The depletion of a country's natural capital hinders poverty reduction and sustainable development objectives. Environmental assets, such as timber or fisheries, and ecosystem services, such as water filtration and carbon sequestration, are critical for human well-being and provide significant economic and social benefits.
The World Bank estimates that the global economy could lose $US 2.7 trillion by 2030 (compared to business as usual) if certain ecosystem services collapse (pollination, carbon sequestration and storage, fisheries and timber provision). In low-income countries, GDP could decline 10% annually on average, with higher losses in countries particularly dependent on ecosystem services.
Understanding the value of a country's environmental assets is the key to sustainable development and economic growth.
Wealth accounting—the balance sheet for a country—captures the value of all the assets that generate income and support human well-being. Gross domestic product (GDP) indicates how much monetary income or output a country creates in a year; wealth indicates the value of the underlying national assets and therefore the prospects for maintaining and increasing that income over the long term. GDP and wealth are complementary indicators for measuring economic performance and provide a fuller picture when evaluated together. By monitoring trends in wealth, it is possible to see whether GDP growth is achieved by building or maintaining capital assets, which is sustainable in the long run, or by liquidating assets, which is not. Wealth should be used alongside GDP to provide a means of monitoring the sustainability of economic development.
World Bank research finds that our material well-being is under threat: from unsustainable exploitation of nature, from mismanagement and mispricing of the assets that make up national wealth, and from a lack of collective action at local, national, and regional levels.
In many countries, GDP is increasing at the expense of total wealth and future prosperity. If not properly informed, citizens might mistakenly expect their improving prosperity to continue indefinitely. If rising GDP today comes at the expense of declining wealth per capita, then prosperity will be unsustainable. Economic growth will erode its own base.
Last Updated: Sep 15, 2023