“What a country cannot measure, it cannot defend.” The former Prime Minister of Mongolia, H.E. Zandanshatar Gombojav, emphasized this point as he opened an event convened under the umbrella of the Trans-Altai Sustainability Dialogue and co-organized by Stanford Natural Capital Alliance and Walter H. Shorenstein Asia-Pacific Research Center (APARC). Held at the UN Convention to Combat Desertification, or CCD COP17, in Ulaanbaatar, Mongolia at the end of August, the event coincided with the launch of the “Summary for Policymakers” for a new report, also from NatCap and APARC, applying natural capital approaches to the mining sector in Mongolia for the first time.  

Zandanshatar, who was Mongolia’s 34th prime minister, conveyed that natural capital accounting (tracking the contributions of ecosystems to people in a standardized way over time) can help ensure groundwater, grasslands, soils, and other natural assets are considered in decisions around mining. During the event, he also announced a new “Trans-Altai Natural Capital Alliance,” calling for a shared approach to measuring and valuing natural capital across the Altai region of Central and East Asia.

Mining is a key contributor to Mongolia’s economy – in 2024, mining and quarrying accounted for approximately 28% of its GDP and 58% of foreign direct investment, and mineral products made up roughly 90% of total exports. Mines depend on natural ecosystems in a variety of ways, but water stands out as a key dependency. When ecosystems are degraded by mining activities, this also degrades their water supply, increasing potential for conflicts with, in this case, local herding communities, and threatening companies’ bottom lines and ability to continue operating. 

Mining is now poised to extend into new regions of the country. The new analysis shows that the mining sector’s demand for water in Mongolia could more than triple by 2035, and pilots a new, interdisciplinary approach, which NatCap intends to expand beyond Mongolia. It included a series of components: a mine-level water-demand database for 38 existing mines and 109 pipeline projects; modeling water-yield-related ecosystem services around mine sites; developing a water-related risk indicator that can be used as a screening tool at the project and provincial levels; and a remote-sensing analysis of ecosystem conditions around active mines. The analysis also mapped relevant policies to identify gaps in addressing mining-related water and environmental risks in Mongolia and reviewed cases of social conflict over mining and water resources.

“There has to be a narrative shift within these industries,” said Mengye Zhu, senior scientist at Stanford NatCap and lead author of the report. She presented the key findings of the analysis at the event. “Nature’s services should be thought of as infrastructure – as the foundation of their investment decisions. It is beneficial for maintaining their business, not just a cost.”  

With a greater understanding of the value of water-related ecosystem services, the Mongolian government and companies can be better informed on where to cite projects, where water-efficient technologies should be prioritized, how to target ecosystem restoration efforts – particularly under Mongolia’s “Billion Trees” Initiative – and how to calculate potential compensation to local communities for the value of degraded ecosystems and reduced water availability. 

“We were able to identify potential water-related risks at the mine-site level through an assessment of current and projected mining water demand and water-related ecosystem services for the next 10 years ,” said Zhu. “This shows how challenging it will be. But we now know the risks, people can intervene and reduce them. Copper mining accounts for the largest share of mining water demand, with a few mine sites facing particular high water-related risks.” 

At the CCD COP17 event, Gim Huay Neo, managing director of the World Economic Forum and chief representative of its China Office, delivered one of the keynote speeches. She suggested the key challenge now is to scale and mainstream proven solutions through the right market and governance systems. She also observed that less than three percent of the financing directed toward addressing climate change goes toward investing in land and water resources, underscoring the need to improve how the value of nature is recognized, distributed, and rewarded.

Victor Caro Castro, former president of the Chilean Natural Capital Committee and professor at the University of Santiago in Chile, gave a keynote as well: Chile’s economy also relies heavily on mining. He said the real choice is not between mining and nature, but where and how production should take place. Water and ecological security are not only environmental concerns but also conditions for operational continuity, financial stability, social legitimacy, and national resilience.

Stanford NatCap and its collaborators intend to continue working with partners in Mongolia to expand this work beyond the mining sector, and help implement natural capital accounts including, potentially, Gross Ecosystem Product (GEP). There was also a panel at the CCD COP17 event focused on GEP, including a presentation about its implementation in China from Baolong Han, a NatCap scientist based at the Chinese Academy of Sciences. Stanford NatCap also plans to expand its application of natural capital approaches to mining industries in other countries. 

The full report on “Assessing Water-Related Risks for Mining Investment Decisions in Mongolia: A Natural Capital Approach” will be released later. For more about this project: Investing in Natural Capital for Sustainable Mining in Mongolia. It is funded by the William and Flora Hewlett Foundation.