This article was originally published on Wealth Accounting and theValuation of Ecosystem Services.
“As international development institutions, it is our mandate to reduce poverty and inequality, to boost shared prosperity, and do so in an environmentally sustainable way. Our cooperation and investments across the globe should reflect these ideals, contributing to current economic well-being and enhancing prospects for future economic growth. Considering that physical, human and natural capital is the foundation of wealth and prosperity, it is an institutional commitment to strengthening this foundation upon which the well-being of future generations is dependent.
The investments of multilateral development institutions and the advice they provide are subject to economic analysis of their potential impacts on the economy and society. Where public policy and large investments are concerned, economy-wide models are often used to assess the net present value of these interventions which tells us whether or not we will be better off as a result of their implementation, compared with a business as usual scenario.
There is a critical limitation to the standard ‘ex-ante’ impact analysis approach, though, and this has been described as the ‘economic invisibility of nature’. While our standard impact analytical approaches capture important interactions in an economy and generate results in terms of indicators that reflect changes in gross domestic product (GDP), income and employment, they are silent on how an investment will affect natural capital as one of the three pillars of wealth and prosperity…”