Table 2 sets out Costanza et al’s (1992, 80 2014, 81 and 2021 82 ) approach to four basic types of capital: built, human, social and natural, which we link to our discount rate discussions.
Type of Capital
Discounting Approach
Discount Rate Key Characteristics
Fixed rate proportional to depreciation rate or interest rate.
- Represents physical assets like infrastructure and machinery. - Requires a straightforward discounting approach linked to their measurable depreciation and required maintenance investment. - Involves education, skills, and health. - Incorporates ethical considerations for finite lifetimes, with a focus on equity and sustainability. - While human capital appreciates, it also faces limits in terms of individual lifespan and societal changes - Encompasses relationships, networks, and societal cohesion. - Emphasizes the long-term value of culture and generational continuity. - Does not depreciate in the same way as built capital. In fact, it tends to accumulate and become more valuable over time, making a discount rate unnecessary. - Includes ecosystems, biodiversity, and natural resources. - Prioritizes sustainability to safeguard long-term
Conventional exponential discounting.
Built Capital
Ethically complex social discount rate recognizing finite human lifetimes.
Human Capital
Low (1-3%)
Social discount rate recognizing ongoing future
Social Capital
Near 0
generations and culture.
environmental and scientific benefits. - Positive adjustments for environmental degradation.
Natural Capital
Protection of future benefits.
Near 0
- Natural capital is expected to increase over time due to rising scarcity and higher marginal values of ecosystem services. A negative discount rate reflects the growing importance of preserving natural capital for future generations
Table 2: Four Types of Capital and their Expected Discount Rate 83 .
Plural frameworks and taxonomies, such as those advanced by the Capitals Coalition 84 builds on this academic research through a global initiative that works to integrate natural, social, human and
80 Costanza, R., Norton, B.G. and Haskell, B.D. eds., 1992. Ecosystem health: new goals for environmental management (pp.1 -269). 81 Costanza, R., De Groot, R., Sutton, P., Van der Ploeg, S., Anderson, S.J., Kubiszewski, I., Farber, S. and Turner, R.K., 2014. Changes in the global value of ecosystem services. Global environmental change , 26 , pp.152-158. 82 Costanza, R., Kubiszewski, I., Stoeckl, N. and Kompas, T., 2021. Pluralistic discounting recognizing different capital contributions: An example estimating the net present value of global ecosystem services. Ecological Economics , 183 , p.106961. 83 Costanza, R., Kubiszewski, I., Stoeckl, N. & Kompas, T., 2021. Pluralistic discounting recognizing different capital contributions: an example estimating the net present value of global ecosystem services, p. 4. 84 https://capitalscoalition.org/
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