Natural capital

The NSW Government is leading the nation as the first state to join the global movement recognising the economic value of our environment.

What is natural capital?

Planting riparian revegetation and fencing a creek line prevents cattle entering waterways and reduces nutrients and sediment run-off as trees grow

Natural capital is similar to other forms of capital – financial, built (or physical), human, and social capital, all of which can produce economic outputs.

Natural capital is the world's stock of natural assets and includes:

  • the rocks and soil beneath our feet
  • our streams, rivers and oceans
  • the air
  • plants, animals and all living things.

From these natural assets, we derive services – known as 'ecosystem services' – which are vital to our health, livelihoods and future. The water we drink, the air we breathe, our land for food production, and forests that help regulate climate and defend against floods are just some examples.

A strong economy needs a healthy environment

Previously, some have thought of nature as free-of-charge – and this has led to it being slowly degraded over time

With financial capital, we know that spending too much money accrues debt, which we need to pay back. It's the same with nature. If we draw down too much stock from our natural assets, we run up a debt which needs to be paid back by replanting forests, rehabilitating waterways or conserving biodiversity. Drawing down on nature without allowing recovery runs the risk of ecosystem collapse, which has compounding economic impacts.

New South Wales doesn't want to just halt environmental decline – we want to reverse it. Recognising nature as an asset provides a cornerstone for the state's economy which our people, business, finance and primary industries can benefit from.

Around the world, things are changing

Economists from the Department of Planning and Environment’s Science, Economics and Insights Division are leading the way with Natural Capital

Globally, people are waking up to the value of nature and its relationship with the economy.

According to the World Economic Forum more than 50% of global Gross Domestic Product is dependent on nature. Its Global Risks Report 2022 ranks one of the top 3 most likely and impactful risks humanity will face in the next 10 years as 'biodiversity loss and ecosystem collapse'. It describes this as: 'Irreversible consequences for the environment, humankind, and economic activity, and a permanent destruction of natural capital, as a result of species extinction and/or reduction'.

Similarly, the UK Government's commissioned review on the economics of biodiversity – the Dasgupta Review 2021 – found nature is a 'blind spot' in economics. It stated: 'we can no longer afford for it [nature] to be absent from accounting systems that dictate our national finances or ignored by economic decision makers'.

Financial markets have started to connect the climate and nature-related risk agendas. Leading financiers are integrating nature-related risks and opportunities in their approaches to sustainable investing, lending and underwriting practices.

Internationally, an initiative called Taskforce on Nature-related Financial Disclosures released a framework in September 2023 to enable financial institutions to assess, manage and report on their dependencies and impacts on nature. The NSW Government was one of the first government members of this taskforce. Right around the world, natural capital considerations have taken off in more than 30 countries, with organisations such as The World Bank looking to transform how we view and value nature.

Moreover, momentum is growing to 'mainstream biodiversity' in government policy. The UN Convention on Biological Diversity developed the Strategic Plan for Biodiversity 2011–2020, which has 20 Aichi Biodiversity targets, with target no. 2 aiming to 'mainstream biodiversity in policy decision-making and national economic accounts'.

What we are already doing in New South Wales

Find out more about NSW Government natural capital programs.

These programs are designed to provide participants with options to support their business goals and deliver environmental benefits.

The NSW government is already actively involved in the natural capital space. Examples include the:

  • Primary Industries and Productivity Abatement Program (PIPAP)
  • Private Land Conservation (PLC) Program
  • Biodiversity Credit Supply Program
  • Marine Estate Management Strategy
  • NSW Sustainability Bond Programme
  • Saving our Species program
  • Biodiversity Offsets Scheme
  • ongoing expansion of our National Parks estate.

The NSW Statement of Intent will interact with key Australian government programs in the natural capital space, such as the:

  • Emissions Reduction Fund
  • National Landcare Program
  • Oceans Leadership Package
  • National Soil Strategy
  • Agriculture Biodiversity Stewardship Package
  • National Reserve System.

What is the Natural Capital Statement of Intent?

The NSW Natural Capital Statement of Intent is the first of its kind for any state in Australia. It will set the ambition for, and approach to, sustainably managing natural capital in New South Wales. The statement

  • provides a pathway to guide and inform government decision-making to conserve and enhance the environment while ensuring economic prosperity
  • provides a framework for economic recognition and valuation of the state's natural assets. It clarifies how government can help to create the conditions for natural capital markets that will be additional to the government's other roles in protecting and improving the environment
  • is not a new policy announcement, nor is it a new natural capital program. Some existing policies and programs already align with the principles and framework.