produced capital into decision-making to create a more sustainable and equitable economy. Their protocols on natural capital and social and human capital provide “decision making frameworks that enable organizations to identify, measure and value their impacts and dependencies on natural capital, social capital and human capital.” 85 They define each form of capital as follows:
Natural capital
Social Capital
Human Capital
Produced Capital The human-made goods and financial assets that are used to produce goods and services consumed by society.
The stock of renewable and non- renewable natural resources that combine to yield a flow of benefits to people.
The networks together with shared norms, values and understanding that facilitate cooperation within and among groups.
The knowledge, skills, competencies and attributes embodied in individuals that contribute to improved performance and wellbeing.
As mentioned above, Costanza et al (2021) 86 argue negative discount rates are appropriate for certain policies. While zero to negative discount rates on entire NPV calculations are not without their challenges, a simplistic pluralistic discounting approach that includes only, built and natural capital (or social capital when applicable) could be used and a net adjustment made to reduce the overall gross discount rate. By considering multiple forms of capital and acknowledging their inherent differences, it is possible to develop discounting methods that systematically account for non-financial long-term outcomes and are ultimately material to the long-term value of the investment. Positive social or environmental long-term outcomes are often overlooked or evaluated using financial practices that may not fully reflect their unique characteristics. These long-term outcomes represent societal benefits that differ fundamentally from monetary value, requiring alternative analytical approaches to capture their full significance. The entrenched use of constant discount rates in financial analysis has become a normative cornerstone. However, this approach does not always accommodate the contextual variability of value. Money, as a social construct, 87 derives its meaning from specific cultural and situational contexts. For example, in a war-torn region, the value of essential goods, such as a bottle of water, can rise dramatically, illustrating how perceptions of value are subject to changing circumstances. Investments that generate social or environmental benefits often carry intrinsic forms of value that do not align directly with monetary metrics in traditional financial systems. Recognizing this discrepancy highlights the potential utility of a broader model that incorporates diverse forms of capital. Such approaches could facilitate more comprehensive evaluations of investments and ultimately, help asset managers to drive more value over time. Financial market practitioners are used to putting investments into established matrices (risk, return), analysing them within traditional models and almost certainly, under some form of time pressure. Perhaps quantifying positive social and environmental long-term outcomes or impact (environmental and social) to a present-day figure is the path of least resistance to institutional adoption. With the emergence of advanced computational power (machine learning, AI) and the increasing amount of scientific data that can quantify inaction on climate change, it is timely to take
85 https://capitalscoalition.org/capitals-approach/ 86 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. 87 See Baker, W.E., 1987. What is money? A social structural interpretation. Intercorporate relations , pp.109-144.
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