Sustainable matrix beyond GDP: investment for inclusive growth

The paper addresses the inadequacy of GDP as a measure of long-term sustainable progress and human well-being, especially highlighted by recent global crises and policy dialogues advocating metrics beyond GDP. It proposes the Inclusive Wealth Index (IWI) as a comprehensive wealth-based measure linked to human welfare that integrates natural, human, and produced capital. Building on prior inclusive wealth accounting efforts, the study updates and extends empirical measures to 163 countries (1990–2019) to assess sustainability, reveal trade-offs among capital assets, and inform policies for recovery aligned with SDGs and the Paris Agreement.

The section on measuring sustainable progress beyond GDP reviews how economic growth has improved well-being while stressing planetary limits and the SDGs framework. It synthesizes critiques of GDP: its poor reflection of well-being, omission of changes in asset stocks (especially natural capital), and lagging coverage of structural changes like globalization. Alternatives (e.g., ISEW, GPI, HDI) have limits, and GDP per capita remains a strong predictor of SDG performance but explains only part of the variance. The IWI is positioned as an equity- and asset-based framework that complements the SNA by focusing on the productive base and accommodating global public goods (climate, biodiversity). Prior Inclusive Wealth Reports documented declines in natural capital and links to SDGs, while remaining challenges include valuing intangibles (education quality, health), interactions among capitals, non-market public goods, technological change–environment links, and intergenerational equity. The latest accounts aim to improve these gaps with updated methods and data.

The study constructs cross-country Inclusive Wealth (IW) accounts by aggregating global datasets on economic, social, resource, and environmental assets and valuing each country’s asset stocks—produced, human (including education and health components), and natural capital—using consistent methods. Core principles: (1) assign shadow prices reflecting each asset’s social value and contribution to intergenerational welfare; market prices are primary inputs but adjusted for long-term sustainability; ecosystem services values are sourced from the ESVD. (2) Measure real sustainable development via non-declining IWI per capita at constant shadow prices, explicitly accounting for population growth. (3) Include time-varying adjustments for total factor productivity (TFP), CO2 damages, and oil price gains; in the latest update TFP is estimated from a production function encompassing all capital assets. Scope updates: coverage expanded to 163 countries, 1990–2019; human capital estimated via a lifetime income approach with school life expectancy and gender disaggregation, incorporating education and health; produced capital improved using sub-category investments (buildings, roads, transport equipment) with country- and year-varying aggregated depreciation rates; natural capital covers agricultural land, forests (timber and non-timber from ESVD), fossil fuels, minerals, and fisheries. Intangible capital such as social capital is treated as embodied in the three main capitals. Limitations noted include incomplete coverage of ecosystem services beyond forests, lack of consumption-side accounts, and limited gender wage information for human capital shadow prices.

• Global natural capital declined by 28% since 1990; per capita natural capital in 2019 was nearly 50% below 1990 levels, contributing to a global decline in per capita IWI of about 0.5% over the period. Human capital per capita increased but with slowing growth in recent years. - The G20’s share of global natural capital increased from 60% (1990) to 68% (2019), while regions such as Latin America and the Caribbean and East Asia and the Pacific saw declines in both quantity and global share. - Across 163 countries (2010–2019), 45 experienced negative per capita wealth growth; 30 of these were low- and lower-middle-income, reflecting low growth in human and produced capital and the largest per capita declines in natural capital. Sixteen countries saw declines in human capital per capita as population growth outpaced human capital formation. Eighteen (mostly G20) countries experienced depopulation yet still grew human capital per capita; 10 of these nonetheless lost natural capital per capita, indicating fewer people do not necessarily mean lower per capita natural capital use. - By income group (1990–2019), G20 countries showed the fastest per capita wealth growth; high-income countries invested heavily in human and produced capital but faced constraints from population dynamics and natural capital depletion; lower-middle-income countries grew more slowly; low-income countries saw wealth shrink due to rapid population growth and natural capital losses. - TFP versus natural capital: most countries exhibited positive TFP growth alongside further natural capital depletion. Low-income countries had the highest rates of per capita natural capital loss. Positive correlations between TFP growth and natural capital depletion were observed in low- and upper-middle-income groups, suggesting technology-driven growth associated with worsening natural capital depletion, while high-income countries tended to pair technological progress with lower natural capital depletion. - Inequality linkages (35-country Gini series): in highly unequal middle-income countries, improvements in income equity were often associated with losses of non-renewable energy, mineral, and fishery resources. In high-income and G20 countries, inequality often worsened alongside the development of these natural capital subcategories (examples include the United States, Denmark, Russia, Sweden, and India). For agriculture and forestry, patterns were mixed; forest declines in middle-income countries coincided with improved equality, while only Honduras and Bolivia showed increases in agricultural resources per capita with equality improvements. Overall, natural capital depletion is unequally distributed and tied to intra- and inter-country disparities.

Findings show that per capita inclusive wealth has not followed a sustainable and equitable trajectory. Rapid population growth coupled with consumption has driven natural capital depletion, especially in developing and low-income countries where weak natural resource management and biased capital accumulation impede sustainable progress. Because key components of natural capital are non-substitutable, losses cannot be fully offset by increases in human or produced capital, leading to long-term unsustainability. High-income and G20 countries, supported by technology and stronger institutions, can accumulate other forms of capital with relatively lower natural capital losses, but benefits may concentrate without effective redistribution, exacerbating within-country inequality. The observed relationships between TFP and natural capital depletion underscore the need for production methods less dependent on natural capital and for policies that integrate resource protection with equitable development. The IWI framework demonstrates that sustainability is achieved through efficient and balanced management of all capital assets, not solely through environmental policies or income growth measures, and provides actionable insights for aligning recovery strategies with SDGs and the Paris Agreement.

The paper advances the Inclusive Wealth Index as a beyond-GDP metric grounded in the equivalence of wealth and welfare, offering a comprehensive assessment of national assets to guide sustainable development strategies. The updated IW accounts (163 countries, 1990–2019) reveal stark contrasts between sustainable wealth accumulation paths and depletion trajectories, emphasizing the urgency for tailored investments in human capital, technological innovation, and protection of critical natural capital. Despite data gaps, the IWI provides a practical roadmap for policy, akin to a balance sheet for national assets, to support SDG-aligned decision-making. The authors call for systematic inclusion of the IWI alongside other non-GDP indicators and further methodological advances—especially in ecosystem service valuation and gender-disaggregated human capital—to improve accuracy and policy relevance.

Acknowledged limitations include: (1) incomplete accounting of ecosystem services beyond forests and evolving ecosystem functions; (2) lack of consumption-side (use-based) wealth accounts; (3) limited information on gender differences in annual wages for shadow pricing of human capital and the need for finer gender disaggregation; (4) challenges in valuing intangibles (e.g., education quality, health components) and interactions among capital assets; and (5) reliance on adjusted market-based shadow prices that may not capture public goods dynamics or cross-border externalities fully.