Natural Capital
Definition of Natural Capital
Natural capital refers to the stock of natural assets — such as soil, water, air, biodiversity, and landscapes — that provide ongoing benefits to people and the economy. In agriculture, natural capital represents the environmental resources that underpin farm productivity, resilience, and long-term viability.
Rather than viewing nature as separate from production, natural capital recognises that healthy ecosystems generate services — including nutrient cycling, pollination, water regulation, and carbon storage — that support food production and rural livelihoods.
Why Natural Capital Matters
Natural capital matters because farming depends directly on functioning natural systems. Its importance includes:
Supporting soil fertility and crop productivity
Maintaining water availability and quality
Providing habitats for pollinators and beneficial species
Regulating climate through carbon storage
Reducing risk from flooding, erosion, and degradation
Creating opportunities for environmental markets and payments
Depleting natural capital can undermine long-term farm performance, while investing in it strengthens resilience and sustainability.
Key Components of Natural Capital in Agriculture
Soil Resources – Structure, fertility, and biological activity
Water Resources – Surface and groundwater systems
Biodiversity – Species, habitats, and ecosystem interactions
Vegetation and Landscapes – Grasslands, hedgerows, woodlands
Carbon Stores – Organic matter in soils and biomass
Ecosystem Services – Benefits generated by natural systems
Together, these components form the environmental foundation of agricultural systems.
How Natural Capital Is Managed
Natural capital is managed through practices such as:
Soil conservation and organic matter improvement
Water stewardship and catchment management
Habitat creation and biodiversity enhancement
Agroforestry and perennial planting
Monitoring land condition and environmental performance
Effective management integrates environmental improvement into everyday farm planning and long-term strategy.
Frequently Asked Questions on Natural Capital
What is natural capital?
Natural capital refers to the world’s stock of natural assets — such as soil, water, air, forests and biodiversity — that provide valuable ecosystem services.
What are examples of natural capital?
Examples include fertile soil, clean water, pollinators, woodlands, wetlands and grasslands, all of which support economic and environmental systems.
What is the difference between natural capital and ecosystem services?
Natural capital describes the stock of natural resources, while ecosystem services are the benefits those resources provide, such as carbon storage or water filtration.
Why is natural capital important in agriculture?
Natural capital underpins soil fertility, crop productivity, water regulation and biodiversity, making it essential for long-term farm resilience.
How is natural capital measured?
Natural capital can be assessed using environmental indicators, biodiversity metrics, carbon accounting and land valuation frameworks.
What is natural capital accounting?
Natural capital accounting is the process of valuing environmental assets and integrating them into economic decision-making.
How does natural capital relate to biodiversity net gain (BNG)?
BNG policies aim to enhance natural capital by ensuring development projects deliver measurable biodiversity improvements.
Can natural capital improve farm profitability?
Yes — managing natural capital effectively can unlock stewardship funding, carbon markets and improved productivity outcomes.
How does natural capital support climate goals?
Healthy ecosystems store carbon, regulate water and improve resilience, contributing to climate mitigation and adaptation strategies.
What is sustainable natural capital management?
It involves protecting and enhancing natural assets to ensure they continue delivering long-term environmental and economic value.
Related Terms
Useful Resources on Natural Capital
Explore these trusted resources to learn more about natural capital and its role in agriculture:
European Commission – Natural Capital and Biodiversity Strategy
The Natural Capital Coalition – Frameworks and guidance
The Sustainable Soils Alliance – Soil as natural capital
Learn the meaning of more essential agricultural terms with our easy-to-use Key Terms Glossary here
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