prof. Konrad Osterwalder, concluded that using the IWI would safeguard the interests of many developing nations. “The Millennium Development Goals (MDGs) have functioned as an important tool to focus international attention and action around key pressing global issues,” he said. “As 2015 fast approaches, the deadline for meeting the MDGs, it is clear that the opportunities for many developing countries to achieve their goals may be compromised if the present rates of decline of various crucial ecosystem services continue.”
“In order to reverse this decline, we need a natural capital accounting framework that takes into consideration the value of ecosystem services in relation to the wealth of nations,” he added. “Ideally, from now on, it will be essential that national and international agencies make use of inclusive wealth per capita as a yardstick to measure economic progress.
“While most economies analyzed in the Inclusive Wealth Report 2012 and the world more generally have been enjoying positive economic growth rates, a look at the broader capital base indicates that this has come at high physical costs. These expenses should be reflected in the balance sheet of nations,” said Dr. Pablo Muñoz, Science Director of the IWR, UNU-IHDP.
“An increase in total wealth does not necessarily indicate that future generations may consume at the same level as the present one; as population grows, each form of capital is more thinly spread over the society,” said Sir Partha Dasgupta, Professor Emeritus of Economics at Cambridge and Science Advisor to the IWR.
Manufactured capital is defined as infrastructure, goods and investments. Natural capital includes fossil fuels, minerals, forests, fisheries and agricultural land. Human capital includes education and skills.