Introduction
At the coincidence of two of the most significant challenges of our time; climate collapse and biodiversity crisis, the concept of natural capital – placing a monetary value on our ecosystems’ resources – has the potential to be as revolutionary as the internet once was.
Just as the internet redefined communication, connectivity, and commerce, the emerging natural capital economy promises to reshape how we value, protect and improve our natural environment. Understanding this transformation through the lens of the technological evolution cycle offers us unique insights into its potential trajectory and impact, as well as helping describe how very early we might be in the growth of a truly nature-based economy.
Technological Evolution Cycle Explained
The technological evolution cycle describes the journey of a technology from its conception to widespread integration. It begins with the innovation stage, where visionaries conceptualise breakthroughs, often in academic or specialised settings. Next, the adoption phase sees these innovations tested and implemented in practical applications. This evolves into broader acceptance by the majority, leading to full-scale integration and, eventually, saturation within society. Understanding this cycle provides a framework to explore the parallel development of natural capital.
The Genesis of the Internet
The internet began as an ambitious concept in the 1960s with J.C.R. Licklider’s vision of an “Intergalactic Network.” This idea laid the groundwork for ARPANET, the first packet-switching network and the internet’s precursor. Crucial developments such as TCP/IP protocols in 1983 and the Domain Name System in 1984 established the necessary infrastructure for a globally interconnected network. These early stages were characterised by innovation and foundational groundwork, much like the changes we see today in the development of the nature-based economy.
Expanding on Internet Development
Beyond the basic infrastructure, the internet saw rapid developments and enhancements. The introduction of commercial ISPs in the early 1990s and the development of the World Wide Web by Tim Berners-Lee were pivotal. These advancements democratised the internet, moving it beyond government and academic domains to public and commercial use, leading to an explosion of growth and the dot-com boom.
Parallel Paths: Natural Capital’s Development
Innovation and Foundation
Discussions on ecological economics in the 1980s initiated the conceptual groundwork for natural capital. Influential reports such as the Brundtland Report in 1987 and the global dialogue sparked by the 1992 Rio Earth Summit laid early theoretical foundations, emphasising the importance of balancing economic growth with environmental preservation.
Infrastructure and Initial Adoption
By the mid-2000s, frameworks like the Millennium Ecosystem Assessment and initiatives such as The Economics of Ecosystems and Biodiversity began to quantify the economic benefits of biodiversity. The adoption of the Natural Capital Protocol in 2016 and the recent establishment of the Taskforce on Nature-related Financial Disclosures, following from the Taskforce on Climate-related Financial Disclosures, represent the gradual but increasing application of these concepts within the finance and business sectors, mirroring the internet’s move into commercialisation.
Detailed Examination of Natural Capital Infrastructure
Whilst we have the underlying core infrastructure of the natural capital economy – our ecosystem itself – we have only just begun the process of building the economic, technological, financial, and regulatory systems we need. This includes the development of sophisticated environmental accounting systems that quantify and value natural capital, often supported by advances in geographic information systems (GIS) and remote sensing technologies that enable precise monitoring and management of natural resources. Financial markets have begun adapting as well, with the emergence of green bonds and ecosystem service payments that incentivise conservation and sustainable practices. Policy frameworks and regulatory bodies are also evolving to support this shift, setting standards and guidelines that ensure environmental impacts are considered in economic activities. Additionally, numerous global initiatives and partnerships have become established to promote knowledge sharing, capacity building, and financial investment in natural capital projects, illustrating a broad-based commitment to integrating ecological health into the global economy.
Challenges and Scaling Up
The development and adaptation of nature-based economic principles is incredibly difficult and we remain so very early in its evolution. Many businesses are still learning how to integrate ecosystem services into their financial calculations. Moreover, the regulatory environment is still evolving, which adds a layer of complexity to valuation and reporting, for example, we have only just received information on how the HMRC will treat carbon credits from a VAT perspective (May 2024). So many questions remain, and many more we have even thought to ask. These challenges are reminiscent of the early days of internet security, systems, structures, and processes all needed ahead of things like data laws and regulations, where standards needed to be established to foster growth and trust.
Readying for Adaption
While a few pioneering organisations are stepping into the adoption phase of natural capital, the majority are still deeply entrenched in the innovation and infrastructure-building stages. Much like the early days of the internet, where initial developments were focused on establishing foundational technologies and protocols, the natural capital economy is currently laying down its own critical groundwork.
Organisations like the Foresight Sustainable Forestry Fund, Federated Hermes alongside Finance Earth and Oxygen Conservation are at the forefront, integrating natural capital into their strategic frameworks. However, akin to the nascent internet era marked by a landscape of experimental technologies and emerging standards, the field of natural capital is characterised by a high degree of innovation with an ongoing need to develop the infrastructure and fundamental principles necessary for broader economic integration.
The challenges ahead are fiendishly difficult. Much of the detailed mapping of this new terrain is yet to be undertaken. Businesses and governments are still grappling with how to effectively integrate ecosystem services into economic planning, regulatory frameworks, land use policy, and corporate strategies. The evolution of the regulatory landscape (in every sense of the word) is especially important when adding layers of complexity to an already intricate valuation and reporting system, just look at the recently published land reform bill in Scotland.
These hurdles mirror the early obstacles faced by internet pioneers, who had to establish security protocols, user trust, and regulatory compliance in a world not afforded with the connectivity or access to information we ironically enjoy as a result of their work.
Despite these challenges, the trajectory of natural capital and the nature-based economy is clear. Just as the internet grew from a collection of isolated networks to become the backbone of global infrastructure, so too does natural capital hold the potential to transform our economic landscape. By learning from the technological evolution of the internet—recognising the importance of early innovation, the gradual shift to adoption, and the critical role of infrastructure—we can better prepare for the next stages of growth in the natural capital economy.
As we stand at this crossroads, it is crucial to continue fostering an environment that encourages exploration, supports innovation, and ultimately facilitates the widespread adoption of natural capital principles. With sustained effort and strategic foresight, we can ensure that the valuation of our natural resources evolves from a fringe concept into a central pillar of sustainable economic development.
The journey is long, and much remains to be done, but the path forward is promising. For all of you out there working so incredibly hard to make the natural capital economy a reality, please keep going, but remember it’s ok to take a moment, recognise how far we’ve come and understand we have an incredibly long way to go!
In the world of the internet, we’re in the late 1990s, we’re all using AOL, Yahoo! is the most exciting company on the planet, Amazon had just started selling books, and eBay would launch later this year. Oh, and the first iPhone was 8 years away, as Steve Jobs had just returned to Apple. Just imagine what the next twenty years of the natural capital economy will bring. We’re so fortunate to be on this journey and so excited to be playing our part in building the future.