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Life on Land: Forging New Forms of Conservation Finance

We are living in an age of mass extinction. Wildlife populations are declining a thousand times faster than expected while more than a million plant and animal species will be threatened by human activity by 2050.

According to the World Wildlife Fund’s Living Planet Index, vertebrate populations have declined by 68 per cent from 1970 levels while global resource extraction has tripled to 92 billion tonnes over the same period. Time is running out for the delicate ecosystems that support the great diversity of life on Earth unless immediate action at scale and speed is taken to reverse this catastrophe.

This was the chilling message that emerged from the inaugural United Nations Summit on Biodiversity, which took place at the UN General Assembly's 75th general debate in September. To coincide with the event, the world’s oldest international wildlife conservation organisation, Fauna & Flora International (FFI), delivered a letter to the UN signed by almost 150 conservation groups from over 50 countries. It called for member states to recognise the scale of the problem by collectively committing an initial US$500 billion to support nature conservation worldwide.

According to The Nature Conservancy (TNC), even this figure may not be sufficient. In its recent report, ‘Closing the Nature Funding Gap: A Finance Plan for the Planet’, published in collaboration with the Paulson Institute and the Cornell Atkinson Center for Sustainability, TNC calculated that the world spent between US$124 and US$143 billion on activities that benefited natural causes last year. While this represents almost a tripling in funding since 2012, an estimated investment of between US$722 and US$967 billion is required per year if the decline in biodiversity is to be reversed by 2030. At current spending levels, this amounts to a US$824 billion annual funding gap.

Results Driven

Funding for biodiversity has not kept pace with Environmental, Social and Corporate Governance (ESG) in recent years, even though an estimated US$44 trillion of economic value generation – over half the world’s total GDP – is moderately or highly dependent on the natural world. 

This can be explained, in part, by the scarcity of mechanisms that allow institutional investors to deploy their capital in this area and the difficulty in putting a monetary value on the environment. For Chris Gordon and Chris Barichievy, co-founders of environmental services provider Conservation Alpha, the key to addressing the ever-increasing shortfall lies in developing financial tools and conservation programmes that combine effective fund deployment with rigorous metrics and verification.

“Around 65 per cent of current biodiversity initiatives are funded from domestic budgets, taxes, and overseas development assistance and philanthropy, primarily deployed up front on short-term programmes, often with risks to success and with limited monitoring and evaluation,” explains Gordon, Conservation Alpha’s Managing Director. “As a result, it’s often difficult to assess the impact on biodiversity and the success of fund deployment. One way that these funds could be better deployed is by paying for success at the end of the project.”

’Payments for results’ mechanisms like this transfer up front risk to private capital markets. It’s a model that’s relatively unheard of in conservation circles but is already proven in the funding of social development areas such as prison reform, healthcare and education. 

It’s a theory the pair have put into practice by developing the groundbreaking Rhino Impact Investment (RII) Project. Focused on the conservation of the black rhino, whose numbers have declined by more than 90 per cent since 1970, the RII is helping to design the world’s first payments for results financial instrument for the conservation of this critically endangered species.

 The development of the RII Project was funded by the Global Environment Facility (GEF) through the United Nations Development Programme (UNDP), Oak Foundation, Rufford Foundation, the UK Government through the Illegal Wildlife Trade Challenge Fund, The Royal Foundation of the Duke and Duchess of Cambridge and the Zoological Society of London.

“Traceability, transparency and accountability are all key moving forward. By using tech-based solutions we can provide a cost-effective way of linking conservation to financial mechanisms,” explains Conservation Alpha’s Technical Director, Chris Barichievy.

“This type of impact bond structure isn’t the only solution, but it can be used to help conserve species, landscapes or habitats at scale where we have willing outcome payers.”

Innovative Thinking

For Dana Barsky, Chief Operating Officer and Head of Sustainable Products and Partnerships at Credit Suisse, which supports the RII, investment in biodiversity will only increase when this kind of innovation, creativity and lateral thinking are more widespread.

“Clients are really focusing on sustainability now. They’re focusing on their portfolios and asking how they can make a positive impact, but it really takes new partnerships of a very different type to make conservation-focused financial products like this work,” she insists. “Philanthropy alone won’t move the needle, you need to draw on the collective expertise of financiers, NGOs and conservationists to create new solutions and achieve results.”

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