The world’s largest sovereign wealth fund, Norway’s Government Pension Fund Global, which runs $1.6 trillion in assets, has just published new assessments of its nature risk, looking at how companies in its portfolio impact and depend on natural capital.
The urgency to redefine what we value is growing. Financial metrics alone, centred around GDP and financial capital, are struggling to deliver the prosperity they once did. Complex global issues such as climate change, nature depletion and social inequalities present systemic risks to economies. Updated metrics of success are needed.
Our typical approach to decision-making, which prioritises financial capital growth, has driven the “output” economy, the pursuit of the production of paid-for things. For the past 70 years, this has delivered notable prosperity for many, alongside a belief that competition and markets will solve all problems. But this same approach is now proving inadequate to addressing the problem of who pays to look after common benefits like forests and biodiversity, and therefore to our global economic resilience.
Is the global economy ready to embrace such a major transformation? When the largest sovereign wealth fund moves, the answer seems to be yes. But it is not easy. Business and finance leaders may know that measures of success need to evolve but the barriers remain significant.
Politicisation of environmental and social issues, and the cost of enacting transition plans and geopolitical tensions further stifle efforts. And yet, rising populism around the world is showing that the majority of people feel left behind by today’s economic systems. They are calling for an economy that values wellbeing, healthcare, jobs and pensions: an “impact” rather than “output” economy.
Over the past few years, innovative leaders in business and finance have led to get the value of all capitals onto the balance sheet and into board rooms. Companies such as Natura, Orsted, Olam, Novartis and Holcim are embedding natural, social, human and produced capitals into decision-making to shore up resilience.
These companies, alongside many others, have innovated and collaborated to account for what matters across sectors and geographies. They have integrated this practice into profit and loss accounts and balance sheets, board papers, performance reviews of staff, and product development.
They have developed a new language to talk about real performance that matters to their business, employees and customers. These companies are prioritising their talent and skills base, building communities where they operate, and protecting and restoring the natural resources throughout their supply chains.
Fuente: Reuters
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