Why invest in natural capital?

By Environment Team on Mon, 22 April 2013

Farmers glean the beach for seafood at low tide in Moromaho Island, Indonesia. Photo from <a href="http://www.adb.org/news/photo-essay/coral-triangle-book">Coral Triangle Book 2011.</a>
Farmers glean the beach for seafood at low tide in Moromaho Island, Indonesia. Photo from Coral Triangle Book 2011.

Written by Nessim Ahmad, Environment and Safeguards Director, and Bruce Dunn, Environment Specialist 

We’ve been thinking a lot lately about investing in “natural capital” in Asia and the Pacific – one of four key thrusts of ADB’s newly approved Environment Operational Directions for 2013-2020

Ecosystems and biodiversity are on the decline in Asia and the Pacific. We put out a report last year together with WWF which depicts a stark picture. In the last 40 years, there has been a 67% decline in the health of ecosystems in the region. This is twice the global average!  

Looking around Asia we have identified at least 4 large-scale regional ecosystems that are fundamentally important to the future well-being of the region. In each case, they have tremendous biodiversity value, but they are also important economic and social assets in their own right.

The Coral Triangle, a vast expanse of 6 million square kilometers often referred to as the “Amazon of the seas”. It provides food and livelihoods to 120 million coastal people and annual income of more than $6 billion from fisheries exports and tourism.

The Heart of Borneo, dubbed as the “lungs of Asia”, is the largest tropical rainforest in Asia. Protecting 6% of the world’s biodiversity, its forests store 3 billion tonnes of carbon and provide clean water for 11 million people.  

The Greater Mekong Subregion is one of the most biologically diverse places on the planet, where 1200 new species have been found in the last 20 years. With the Mekong basin as its “lifeblood”, it supports 60 million people and provides as much as $4 billion in freshwater fish catch annually.  

Finally, we have the Eastern Himalayas, sometimes referred to as the “water tower of Asia”. Its forested watersheds feed 7 major rivers that provide freshwater to more than a billion people.  

While each of these ecosystems is of immense value, they are all under threat – from habitat loss, climate change, over exploitation, and pollution.  

Regional approaches are essential to reverse these trends.  They allow us to see and act on the big picture….and operate at a scale that is ecologically coherent. 

 In the Greater Mekong Subregion (GMS), six countries are working on a Core Environment Program and Biodiversity Corridors Initiative to ensure that major infrastructure development does not fragment ecosystem connectivity. 

In the Coral Triangle, the six concerned countries have adopted a regional plan of action to protect priority seascapes and expand community based fisheries.

In the Heart of Borneo likewise, a regional plan is being put in place by Brunei, Indonesia, and Malaysia.  This plan covers an integrated protected area network across the three countries.

And most recently, four countries - Bangladesh, Bhutan, India, and Nepal have adopted a regional framework for cooperation to protect watersheds in the eastern Himalayas.  

We have some important ingredients for success – political commitment, leadership, strong country ownership, and coalitions of committed partners including ADB, the Global Environment Facility, WWF and bilateral donors.  

But for meaningful results to happen, we need to change the rules of the game. We need to make sure there are incentives for people to invest in natural capital. For example, throughout the region we are seeing promising cases of giving rights to local communities that change the way they manage resources. Where coastal communities can enforce no-catch zones for instance, the fish stocks rebound very quickly. Another example is sustainable palm oil certification which is encouraging private sector investment on degraded land rather than primary forest. Such successful approaches need to be mainstreamed, replicated, and upscaled, leading ultimately to transformational change. 

Growing evidence suggests that ecosystems provide a range of economically valuable services, over and above their intrinsic value. Sound economic logic tells us we should live off the interest and not the capital, and this logic extends to natural capital.

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