Sustainable Capital Accounting in Economic Development

Sustainable capital accounting frames economic progress in terms of changes to a society’s stock of assets: produced capital such as infrastructure and machinery; human capital including education and health; knowledge capital from research and innovation; and natural capital comprising ecosystems and resource stocks. By measuring the aggregate value of these assets and tracking its evolution, sustainable capital accounting moves beyond gross domestic product to assess whether development pathways preserve or erode the wealth base that underpins long-term wellbeing. This approach underlines the interdependence between economic growth and environmental stewardship, emphasising that depleting natural resources or neglecting human and knowledge capital may yield short-term gains at the expense of future prosperity. In practice, sustainability metrics adjust conventional saving rates for depreciation of physical assets and resource extraction, estimate the economic contribution of ecosystem services, and integrate intangible assets such as education to produce indicators that guide policy on investment, conservation and social welfare. The global significance of this framework lies in its capacity to reveal hidden trade-offs between growth and sustainability, inform capital allocation across sectors, and support intergenerational equity by ensuring that wealth per capita does not decline over time.

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Sustainable Capital Accounting in Economic Development publication trend

The graph below shows the total number of articles in sustainable capital accounting in economic development across all publications each year (not limited to Nature Index journals).

Technical terms

Adjusted Net Savings: A sustainability indicator measuring national saving after accounting for depreciation of physical capital and depletion of natural resources.

Inclusive Wealth: The aggregate value of an economy’s produced, human and natural capital assets, used to assess long-term development prospects.

Genuine Savings: Net investment indicator adjusted for environmental depletion and pollution, reflecting whether current activities add to or subtract from future wellbeing.

References

1. Advancing testing of the genuine savings hypothesis: The use of comprehensive measures of technical change for Ireland. Journal of Environmental Management (2024).
2. Adjusted net savings needs further adjusting: Reassessing human and resource factors in sustainability measurement. Journal of Environmental Economics and Management (2024).
3. Using inclusive wealth for policy evaluation: Application to electricity infrastructure planning in oil-exporting countries. Ecological Economics (2017).