Rethinking the Economy’s Relationship with Nature
Nature is not separate from the economy—it is the foundation of it. Biodiversity and ecosystems provide essential goods and services such as food, water, carbon sequestration, pollination, and waste decomposition. Despite this, conventional economic models often ignore these services or treat them as externalities.
This detachment has led to what is known as the impact inequality: the gap between the demand humanity places on nature and nature’s capacity to regenerate. Today, we are overshooting Earth’s biocapacity by approximately 70%. We are using natural resources at a rate that would require 1.7 Earths to be sustainable.
To correct this imbalance, economic systems must reflect the true value of natural capital. Relying solely on GDP as an indicator of progress hides environmental degradation. A more comprehensive measure is inclusive wealth, which includes produced, human, and natural capital. Countries that deplete their ecosystems while growing their GDP are not achieving true progress. Natural capital accounting can help. It allows us to evaluate whether an economy is growing sustainably by including the state of ecosystems in national accounts. While challenges remain in valuation and data availability, many countries have begun integrating nature into their economic planning frameworks.
Incentives, Risks, and the Role of Policy
The undervaluation of nature is reinforced by harmful incentives. Global environmental subsidies—estimated between $4 and $6 trillion annually—encourage extraction and pollution rather than conservation. This amounts to a negative price on nature, making overexploitation economically attractive.
At the same time, many ecosystem services, like those provided by oceans or tropical rainforests, are global public goods. Yet no global mechanism ensures their sustainable use. This misalignment leads to overuse and degradation, especially in biodiversity-rich regions of the Global South, where the economic benefits often flow abroad while local environments are harmed.
Private firms are increasingly aware of the risks that ecosystem degradation poses to their operations and supply chains. Investment in nature is not only an environmental obligation but also a form of risk management. Healthy ecosystems ensure resilience in sourcing, production, and distribution.
To shift toward sustainable practices, a combination of public policy, market signals, and international cooperation is needed. Payment for ecosystem services, reform of subsidies, ecological taxation, and corporate disclosure are among the tools that can better align economic activities with ecological realities.
Biodiversity must be embedded in economic frameworks—not treated as an externality. Long-term human prosperity depends on functioning ecosystems and the services they provide. Recognising nature as a form of capital allows policymakers and businesses to manage environmental risks, support inclusive growth, and foster resilience. This shift requires more than awareness—it demands tools and structures that make nature-positive investments feasible and effective. The BIOFIN-EU initiative directly supports this transformation, by helping reorient financial flows away from environmentally harmful practices toward biodiversity-linked activities.
