What is "natural capital"?

Study for the CFA Sustainable Investing Certificate. Use flashcards and multiple-choice questions; each question provides hints and explanations. Prepare effectively for your exam!

Natural capital refers specifically to the stock of natural assets that encompass geology, soil, air, water, and all living organisms. This concept emphasizes the intrinsic value of nature and the vital role these assets play in sustaining ecosystems and human life. By recognizing the ensemble of resources that the earth provides, natural capital highlights the importance of preserving biodiversity and maintaining healthy ecosystems for current and future generations.

This definition underscores the interdependent relationship between natural systems and economic activities. It allows for a more comprehensive understanding of sustainability and the need for businesses and governments to account for environmental impacts in their decision-making processes.

The other options do not capture the full essence of natural capital. For example, while natural resources can be sold for profit, this commercial aspect does not encompass the broader definition and significance attributed to natural capital. Similarly, international collaborations to enhance natural spaces in urban settings may be valuable, but they don't define what natural capital itself is. Lastly, stating that it is the sum-total of monetary benefits directly tied to nature neglects the integral concept of the stock of natural assets that form the foundation of natural capital.

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