Why We Don’t Really Measure Natural Capital but Really Should

The document contends that the global fixation on Gross Domestic Product (GDP) as the primary measure of national success is outdated and fails to account for the sustainability of national assets. It proposes the adoption of 'inclusive wealth'—a portfolio comprising produced, financial, natural, human, and social capital—as a framework for integrated decision-making. The author highlights that while Statistics Canada measures natural capital, which accounts for approximately 40% of Canada's national wealth, these figures are largely ignored by policymakers. The report suggests that failing to maintain these assets contributes to slowing economic growth and environmental crises, such as climate change. It outlines the International Institute for Sustainable Development's (IISD) commitment to integrating inclusive wealth into the UN Sustainable Development Goals and developing new macroeconomic modeling and expertise in ecosystem services measurement.

• National economic policy is currently dominated by a fixation on GDP growth, which the author argues is a legacy of the 1940s that no longer reflects modern realities and may contribute to slowing growth due to the neglect of national wealth.
• The concept of 'inclusive wealth' is presented as an integrative framework that combines five asset classes: produced, financial, natural, human, and social capital. A nation's development is considered sustainable only if the total value of this portfolio grows or remains stable in per capita terms.
• In Canada, natural capital—including energy, mineral, timber, and land assets—represents approximately 40% of the country's national wealth, yet these measurements by Statistics Canada receive very little attention from policymakers.
• Norway is cited as a successful example of applying inclusive wealth principles by reinvesting North Sea oil revenues into a sovereign wealth fund valued at US$740 billion to ensure future well-being after oil reserves are depleted.
• The author links current global crises to the decline of specific asset classes: social unrest to the loss of social capital, high unemployment to a drop in human capital, and climate change to the failure to maintain the atmosphere as a global asset.
• The International Institute for Sustainable Development (IISD) intends to advocate for the inclusion of inclusive wealth in the UN Sustainable Development Goals and will develop new macroeconomic forecasting models that move beyond GDP.

APA

Smith, R. (2013). Why We Don’t Really Measure Natural Capital but Really Should. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/natural_capital.pdf

Chicago

Smith, Robert. Why We Don’t Really Measure Natural Capital but Really Should. International Institute for Sustainable Development, 2013. https://www.iisd.org/system/files/publications/natural_capital.pdf.

Wikipedia

{{cite report |last1=Smith |first1=Robert |title=Why We Don’t Really Measure Natural Capital but Really Should |publisher=International Institute for Sustainable Development |date=December 2013 |url=https://www.iisd.org/system/files/publications/natural_capital.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{smith2013why, author = {Smith, Robert}, title = {{Why We Don’t Really Measure Natural Capital but Really Should}}, institution = {International Institute for Sustainable Development}, year = {2013}, month = dec, url = {https://www.iisd.org/system/files/publications/natural_capital.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }