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ADB, CEPA urge Sri Lanka to integrate natural capital into economic planning

The Asian Development Bank (ADB) and the Centre for Poverty Analysis (CEPA) have called for Sri Lanka to integrate natural capital accounting into national economic planning, warning that conventional economic indicators such as Gross Domestic Product (GDP) fail to capture the depletion of natural resources underpinning long-term economic growth.

The call was made at a policy workshop titled ‘Natural Capital Accounting: Why Is It Crucial in Managing the Fragile Environment in Sri Lanka?’, held at Courtyard by Marriott Colombo under the patronage of ADB Country Director for Sri Lanka Shannon Cowlin.

The workshop brought together policymakers, economists, statisticians and environmental specialists to explore a phased approach to introducing Natural Capital Accounting (NCA), with a proposed rollout in 2027, initially focusing on upper watersheds and coastal and marine ecosystems.

NCA, based on the United Nations System of Environmental-Economic Accounting (UN-SEEA), combines conventional economic statistics with information on the extent, condition and economic value of natural assets and the services they provide.

Unlike GDP, which measures economic output, NCA helps identify the economic costs of environmental degradation, including soil erosion, water insecurity, flooding and the deterioration of coastal ecosystems. It is intended to complement rather than replace existing national accounts.

ADB Country Director Shannon Cowlin said Sri Lanka’s natural resources were fundamental to its economic resilience, livelihoods and long-term development

“Natural capital accounting provides an important opportunity to make the value of these resources visible in economic decision-making,” she said, adding that stronger environmental evidence would help policymakers and investors pursue growth while safeguarding natural assets.

Dr. Herath Gunatilake, Senior Advisor to CEPA and former Director of ADB’s Environment and Safeguards Division, highlighted the importance of developing credible ecosystem accounts to improve public investment and resource allocation.

He identified political commitment, fragmented institutional responsibilities, data limitations and inadequate technical capacity as key challenges to implementation.

International experiences from China and Indonesia also demonstrated how environmental-economic accounts could support investment decisions, ecosystem protection and low-carbon development strategies.

ADB representatives Joseph Mariasingham and Sumit Pokhrel, and Dr. Shamen Vidanage of the International Union for Conservation of Nature, also shared insights on natural capital accounting and nature-positive investments.

Participants stressed the need for inter-agency coordination, reliable environmental data and regularly updated ecosystem accounts to ensure natural capital considerations are incorporated into budget preparation, project appraisal and land-use planning.

The proposed phased initiative could help Sri Lanka better assess the economic value of its natural resources while ensuring that development gains do not come at the expense of long-term environmental sustainability