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4. Recommendations to Governments

4.1 Requirement for all Government Departments to develop Natural Capital Inventories

All government departments should be required to produce Natural Capital Inventories that identify as far as possible all the natural capital assets for which that department is responsible, or whose value may be affected (whether adversely or positively) by their departmental activity. Each government department would be required to coordinate with the Finance Ministry or Treasury (through the Chief Secretary of Natural Capital, see Section 4.2) on the valuation for the natural capital assets contained
in their inventory (in line with the latest recognised valuation methodologies).

4.2 Creation of a Ministerial Position within the Finance Ministry to Oversee the Management of Natural Capital

The long-term objective of establishing this role within government is to create a position with the responsibility of regulating a country’s use of natural capital, including both natural resources and ecosystems, and to sign off on all use and depletion of natural capital. This would be a ministerial position within the country’s Treasury/Finance Ministry. For example, within the UK this could be equivalent to the position of Chief Secretary to the Treasury, e.g. the Chief Secretary of Natural Capital.

The responsibilities of the Chief Secretary of Natural Capital would be to:

a. Oversee the adoption of the latest environmental accounting methodologies (as set out in the System of Environmental and Economic Accounting, SEEA);
b. Question why departments are pursuing a technological solution that might be more efficiently brought about through a natural or ecosystem-based approach;
c. Ensure that the Finance Ministry or Treasury prepares a set of Natural Capital Accounts to be published every three years (with the aim of fully integrating these accounts into the government’s budget);
d. Head up the Ministerial Committee on Natural Capital (see Section 4.3).

4.3 Creation of a Ministerial Committee on Natural Capital

This inter-departmental committee would consist of ministers from each relevant department and would be supported by leading external policy experts (see Section 4.4). The committee would:

a. Oversee the necessary actions to measure the economic value of the key components of natural capital within national accounting procedures;
b. Ensure that the values of natural capital are integrated into policy formulation and investment decisions across all government departments (by identifying and advancing the necessary pieces of legislation to underpin this process);
c. Prepare a complementary report to the Natural Capital Accounts that investigates the implications of the government’s policies on the environment and the economic. This publicly available report will identify the projects, programmes and policies that became economic (or uneconomic) as a result of integrating the value of natural capital.

In addition, government departments should utilise the key performance indicators for sustainability when determining their policies and measures. Estimates and budgets must include the financial cost of implementing these measures, the timescale of the expenditure and the income and qualitative returns expected from the measures, and should be agreed to by the Finance Ministry or Treasury.

4.4 Creation of an Advisory Group to the Ministerial Committee on Natural Capital

This advisory group would oversee the technical transition to the incorporation of natural capital into governmental procedures and serve as an expert committee to oversee the technical incorporation of the value of natural capital into day-to-day government activity.

This advisory group would build upon the existing scientific and economic work and bring together leading experts from academia. Initial groups would be established to determine the real value of the central aspects of natural capital that may or may not already be incorporated into government accounting e.g. minerals, sub-soil assets, water resources, forests, marine fisheries etc. These groups would serve to provide a detailed report on the value of each natural capital component every five years.

4.5 Integrate the Value of Natural Capital into Policymaking Processes

All policy and project proposals that influence the state of the country’s environment should undergo economic appraisal that includes the valuation of natural capital and ecosystem services. Government departments will be obliged to incorporate a costed explanation of how their policies will enhance natural capital or transform it into other forms of capital so that overall national wealth is increased.

Where a policy proposal is estimated to deplete natural capital or result in declining ecosystem services, that depletion must be clearly costed and agreed by the Finance Ministry or Treasury. These revisions will need to be updated in the equivalent to country’s ‘Green Book’ or ‘Government guidelines for project and programme evaluation’.

Once the real value of the key components of the natural capital have been established by the advisory group, the following actions should be taken:

a. All government funded investments are required to use the real value of natural capital in order to determine the optimal investment strategy;
b. The private sector should be encouraged (or required over a reasonable time period) to use the same metrics;
c. Local authorities should be encouraged (or required) to use the same methodologies for evaluating planning applications that result in changes to the stock of the country’s natural capital (land, water, etc).
d. Develop a communication and engagement strategy that clearly explains the government’s approach to natural capital to the general public;
e. The National Audit Office should monitor the application of these rules/principles and provide and annual assessment of their applicability.