Nature-adjusted GDP: tracing the 'wealth of nations' back to the source

Going back to 1776, when Adam Smith wrote his treatise on capitalism, The Wealth of Nations, he certainly wasn’t thinking about nature as a limiting factor to economic growth. Back then, there were only about 850 million people on Earth, and nature was seen as an endless well of resources for the taking. A wolf had no economic value in the eyes of the early capitalists.

Of course at the time, no one understood just how valuable ecosystems were and the enormous importance of the iconic species that manage them. It turns out that wolves are indeed very valuable, which we learned after their complete extirpation from the Yellowstone ecosystem in the early 20th century. Within decades, the entire ecosystem started to collapse. Without wolves, coyotes and deer ran amuck. The former decimated beaver populations, the ecosystem engineers of the river. And deers, with no serious threats, could now descend to the river banks and devour the abundant riparian vegetation, leading to major soil erosion, which then disrupted fish spawning, and so on. It wasn’t until the wolves were reintroduced in the mid-90s that the ecosystem began to heal. 

Simplified diagram of the trophic cascade in Yellowstone, an ecological process where changes at the top of the food web trigger a ripple effect down through lower levels of the food chain.

We now know that without the intricate web of life and the myriad species that make the Earth's operating system function, none of us would probably even be here today. The One Earth 'Razor's Edge' Climate Model shows the enormous role nature plays in balancing our global climate system. In order to achieve the long term 1.5C goal of the Paris Agreement, certainly we need to transition our energy systems, but equally important is the annual “background” removal of carbon dioxide (CO2) by the world’s land and ocean carbon sinks (the light blue and green curves below). Without these regulating functions of nature, we’d all be cooked.

One Earth 'Razor's Edge' Climate Model, 2025.

So we need to secure and properly finance these carbon sinks, and in addition, there is a large potential for additional carbon dioxide removal from natural climate solutions. Based on a series of papers supported by One Earth, we estimate that it's possible to remove approximately 169 GtCO2 through reforestation and forest management by 2100, 45 GtCO2 from coastal restoration, and 67 GtCO2 of carbon removal from grassland restoration and silvopasture.

We are also beginning to estimate the additional climate mitigation potential of specific wildlife species. New research shows that the presence of large herbivores like bison in grassland ecosystems can actually increase carbon removal. Two recent papers show that restoring pacific and Atlantic whale populations could result in an additional 32 GtCO2 removed, and restoring African forest elephants to their original levels could remove another 11GtCO2.

If we were to attach a price tag to these nature-based climate mitigation pathways at $20/tonne, it would total about $6.5 trillion in value. These are just a few examples of the role nature plays in regulating our climate. And climate regulation itself covers just two of 45 different types of ecosystem services provided across terrestrial and aquatic domains. 

A framework for organizing ecosystem services across both the terrestrial (left) and marine (right) domains. Climate regulation represents just two of 45 different services provided by nature. Credit: NatureScot, 2020.

The latest estimate is that the sum total of all ecosystem services is worth roughly $58 trillion, underwriting about 55% of the global economy annually. But of course, nature does not receive any compensation for this, which is due in part to how we account GDP – gross domestic product. 

Recently, the UN put out its first big report from the ‘Beyond GDP’ high-level task force, Counting What Counts. In the report, they make a case for incorporating new metrics to track how countries are really doing beyond just a simple GDP per capita metric. The recent decoupling of health outcomes in North America despite increasing GDP is a great example of how economic productivity alone is no longer an adequate measure of a country's prosperity. East Africa, for example, is currently showing a dramatic increase in GDP per capita, but this is at the expense of wide-scale land degradation, which could result in an increase in poverty in the future.

Two examples illustrating that, when it comes to health and environmental concerns, GDP per capita is not a reliable indicator of a country's economic progress. From Counting What Counts, United Nations, 2026.

Clearly GDP is not a good measure of the health and wellbeing of a society. Many ideas have been proposed to either fix or supplement this metric, going back to the 'Green GDP' concept introduced in the early 1990s by SEEA, the UN system of environmental-economic accounting. It was eventually shelved due to country backlash, and since then many other proposals have been made:

• Doughnut Economics (DEAL)
• Global Ecosystem Product (GEP)
• Gross National Happiness (GNH)
• Nature Relationship Index (NRI)
• Human Development Index (HDI)
• Better Life Index (BLI)
• Sustainable Economic Welfare (ISEW)
• Global Peace Index (GPI)

All of these are what we might call “side-along” metrics, They don’t actually touch the core GDP metric itself.  Though many of these proposals are beautiful and useful, none of them were really developed rom the perspective of a financial planner sitting in a country office or at Central Bank, who only cares about answering one question, "Is my investment going to pay off?" Countries need access to capital to grow, and how much capital they can get (and at what lending rate) is determined primarily by one equation –Debt Level. Here's how it works:

Countries need to increase their growth rate (g) in order to lower their interest rate (r). But there's a big problem.. Some of the most important biodiversity areas and carbon sinks are held by relatively low-income countries, some of whom have a very high r value. Protecting natural assets doesn’t help them in the all-important debt to GDP ratio calculation. In fact, it’s just the opposite. Converting or extracting natural resources quickly increases their cash flow (boosting g), which then reduces their cost of capital. In a sense, the equation at the heart of the global economy effectively incentivizes the destruction of nature, not its preservation for the long term. 

It's important to have a sense of the sheer volume of capital flows driven by the simplistic debt-to-GDP ratio. In Emerging Markets and Developing Economies (157 nations representing 90% of the global population), sovereign bond issuances hit $4 trillion in 2025, bringing the total debt stock to USD 14 trillion, or 30% of GDP, the highest level since 2007 according to the Global Debt Report (2026). This means EMDE countries will be spending close to $1 trillion per year just to service their debt. 

Sovereign bond issuances (right) and total outstanding debt (left) of Emerging Markets & Developing Economies (EMDEs). EMDEs borrowed $4 trillion USD in 2025 with $14 trillion in total debt. Credit: Global Debt Report, 2026.

This system is not good, but unfortunately it is how the world works. But what if there were a way to reduce the debt burden of low-income countries by putting nature on the balance sheet?

This is the question addressed by an exciting new paper introducing the concept of Regenerative GDP (or ReGDP). Led by Ralph Chami, an economist and former IMF Asst. Director, the paper has worked out the quite complicated math that can in a sense "hack" the all-important debt level equation, injecting projected revenues from ecosystem services into economic growth calculations. This could quickly reduce lending rates and thus improve the long term economic outlook of EMDEs.

Moving beyond GDP to ReGDP is not a symbolic shift. It is about aligning economic logic with ecological reality. And that alignment will define the next chapter of our economy.  – Ralph Chami

The new Chami et al. paper models the ReGDP of the Bahamas, a heavily indebted nation with a 66% debt-to-GDP ratio. Recently, marine biologists studying the behavior of sharks in the Bahamas (by strapping cameras to their backs), discovered the world’s largest sea grass meadow, roughly the size of Austria. Based on this asset, the economists can now accurately project future revenues from carbon, fisheries, and tourism, which dramatically improves the Bahamas debt level calculation, and thus its overall economic outlook. The ReGDP approach allows poorer countries that are rich in natural resources, to incorporate these ecological assets into their balance sheets.

Two rays feeding amongst the seagrass of the Bahamas. Photo by Cristina Mittermeier, Sea Legacy, 2021.

What does this mean in light of the 30x30 goal (protecting 30% of the planet by 2030)? This target was operationalized as part of the UN Biodiversity Convention in Montreal a few years ago, and in some ways you could say it has initiated a giant “World Game” (a term coined by Buckminster Fuller). In this context, the game can be imagined as something like a ”race” for nations to protect more of their natural resources, thereby gaining a larger share of the 30% global goal. Some countries will do much better than others protecting their critical natural assets, and like the Bahamas, those countries could be rewarded for healthy functioning ecosystems though reduced debt burdens, saving them hundreds of billions of dollars over time. 

This sounds theoretical, but actually the global game is already underway. Many major asset managers, who buy sovereign EMDE debt, are now interested in assigning a lower risk status to the top performing countries, resulting in preferred interest rates on their bond issuances. Playing this out in one global scenario, countries with a higher ecological status could save as much as $377 billion over an average modified loan duration of 6.5 years, versus countries that continue doing business as usual. You can see that this could quickly become an enormous financial incentive for countries to strive to conserve and restore their ecosystems. 

To support this theory of change, the Nature Data Lab is developing a new 'Conservation Status Index' powered by the Global Safety Net v3 (GSN3), which estimates the full extent of natural ecosystem areas country by country. The GSN3 process uses annual satellite imagery to model with historic land use data, intersected with areas of particular importance for biodiversity and ecosystem services (AIBES). These data are compiled and displayed on the new GSN3 web application. There are three main views of the data, compiled at 90m resolution:

https://youtu.be/7b5BIysmnDU?si=-7nRobz8Bc7brD-i

The first shows the five main ecological groups – rare species sites, high biodiversity areas, large mammal assemblages, intact wilderness, and climate stabilization areas. Clicking on any country displays statistics on the total extent of these natural land areas. The second view provides an inventory of these areas by land cover class – from different forest types to grasslands and drylands, to wetland and freshwater. The third view shows the extent to which these areas of importance are protected or conserved, incorporating local conservation efforts and documented Indigenous territories.

Our belief is that there is a pathway to incorporating the wealth of nature into the wealth of nations, creating a new incentive for governments to protect and restore more of their lands and ocean areas. But this require an ongoing investment in science and data products like GSN3 and others, to make nature visible and measurable at global scale.