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Inclusive Wealth
AS A MEASURE FOR ECONOMIC DEVELOPMENT

I
ntroduced by the United Nations
IN THIS DOCUMENT
Environment Programme (UNEP)
and UNU-IHDP, the Inclusive Wealth 1. What is Inclusive Wealth? 2
encompasses a country's natural, 1.1. Components of Inclusive Wealth 2
2. What is the need of adopting Inclusive Wealth Approach (IWA)? 3
human, social, and physical resources.
3. What are the challenges in adopting inclusive wealth approach? 4
This approach is especially relevant in 4
3.1 Data Collection and Capacity Issues
India, where its diverse socio-economic 3.2 Assessing Inclusive Wealth is complex 5
landscape calls for a more comprehensive 3.3 Political Hurdles 5
assessment of wealth. 3.4 Public Acceptance and Cultural Context is limited 5
4. What are the initiatives taken to ensure adoption of inclusive wealth approach? 5
The Global Wealth Index 2023 shows that
4.1 National Level Initiatives 5
global inclusive wealth has increased by
4.2 Global Initiatives 6
nearly 50% over the past 30 years, reflecting 8
5. What steps can be taken to ensure adoption of inclusive wealth approach?
strong economic growth. However, this 5.1 Policy Initiatives 8
growth has led to a significant depletion 5.2 Assessment Initiatives 8
of natural capital, with over a quarter lost 5.3 Leveraging Data and Technology 9
during this period. This highlights the 5.4 Engagement and Capacity Building 9
urgent need to balance economic progress Conclusion 9
with sustainable resource management. Topic At a Glance 10
Boxes and Figures 11
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1. What is Inclusive Wealth?

Inclusive Wealth refers to a nation's total wealth, which includes financial assets as well as natural resources, human and
social capital.

1.1. Components of Inclusive Wealth

41%
Figure 1.1. Components of Inclusive Wealth

Natural
Capital

Consumption Produced
Welfare/utility /investment Production Capital

Human
Capital

Produced Capital: It includes physical assets like A sound human capital development leads to
infrastructure, machinery, and technology. Although social networks, relationships, and community
traditional wealth measures often account for these connections that are vital for inclusive development.
assets, their sustainability and efficiency are now seen Strong social capital fosters better governance,
as essential for long-term economic well-being. builds trust in institutions, and encourages
teamwork in solving problems.
Human Capital: It refers to the skills, knowledge, and
health of the workforce. Investments in education, Natural Capital: This includes the world’s stocks of
healthcare, and skill development contribute to a natural assets such as forests, water, minerals, and
more productive and adaptable labor force, enhancing biodiversity. Natural capital is important for ecosystem
economic resilience and growth. services, which are vital for human survival and
economic activities.

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Box 1.1 : Social Emotional Learning and Augmenting Human Capital

About 41%
Figure 1.2. Sensitive periods of brain
Social emotional learning (SEL) can be defined as the development after birth
process of developing competencies, abilities, and/
or attitudes necessary to recognize and control
emotions, develop caring and concern for others,
Sensitive Periods of Brain Development
form positive relationships, make responsible
decisions and deal with challenging situations.

Development Phases 0 to 3 years Adolescence

Change in Brain Development

SEL occurs throughout life; however, infancy,
childhood and adolescence are periods of
considerable SEL development where maximum
growth and restructuring of the brain occurs through Prefrontal Cortex
informal and formal learning. These are developmental
phases during which the brain is highly receptive to
social influences and sensitive to training-induced
Parietal and Temporal Association Cortex
changes in learning SEL competencies.

Impact

A recent report showed that SEL programmes have Sensorimotor Cortex

consistent positive impacts on a broad range of
0 6 12+ 2 4 6 8 10 12 14 16 18 20
student outcomes, including increased SEL skills,
attitudes, prosocial behaviours and academic Age in Months Age in Years
achievement, and decreased conduct problems and
emotional distress.

The argument for considering social and emotional

competencies as a form of human capital stems from
the fact that various personality traits like self-regulation, emotion regulation and empathy, among others,
exhibit a certain degree of stability, yet can be cultivated further through explicit training.

These traits improve task performance, boost labour productivity, and contribute to favourable economic
results both directly and indirectly by promoting stable relationships and overall well-being

2. What is the need of adopting Inclusive Wealth Approach (IWA)?

Limitation of traditional Methods: than national statistics. However, gathering reliable
GDP: It overlooks environmental degradation, personal data can be challenging in developing
the value of natural resources, and rising socio- countries.
economic inequalities. In India, GDP growth Localised Approach: The wide differences between
has uplifted many from poverty, but it has also Indian states call for a localized approach to assessing
caused serious environmental damage, costing the wealth that tracks contributions to the Sustainable
country about 5.7% of its GDP each year. Development Goals (SDGs) and long-term sustainability.
Green GDP: It measures net GDP after deducting the
The Inclusive Wealth Approach method focuses
environmental and social costs of development.
on overall growth and requires less data, making
However, this does not take into account some
it more appropriate for developing countries with
other assets of a country’s economy, such as its
limited data access.
human resources or its prevailing ecosystem.
Better Life Index: The OECD has released a report Long-term sustainability focus: By considering
that focuses on measuring the overall wellbeing of changes in different types of capital, IWA allows
a country by looking at individual activities rather policymakers and stakeholders to evaluate the long-
term sustainability of current economic activities.

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For example, New Zealand adopted the Wellbeing Improved policy decisions: A better understanding
Budget, which prioritizes people's wellbeing and of a nation's wealth allows policymakers to make
environmental sustainability by integrating social informed decisions about how to allocate resources,
and environmental indicators with traditional set investment priorities, and develop strategies for
economic metrics. growth.
Better resource management: IWA promotes better For example, South Korean Green New Deal
management of all types of capital, especially natural focuses on three key tasks: investing in clean energy,
resources, which are often undervalued or ignored in promoting innovation, and developing sustainable
traditional economic assessments. infrastructure.
For example, Costa Rica’s Payments for
Environmental Services Program (PES) is a
financial mechanism that promotes forest ecosystem
conservation and combats land degradation.

Box 2.1 : Inclusive Wealth and Welfare of marginalised communities

Empowerment of Women: It highlights the significant role women play in the economy, mainly through unpaid
labour at home and in their communities. Recognizing women's contributions enables the creation of policies
that promote gender equality and improve their access to resources. This aligns with Article 15(3) of the Indian
Constitution, which permits special provisions for women and children.

Support for Tribal Communities: Tribal communities rely on natural resources for their livelihoods. An inclusive
wealth approach helps ensure their rights to land and resources are recognized, promoting sustainable practices
that benefit both the community and the environment.
For example, The Forest Rights Act (2006) in India empowers forest-dwelling tribes to manage their resources,
preserving their cultural heritage, sustaining livelihoods, and conserving biodiversity.
Protection of Children: Investing in human capital is vital for children's welfare. An inclusive wealth approach
prioritizes education, health, and nutrition, which are essential for a child's development.
For example, The Mid-Day Meal Scheme in India provides nutritious meals to schoolchildren, boosting
enrolment and health while supporting education and investing in the nation’s future.
Recognition of Transgender Rights: An inclusive wealth approach promotes the social and economic inclusion
of transgender individuals by recognizing their rights and addressing systemic discrimination.
For example, The Transgender Persons (Protection of Rights) Act, 2019 aims to legally recognize and protect
transgender rights.

3. What are the challenges in adopting inclusive wealth approach?

Addressing the complexities and challenges of measuring inclusive wealth is essential for understanding its implications
in modern economies.

3.1. Data Collection and Capacity Issues

Data Availability and Quality: Different countries Evolving Inclusive Wealth: Inclusive wealth is
use varying methodologies and definitions, leading to dynamic and changes over time, requiring continuous
inconsistencies in data collection. Many developing long-term data collection to monitor shifts in capital.
nations lack the necessary data on natural and social
capital, making comprehensive assessments difficult.

Building Capacity for Data: Developing the

institutional capacity to collect and analyze data on
inclusive wealth may require substantial investment
and training.

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3.2. Assessing Inclusive Wealth is complex

Complexity of Components: Inclusive wealth Natural Capital Substitution: The belief that natural
comprises multiple dimensions: produced, natural, resources can be replaced by produced or human capital
human, and social capital. Each dimension has distinct has contributed to their depletion, as investments
characteristics and methods of valuation, which often prioritize produced capital over sustainability.
complicate the measurement process. This imbalance speeds up resource depletion and
undermines the goals of inclusive wealth, making
it harder to create a comprehensive assessment
framework.

3.3. Political Hurdles

Integration with Existing Economic Frameworks: Lack of Political Will: Shifting focus to inclusive
It may meet resistance from established economic wealth requires strong political commitment, which
practices. Policymakers may struggle to transition may be lacking in some contexts, especially where GDP
from traditional metrics to inclusive wealth measures, growth is prioritized.
especially if existing incentives are tied to GDP growth.

3.4. Public Acceptance and Cultural Context is limited

Understanding Gap: Many stakeholders may be Perception of Wealth: Cultural values affect how we
unfamiliar with inclusive wealth, which can lead to view wealth, and differences in economic development
resistance or confusion. Effectively communicating can lead to misleading comparisons if not explained
its importance and benefits is challenging, especially properly.
in a climate where traditional metrics are more widely
recognized.

4. What are the initiatives taken to ensure adoption of inclusive

wealth approach?
There are numerous initiatives, both at the national and the global level that have been implemented to promote an inclusive
wealth approach that integrates environmental, social, and economic factors in assessing national wealth.

4.1 National Level Initiatives

Natural Capital Accounting: The Ministry of Statistics Programs like the Pradhan Mantri Kaushal
and Programme Implementation (MOSPI) in India Vikas Yojana (PMKVY) are designed to improve
initiated the Natural Capital Accounting and Valuation employability and raise income levels.
of Ecosystem Services (NCAVES) project in 2017.
Sustainable Development Goals (SDG) India Index:
This aligns with the System of Environmental It is developed by NITI Aayog that tracks progress on
and Economic Accounting (SEEA) framework to the SDGs, which include various elements of inclusive
compile green wealth accounting, emphasizing wealth.
the importance of natural capital in economic
assessments. Partnerships with International Organizations: The
government works with international organizations
National Mission for Green India: It is a part of the like the World Bank and UNDP to improve its ability to
National Action Plan on Climate Change that aims measure inclusive wealth.
to increase forest cover and quality, contributing to
natural capital.

Human Capital Development: The Skill India Mission

emphasizes the importance of human capital in
inclusive wealth by enhancing workforce skills, which
boosts productivity and economic resilience.

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4.2. Global Initiatives

UN System of Environmental Economic Accounting European Union’s Beyond GDP Initiative: This
(SEEA): It is a framework that integrates economic and initiative encourages EU member states to adopt
environmental data. It provides a standardized approach new measures of progress that go beyond traditional
for countries to measure and report on the interactions economic indicators.
between the economy and the environment.
Global IWI (Inclusive Wealth Index) Project
The Economics of Ecosystems and Biodiversity Collaboration: The UN University and UNEP aim
(TEEB): This global initiative aims to "make nature's to offer a broader measure of national wealth. Their
values visible" by highlighting the economic benefits methodology evaluates three types of capital: natural,
of biodiversity and the costs associated with ecosystem human, and produced, focusing on the long-term
degradation. sustainability of national economies.

UN Inclusive Wealth Report: Released by the United The Genuine Progress Indicator (GPI): An alternative
Nations Environment Programme (UNEP), this metric to GDP that accounts for environmental and
assessment evaluates countries' wealth by considering social factors, providing a more comprehensive view of
their natural, human, and produced capital. economic well-being.

World Bank Wealth Accounting: The Comprehensive Natural Capital Protocol: Developed by the Natural
Wealth Accounting and Valuation of Ecosystem Capital Coalition, this framework helps businesses
Services (WAVES) initiative helps countries implement identify, measure, and value their impacts and reliance
Natural Capital Accounting. It promotes sustainable on natural capital in a standardized way.
development by integrating natural resources into
development planning.

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Box 4.1. In Conversation: India’s Natural Wealth

Vini, have you ever thought about how much our forests,
rivers, and clean air are worth?

Worth? Aren’t these things priceless?

True, but they also contribute to something called Natural

Capital—a part of what we call Inclusive Wealth.

Inclusive Wealth? What’s that?

It’s a way to measure a country’s true progress. Instead

of just looking at GDP, it adds up three types of wealth:
Natural Capital, like forests and rivers; Human
Capital, like education and skills; and Produced
Capital, like buildings and infrastructure.

Vini
So it’s about balancing development with
sustainability?

Jiya

Exactly! India has started using Natural Capital

Accounting (NCA) to track how nature supports our
economy. For example, if we lose a forest, we’re not just
losing trees but also clean air, biodiversity, and even
tourism revenue.

That makes sense. Protecting nature is about

preserving our long-term wealth.

Yes, because a nation’s true prosperity is about more than

just money—it’s about people, nature, and resources
working together.

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Box 4.2 : Inclusive Wealth and fulfilment of SDGs

Role of Produced Capital: Strategic investments in 41%

infrastructure can advance targets related to climate, Figure 4.1 Produced Capital and SDGs
energy, water, transport, and technology.
Additionally, with one in three women facing Produced Capital
physical or sexual violence globally, well-designed

3 6 7
public infrastructure can help reduce such GOOD CLEAN AFFORDABLE
incidents by creating safer environments. HEALTH AND WATER AND AND CLEAN
WELL-BEING SANITATION ENERGY
Role of Natural Capital:
Sustainable Resource Management: The
Inclusive Wealth Approach (IWA) promotes
the accounting of natural capital, encouraging
9 INDUSTRY,
INNOVATION AND
INFRASTRUCTURE
11
SUSTAINABLE
CITIES AND
COMMUNITIES
responsible resource use. This supports SDGs
focused on marine (SDG 14) and terrestrial (SDG 15)
ecosystem.
Intergenerational Equity: The IWA focuses Produced Capital Influences
on policies that consider the long-term effects
of today’s decisions, aligning with SDG 12 Interlinkages with Over 50% of 121 SDG targets
(Responsible Consumption) and SDG 13 (Climate every target for targets in total (72%
SDG 3, 6, 7, 9, 11 for 15 SDGs of total)
Action).
Role of Human Capital:
Equity and Social Inclusion: It prioritizes inclusivity, promoting fair wealth distribution and empowering
women, which aligns with SDG 10 (Reduced Inequalities) and SDG 5 (Gender Equality).
Investment in Human Capital: By focusing on education, health, and skills, the IWA supports SDG 4 (Quality
Education) and SDG 3 (Good Health), both important for sustainable societal development.

5. What steps can be taken to ensure adoption of inclusive wealth approach?

The Inclusive Wealth report and related studies suggest that adopting an inclusive wealth approach can be achieved through
various measures that incorporate environmental, social, and economic factors into national wealth assessments.

5.1. Policy Initiatives

Policy Integration: Integrate the IW framework into Align Investments with Natural Capital: Governments
national and state policies, ensuring it complements should connect investment strategies to natural capital
existing frameworks like GDP and the Sustainable and inclusive wealth.
Development Goals (SDG).
This includes using sovereign wealth funds and
For example, domestic policies, such as focusing on Environmental, Social, and Governance
swapping fossil fuel subsidies for greener options, (ESG) criteria to enhance resilience against global
implementing carbon taxes, and improving challenges like pandemic.
resource revenue management, can help balance
Pilot Programs: Start with small-scale pilot projects
development with environmental protection.
to test the IW framework in different states, gathering
insights and best practices for broader implementation.

5.2. Assessment Initiatives

Localized Wealth Assessment: Localized IW measures For example, The Ministry of Statistics and
should be developed for different Indian states to Programme Implementation (MOSPI) has started
effectively monitor progress and disparities in natural, compiling green wealth accounting; this can be
human, and produced capital. This approach will allow expanded for regional assessments.
policymakers to tailor strategies to meet the specific
needs of each region.
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Consider Population Growth and Future Welfare: Research and Development: Undertake studies to
Future demographic changes should be included examine how various forms of capital interact and
in wealth assessments to ensure policies support impact overall well-being and sustainability. This
welfare across generations. evidence-based research can provide insights for
refining policies and shaping new initiatives.
Enhancing Human Capital Accounting:
Implementing human capital accounting will
empower policymakers to address health and
education challenges more effectively, identify
inequalities, and create targeted policies that
promote overall well-being.

5.3. Leveraging Data and Technology

Assessing Progress through Indicators: States should Ecosystem Services for Sustainability: Improving
develop indicators to evaluate progress across different the valuation of ecosystem services is essential for
types of capital and regularly monitor them to refine sustainable development. By investing in better
policies using real-time data. data and technology, decision-makers can manage
ecosystems sustainably, ensuring that both human and
For example, insights from the SDG Index can help
natural capitals support long-term prosperity.
track inclusive wealth progress and highlight areas
for improvement.

5.4. Engagement and Capacity Building

Stakeholder Engagement: Marginalized communities Awareness Campaigns: Initiate awareness
and stakeholders should be actively engaged in campaigns to educate the public about the Inclusive
discussions about wealth assessment and development Wealth approach and its advantages for sustainable
strategies to ensure their perspectives are included. development.
This engagement will lead to more inclusive policies This effort will help generate support for
that genuinely reflect the diverse needs of all transitioning away from GDP-centric measures.
segments of society.
Capacity Building and Education: Government
officials, economists, and community leaders should
receive training on the Inclusive Wealth framework to
improve their understanding of sustainability and how
wealth is built.

Conclusion
Adopting the Inclusive Wealth approach is important for sustainable economic development that prioritizes well-being over
mere financial measures. By considering natural, human, social, and produced capital, this framework offers a holistic view
of prosperity that meets society's diverse needs. In India, where inequalities are more pronounced and widespread, this
approach can guide policies that empower marginalized communities, ensure fair resource management, and foster long-
term sustainability.

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Topic at a glance
Inclusive Wealth (IW)
Inclusive Wealth (IW) is a broader measure of national prosperity that includes natural, human, social, and produced capital.

Need for Adopting the IW Approach

Limitations of Traditional Methods: fails to take into account assets like human resources.
Localised Approach: to assess wealth and track SDG contributions.
Long-Term Sustainability: focuses on different capitals to assess economic resilience.
Resource Management: encourages better management of natural resources.
Improved policy decisions: helps policy maker in better understanding of nations wealth.

Challenges in Adopting IW

Data Collection and Capacity Issues: especially in developing countries like India.
Complexity of Measurement: due to different types of capital (natural, human, social), each with unique traits.
Political and Cultural Resistance: due to shifting from traditional methods.

Measures Taken by India and Globally

India: National Mission for Green India, the Skill India Mission, and the Natural Capital Accounting etc.
Global Initiatives: The UN’s System of Environmental Economic Accounting (SEEA), the World Bank’s WAVES
initiative, and the EU’s Beyond GDP initiative etc.

Way Ahead

Policy Initiatives: Governments should integrate IW metrics into national policies.

Assessment Iniatiatives: Localized wealth assessments,Human capital accounting to be adopted.
Leveraging Data and Technology: to refine policies using real-time data and improve the valuation of
ecosystem services.
Capacity Building: Engage marginalized communities, train officials and run awareness campaigns.

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Boxes, Figures and Tables

Box 1.1 : Social Emotional Learning and Augmenting Human Capital ������������������������������������������������������������������������������������������������������������������� 3
Box 2.1 : Inclusive Wealth and Welfare of marginalised communities �������������������������������������������������������������������������������������������������������������������4
Box 4.1. In Conversation: India’s Natural Wealth ������������������������������������������������������������������������������������������������������������������������������������������������������� 7
Box 4.2 : Inclusive Wealth and fulfilment of SDGs������������������������������������������������������������������������������������������������������������������������������������������������������ 8
Figure 1.1 Components of Inclusive Wealth ���������������������������������������������������������������������������������������������������������������������������������������������������������������� 2
Figure 1.2 Sensitive periods of brain development after birth ���������������������������������������������������������������������������������������������������������������������������������� 3
Figure 4.1 Produced Capital and SDGs ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������8

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