The index ranks 149 countries according to their performance across eight equally weighted categories. This year New Zealand ranked first for economic quality, first for social capital, second for business environment, second for governance and third for personal freedom.
However, the think tank's study found Slovenia is the country best at using nature to improve the wellbeing of its citizens. and said protecting the environment makes nations more prosperous.
Top five
New Zealand: Officially the most prosperous country on earth, according to the Legatum Institute, New Zealand ranked top of both the social capital and economic quality sub-indexes, and 2nd for business environment and governance. Norway: For seven consecutive years Norway was ranked most prosperous country but this year it lost its crown, with a higest ranking of 3rd in the governance sub-index. Finland: This seriously prosperous European state has the best governance in the world, according to the Legatum Institute. Switzerland: This country has fantastic education (1st overall) and great healthcare. It was 3rd in the health sub-index. Canada: America's northern neighbour is much more prosperous, according to the Legatum institute, finishing 3rd for social capital and business environment and 2nd for personal freedom. |
In its study, the London-based Legatum Institute for the first time included governments' efforts to reduce pollution, preserve biodiversity and limit the exploitation of natural resources in a formula to calculate its annual prosperity index.
"Protecting the environment, leaving citizens with a nicer, cleaner and even prettier environment, is strongly linked to wellbeing," Alexandra Mousavizadeh, director at the Legatum Institute, told the Thomson Reuters Foundation.
The index is published amid increased global efforts to tackle climate change and foster sustainable growth.
In September last year UN member states set a number of ambitious targets to end poverty, protect the planet, and ensure prosperity for all by 2030.
In December, nearly 200 nations agreed to keep global temperature increases to below 2degC to curb global warming, as part of the landmark accord reached in Paris.
The Legatum Institute's index measures the prosperity of 149 countries based not only on their wealth but also on a series of other factors including education, personal freedoms, how safe people feel and how they get on with their neighbours.
In 2016 New Zealand was ranked first, followed by Norway, while Slovenia came top in the category dedicated to the natural environment.
Its ranking was due to the "aggressive" environmental policy Slovenia has adopted over the past decade, which has included the creation of large protected areas on land and sea, according to the institute.
"Slovenia is a country with a high diversity of natural environment gathered in a small area," the Slovenian ministry of the environment said in a statement. "Preserved nature is our core national treasure and our identity."
The creation of natural parks increased health and happiness as well as helping the tourism industry, which, in turn, boosted the country's overall wealth, said Harriet Maltby, head of policy research at the institute's Prosperity Index.
The new index penalised fast-developing countries like China and India that generated high levels of growth, reducing poverty, but at the expense of air quality.
