Source: Small Island Developing States
An event on the sidelines of the 2021 High-level Political Forum on Sustainable Development (HLPF) discussed how expanded measures of wealth – referred to as comprehensive wealth, inclusive wealth, and/or natural capital accounting – can inform investments in post-COVID recovery, while also capturing SDG progress better than traditional wealth measures.
The International Institute for Sustainable Development (IISD) organized the event, ‘Building Post-COVID Recovery Around Wealth rather than GDP,’ on 12 July 2021, as part of its initiative on measuring comprehensive wealth to promote inclusive and sustainable development.
Speakers explained that wealth differs from income by measuring skills and assets in addition to income flows, and is a better indication of the resilience of wellbeing. Wealth can derive from either human capital or produced capital. Accounting systems should include natural capital in economic wealth measurement, added another speaker. One also discussed social capital, “the ability of communities to overcome collective action problems,” which is made up of personal relationships, degree of trust in others, quality of networks, and shared sense of community.
On the benefits of measuring wealth, speakers noted that:
- GDP is insufficient to measure achievement of the SDGs, and may risk exacerbating national and global challenges through short-term rather than long-term decision making;
- Only by measuring wealth can governments target investments in infrastructure to generate long-term resilience; and
- Natural capital accounting can synergize with other sustainable development frameworks, including the circular economy model, nature-based solutions, and land degradation neutrality.
A speaker highlighted challenges in constructing indicators of expanded wealth, such as – for Indonesia – lack of disaggregated data, lack of estimates of depreciation rate by capital type, and lack of comparable indicators of social capital. [Earth Negotiations Bulletin side event coverage]