SNH’s natural capital asset index

7th June 2018 By Tom McKenna

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Scotland’s Natural Capital Asset Index: Tracking the national Index 

Robert Kennedy famously said of GDP “it measures everything in short, except that which makes life worthwhile”. There has been a general consensus that a more comprehensive way to measure wellbeing needs to be found. A failing of GDP is its inability to measure the often free benefits provided by nature, or ecosystem services. Since 2011 Scottish Natural Heritage has been developing the Natural Capital Asset Index, a way to detect the changes in the potential benefits that can be derived from Scotland’s environment. All values in the Index are relative to each other and a point in time, the index does not set out to measure anything explicitly. 

When I joined Scottish Natural Heritage (SNH) last autumn, part of my role was the update and maintenance of the Natural Capital Asset Index (the Index).   I was impressed by the Index, its structure and ability to account for so much complexity in the real world with a relatively simple structure. This explains in part how the Index has flourished from a pilot project in 2011 to being part of Scotland’s National Performance Framework in just six years. 

The Index tracks changes in the capacity of Scotland’s terrestrial ecosystems to provide benefits to people. It combines indicators of the quantity and quality of these ecosystems (or habitats).  The original method developed an approach used by the Netherlands Environment Agency (ten Brink 2007). The Index assesses the relative potential of these habitats to deliver ecosystem services from a set land area, based on work by researchers in Germany (Burkhard et al, 2014). It then multiplies this by how much of that habitat is found in Scotland and whether the habitat is in a state that is able to deliver these ecosystem services. 

The capacity of ecosystems to provide benefits fluctuates over time due to changes in habitat quantity and quality. Habitat quantity is tracked using what we know about land cover change in Scotland, currently we are only able to track changes for these habitats using agricultural and forestry statistics: the baseline uses land cover data from a range of sources. Habitat quality is tracked using 38 separate indicators which rely on datasets gathered by a range of public organisations and citizen science schemes.

People sometimes say that natural capital and ecosystem services give monetary values to aspects of nature which are intangible and priceless. The Natural Capital Asset Index does not attempt to value the benefits provided from nature but instead examines the relative value of their contribution to wellbeing. 

When SNH began developing the Index in 2011 they backdated the results to a baseline year of 2000 and have updated it on an annual basis since. A further effort to backdate the results to 1950 was also undertaken (albeit with a smaller set of indicators and at a coarser temporal scale) which showed that natural capital in Scotland declined dramatically until the 1980s (see figure below).

The back-casted Natural Capital Asset Index for Scotland. Figures prior to 2000 are less reliable as they were calculated using fewer habitat types and fewer indicators.  However, the figures are still indicative of the overall trend.

2018 update

In an effort to try and capture a more inclusive and whole picture the Scottish Government has developed a National Performance Framework.  This consists of 50 separate indicators, the Natural Capital Asset Index forms one of these indicators: Increase natural capital. Within this Framework, an official increase in natural capital occurs when the index increases by 3% over three years.  The 2018 update saw a cumulative increase of 2.9% over the previous three years.

The 2018 update for the Natural Capital Asset Index with results split into the three main ecosystem service types.

We updated the Index this year using data up to the year 2016. The update indicates that Scotland’s environment offered the highest potential for human wellbeing than at any other point this century. The potential for provisioning, regulating and cultural services increased by 0.2%, 0.6% and 0.8% respectively.  Nearly every broad habitat type showed improvement, with the exception of agricultural habitat which declined slightly, likely as a result of a loss in extent. 

Mires, bogs and fens, and Heathland both showed improvements.  This is important considering they are the habitats that provide the most ecosystem services per area and the largest habitat type in Scotland respectively. 

The 2018 update of the Natural Capital Asset Index: breakdown into its composite broad habitat types

There is no such thing as a perfect indicator, each indicator chosen reflects compromises. Single indicators are clear and accurate but are unable to account for complexity or trade-offs.  Composite indicators, on the other hand, allow for a more comprehensive understanding of changes in a system, but can often lose much of the detail used to create them.  In the Natural Capital Asset Index, forest habitat has recently shown a large increase in ecosystem service potential. However a, drop in overall quality of these habitats has been masked by large increases in forest cover. 

The Index is good for understanding the general trends in wellbeing potential derived from the environment.  At the same time we can highlight some underlying trends when presenting the results, such as losses in waders or in the perceived quality of green spaces. 

We believe that the Natural Capital Asset Index is a unique and powerful indicator of the quality of Scotland’s environment and we want people to know about it.  We also want to continue to improve it. For example, the Index does not account for marine habitats (which are up to six times larger than their terrestrial counterparts): this year we’re working with Marine Scotland to look at what an Index for the marine environment would involve. It can’t account for where the habitats lie: for example, forests in or around cities are much better for air filtration or recreation than those in remote areas. Nor can it account for how habitats are assembled: landscape-scale approaches can provide many more ecosystem services than the sum of their parts. We also face challenges with uncertainties around whether data will continue to be collected for the indicators that underpin the Index. 

Despite these limitations, our aim this year is to explore how we can use the Index more to inform the choices that Scotland faces in managing our natural environment to sustain prosperity and wellbeing for Scotland’s people into the future. This includes using the Index to model land use changes or changes in certain indicators such as protected site condition. This may even give an indication of priority areas for future investment opportunities. 

 

Tom McKenna is an economist at Scottish Natural Heritage.