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Part 2 of a three-part series on India and the Architecture of Inclusive Wealth.
Financial ratios are the grammar of modern capital allocation. Return on assets, inventory turnover, debt-to-equity, interest coverage — these are the metrics through which investors, lenders, and rating agencies decide where capital should flow and at what price. The problem is that the grammar was written for an economy in which only one form of capital, the produced kind, was assumed to matter. An agribusiness that overexploits a shared aquifer can register rising asset turnover and improving operating margins for a decade before the well runs dry; its accounting performance and long-run viability pull in opposite directions, and conventional ratio analysis is unable to detect the divergence.
Financial ratios are not neutral mirrors of economic reality; they are instruments that shape it. A ratio system that treats ecological depreciation as a real charge against earnings will, eventually, produce a different economy — one in which the regeneration of natural capital is rewarded rather than penalised.
The cost of this blind spot is no longer theoretical. The World Economic Forum estimates that roughly US$44 trillion of economic value generation — more than half of global GDP — is moderately or highly dependent on nature and its services. A partial collapse of ecosystem services could reduce global GDP by 2.3 percent annually by 2030, with developing economies facing potential output losses of up to 10 percent each year. Yet the analytical machinery used to allocate capital across firms and sectors still treats nature as either infinite or irrelevant. The result is a structural mispricing of risk — one that the Inclusive Wealth framework has been building the conceptual foundations to correct.
The Measurement Revolution: SEEA, TNFD, and Inclusive Wealth
The conceptual case for treating natural capital as a productive asset has been built on foundations laid much earlier in the ecological economics tradition — a body of work that views the economy as embedded within, not separate from, the biosphere, and treats ecosystems as the productive envelope within which markets operate rather than an externality to them. What has changed in the last decade is that this view has finally found purchase in mainstream measurement and disclosure architecture. The UN System of Environmental-Economic Accounting (SEEA) provides a globally endorsed statistical framework for incorporating ecosystems into national accounts, and India’s Ministry of Statistics and Programme Implementation has already begun aligning its green wealth accounting with SEEA standards under the NCAVES project. UNEP’s Inclusive Wealth Reports now cover 163 countries and quantify the social value of produced, human, and natural capital over time — a measurement architecture that, applied to firms rather than nations, would fundamentally re-rank corporate performance.
Private-sector practice is catching up. The Taskforce on Nature-related Financial Disclosures (TNFD) released its final recommendations in September 2023, and as of mid-2025, over 620 organisations representing more than US$20 trillion in assets under management and US$7 trillion in market capitalisation have committed to TNFD-aligned reporting. The TNFD 2025 Status Report notes that more than half of surveyed investors are now “very concerned” about the impact of nature loss on financial markets, and that 91 percent agree that the International Sustainability Standards Board should incorporate the TNFD recommendations into its global disclosure architecture.
An agribusiness that overexploits a shared aquifer can register rising asset turnover and improving operating margins for a decade before the well runs dry; its accounting performance and long-run viability pull in opposite directions, and conventional ratio analysis is unable to detect the divergence.
Two complementary measurement approaches now sit at the centre of this translation. The first is shadow pricing, which assigns monetary value to ecosystem services that markets currently ignore, such as the flood-protection benefit of mangroves or the pollination contribution of insects. The second is biophysical accounting, which measures natural assets and their services in physical units — hectares of mangrove forest, tonnes of carbon stored, cubic metres of water replenished. Used together, they reconnect economic intuition with ecological function and allow analysts to construct ratios in which natural-capital stocks appear alongside produced ones on the asset side, and ecological depreciation appears alongside financial amortisation on the cost side.
From Disclosure to Decision: Embedding Nature in the Cost of Capital
Endogenous growth models in the environmental economics literature demonstrate that when natural capital is appropriately priced, optimal investment paths shift toward conservation or enhancement of ecological assets — without compromising long-run output. In other words, the perceived trade-off between profitability and stewardship dissolves once the missing prices are restored. A handful of sovereign wealth funds and large corporations have already begun to incorporate ecological metrics into their cost-of-capital calculations and strategic planning. The early evidence suggests that explicit recognition of nature-related risks has tended to lower risk premiums and improve capital allocation efficiency, rather than raising the cost of doing business as critics initially feared.
For ratio analysis, three concrete adjustments suggest themselves. First, return-on-assets calculations should be expanded to include natural-capital stocks on the denominator and ecological depreciation on the numerator — a kind of “Return on Inclusive Capital” that treats produced and natural assets symmetrically. Second, gearing ratios should incorporate “natural-capital leverage,” the degree to which a firm’s operating income depends on the implicit subsidy of undegraded ecosystems. A water-intensive textile cluster operating on an over-extracted aquifer is, in a meaningful sense, more leveraged than its conventional debt-to-equity ratio suggests. Third, revenue lines should be disaggregated to separate ecosystem-service revenues, so that firms benefiting from nature-positive operations are recognised as building, not depleting, the productive base.
The conceptual logic here is the same as the Inclusive Wealth framework operating at the national level: shift the analytical gaze from short-term flows to long-term stocks, and from a single capital category to a portfolio of capitals. India’s own subnational Inclusive Wealth assessments have shown how states that look comparable on GDP per capita can diverge sharply once the natural-capital pillar is given equal weight — the same kind of divergence that nature-adjusted ratio analysis would surface across firms and sectors.
India’s Opportunity in Nature-Adjusted Finance
India has a distinctive opportunity to lead on this front, for three reasons. First, its existing data infrastructure is more advanced than is commonly recognised. The NCAVES alignment with SEEA, the Niti Aayog’s state-level SDG dashboard, and the gradual incorporation of ESG disclosures by the Securities and Exchange Board of India under the Business Responsibility and Sustainability Reporting framework together provide the raw material for nature-adjusted financial ratios at scale.
Where EAP corrects flow-based productivity measures, Inclusive Wealth corrects stock-based wealth measures by treating produced, human, and natural capital as a single integrated portfolio.
Second, India’s exposure is enormous: roughly half of the national GDP is generated by sectors that depend heavily on ecosystem services, particularly agriculture, water-intensive manufacturing, and tourism. Mispricing nature-related risk is therefore a first-order financial-stability issue, not a peripheral ESG concern. Third, India’s diplomatic position in the Global South gives it standing to shape global financial standards in ways that align with its own development priorities rather than run counter to them.
Governments should require natural-capital accounting in fiscal reporting and establish regulatory standards for the corporate disclosure of ecological dependencies and risks, building on TNFD alignment. Banks and institutional investors must factor nature-related risk into lending and investment choices, with central banks providing supervisory expectations — a direction the Network for Greening the Financial System has already begun to articulate. And international accounting standards bodies should accelerate convergence toward environment-adjusted GDP and wealth measures, anchored in the Inclusive Wealth methodology and the SEEA framework.
The deeper point is that financial ratios are not neutral mirrors of economic reality; they are instruments that shape it. A ratio system that treats ecological depreciation as a real charge against earnings will, eventually, produce a different economy — one in which the regeneration of natural capital is rewarded rather than penalised. The final instalment of this series extends the same lens upward to the sovereign frontier, where debt and natural capital have become inseparable problems for some of India’s most important neighbours and partners.
Soumya Bhowmick is a Fellow and Lead, World Economies and Sustainability at the Centre for New Economic Diplomacy (CNED) at the Observer Research Foundation.
Disclaimer
This article draws on expert consultations supported by the SYLFF Research Grant (SRG) from the Tokyo Foundation in 2025 and 2026. The author was eligible for this grant as a former SYLFF Fellow at the master’s level at Jadavpur University, and the grant has enabled the author to advance work on the Inclusive Wealth Framework through consultations at UNEP headquarters in Nairobi and with other relevant organisations in India and abroad.
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