Readout: OSTP Initial Engagement on Developing Natural Capital Accounts
In June and July 2022, the White House Office of Science and Technology Policy (OSTP) convened a series of roundtables to engage stakeholders and experts on the Administration’s initiative to develop natural capital accounts for the nation.
On Earth Day 2022, the Biden-Harris Administration announced an initiative to develop a Federal Strategic Plan on Statistics for Environmental-Economic Decisions so that we as a nation can account for the significant contribution of nature to our economic growth and the services it provides to the American people. These “natural capital accounts” will connect with the existing U.S. national economic accounting system and measure changes in the economic value that natural assets provide to society—from fish stocks and forests to the quality of our shared air and water. Nature will finally be reflected on our nation’s balance sheet.
Several U.S. federal agencies have already developed research accounts, laying a critical foundation for standardized U.S. natural capital accounts that are consistent with international standards. An Interagency Policy Working Group, led by OSTP, the White House Office of Management and Budget, and the Department of Commerce, was established to harmonize cross-agency efforts and develop a strategic plan to produce consistent and routinely updated natural capital accounts and environmental-economics statistics that the Federal government, states, and the private sector can rely upon.
On behalf of the interagency policy working group, OSTP held a series of roundtables to meaningfully engage with stakeholders and experts on this topic. Stakeholders included the business and private sectors, NGOs, and members of the academic community. All participants in the roundtables shared their excitement for the critical Federal effort to produce standardized and routinely updated Federal Strategic Plan for Statistics for Environmental-Economic Decisions. There was overwhelming support for the Federal government’s efforts to help put nature and the environment into the language of investors, bankers, and businesses to ensure U.S. economic competitiveness in a 21st century global economy. OSTP observed three main themes in these discussions:
- A Standardized U.S. Government Natural Accounting Framework is Critical for the Growth of U.S. Businesses.
American businesses depend on natural capital assets, from minerals to fish stocks to pollinators, that often serve as the first links in supply chains or protect vital infrastructure. Climate change and overuse of these natural capital assets can risk the financial health and sustainability of a business. Standardized reporting of natural capital statistics will help American businesses better understand what nature-related metrics and data are important to track and report, thereby reducing costs, increasing competitiveness, and creating a stronger understanding of how their practices both impact and are impacted by nature and biodiversity. Companies also want to make strong positive commitments to protecting the environment and nature, but lack a unifying Environment, Social, and Governance (ESG) framework or guidance for what to commit to, what to make claims about, and what to report on. Standardized, maintained and regularly-updated natural capital accounts can provide a foundation for unifying the environmental elements of the ESG frameworks and would reduce uncertainty and litigation risk for businesses by providing the foundation on which to build credible reports on nature-positive activities.
There are already robust ways to reduce greenhouse gas emissions—companies can reduce their actual carbon footprints measurably or pledge net-zero commitments by certain dates measured by agreed-upon standards, often developed with or by the non-governmental community, that help entities track progress. Standardized natural capital accounts will do the same for measuring natural assets and will bring structure and clarity to American businesses and organizations that want to plan for the future and invest in stewarding our natural assets.
- Inclusive Natural Capital Accounts are Important for National, Regional, Local, and Private Sector Decision Making.
Participants also highlighted the need for the natural capital accounts to take an inclusive approach to what is counted and how nature is valued. The location of natural assets influences their contributions to local, regional, and national economic growth and can have an immediate effect on the economic well-being of the communities in which they are located. A standardized set of natural capital statistics must be created in a way that will have a positive impact on U.S. economic growth at all scales. Stakeholders also noted that accounting for our key natural assets in a way that connects to the economy is crucial for decisions surrounding the future stewardship and caretaking of our natural resources. All stakeholders consulted recognized the tensions among an immediate need for natural capital accounts, the scale and scope surrounding the challenge of developing the accounts, and the need for natural capital accounts that are robust and grounded in rigorous statistical detail in order to become a permanent feature of the statistical system, a partner to national economic accounts, and to produce a summary that complements Gross Domestic Product (GDP).
- U.S. Leadership is Important and Can Spur Action.
The United States’ commitment to producing natural capital accounts in a way that is compatible with international standards, like the United Nation’s System of Environmental-Economic Accounting, positions the U.S. to create a gold-standard implementation model. Participants noted that the United States has a prime window of opportunity in this space to shape norms, establish international precedence, and lead by example. By producing natural capital accounts, the United States is signaling to the international community its commitment to understanding and prioritizing the critical role of nature in economic progress, security, and growth. U.S. investment in a system of natural capital accounts may also spur increased investment and research in nature-positive economic metrics that will help push us towards a more sustainable 21st century economy. Countries around the world are now looking to the U.S. government to develop natural capital accounting and standardized environmental-economic statistics that can support the integration of nature into the global economy.
Comments from Stakeholders and Experts
Amy Senter, Director for the World Business Council for Sustainable Development – “In the face of unprecedented nature loss, we must act now to mainstream nature in business decision making. Central to this shift will be for capital markets to recognize the value of natural capital through consistent, comparable and reasonably assured data on nature-related risks and opportunities.”
Elizabeth Gray, CEO of Audubon – “The NGO community is very interested in natural capital accounts and environmental-economic statistics, which will help people make the connections between nature, the economy, and their everyday lives.”
Jim Boyd, Senior Fellow at Resources for the Future – “Integrating natural capital into National Economic Accounts provides an apolitical, objective, rule-based, and robust way to understand important economic dependencies on nature.”
Lauren Smart, Chief Commercial Officer of S&P Global Sustainable1 – “Natural capital accounting speaks the language of investors and banks and puts nature in terms business can understand.”
Mark Gough, CEO of Capitals Coalition – “Understanding the value of natural capital and embedding this value across economic planning and decision-making will provide the United States with a critical tool to tackle climate change, conserve its natural heritage, bolster defences against extreme weather, safeguard sustainable livelihoods and strengthen local economies. Working alongside the business community to ensure that natural capital accounts can be applied across the public and private sectors is fundamental to success.”
Michael Coke, Partner at Wilson Sonsini – “Federal guidance on how to measure natural assets and the development of natural capital priority accounts will send a strong signal about what businesses should focus on and will incentivize companies to report on their impacts to natural capital.”
Rebecca Shaw, Chief Scientist and Senior Vice President at the World Wildlife Fund – “If we do not measure our natural assets, we cannot monitor how they are doing – whether they are declining and how they are impacted by our actions – nor can we properly steward our natural resources for future generations. By measuring key natural assets, this initiative will allow us to prioritize the environment in our economic decisions.”
Next Steps
The rich input from these roundtables will be incorporated into the National Strategy to Develop Statistics for Environmental-Economic Decisions and future work of the Interagency Policy Working Group. OSTP with the interagency working group will hold additional engagement opportunities with other stakeholder groups in the coming months. A draft of the National Strategy to Develop Statistics for Environmental-Economic Decisions is available here for public comment. The Interagency Policy Working Group is eager to hear from stakeholders during the public comment period and will use this input to guide its work to finalize the strategic plan.
