Beats | January 10, 2018

Assembling the pieces for ‘landscape-scale’ conservation investments

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More than $3 billion in committed capital that has already been raised for investments in food and agriculture, habitat protection, clean water initiatives and other conservation projects was sitting on the sideline waiting for attractive deals last year.

That presents an enticing opportunity for developers who can package conservation projects that deliver both environmental and financial returns. The Nature Conservancy, World Wildlife Fund, Conservation International and other major conservation organizations are stepping up to stock that deal pipeline.

“Conservation organizations like World Wildlife Fund are uniquely positioned to engage local communities, corporations and governments in conservation projects,” Paul Chatterton, founder of the WWF’s Landscape Finance Lab, said in a recent report published with Clarmondial, a Swiss investment advisor. Now, he said, such projects must “include investors and harness capital markets to drive conservation goals.”

The annual Conservation Finance conference, convening Wednesday at Credit Suisse’s New York offices, is a good place to track the development of the marketplace. For five years, the conference has brought together conservation practitioners with bankers and other financiers looking for investable opportunities in wildlife habitats, wetlands, water, forestry and sustainable agriculture.

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The Landscape Finance Lab includes sketches for the restoration of watersheds in Indonesia, reefs in Fiji and wetlands along the Zambezi river between Zambia and Zimbabwe. The Coalition for Private Investments in Conservation is developing blueprints for return-seeking projects to promote coastal resilience, forest landscape conservation, watershed management and sustainable agriculture and coastal fisheries.

The trick is to package a bundle of revenue-generating activities into a project that also delivers significant environmental benefits. Sustainably produced fish, produce or timber are relatively easy to monetize. The business models for other conservation outcomes are more complicated, including “payments for ecosystem services” such as biodiversity, ecosystem resilience, carbon reduction and watershed improvements.

The Clarmondial report, “Capitalizing Conservation: How conservation organizations can engage with investors to mobilize capital,” suggests ways to enhance the risk-return profile of conservation investments. Corporate buyers, for example, can provide long-term agreements to buy sustainably produced raw materials. ‘Blended finance’ mechanisms that leverage development funding or philanthropic capital can reduce risk for private investments with first-loss guarantees and other mechanisms. By working at “landscape scale,” projects can generate value for local residents, businesses, government and the environment, the report said.

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Despite the shortage of investable deals, funds continue to raise capital. Last year, Mirova, an $8 billion unit of Natixis Global Asset Management, formally launched a $300 million Land Degradation Neutrality Fund to invest in sustainable agriculture, forestry, green infrastructure and ecotourism. It is one of the first private funds aimed at land-degradation neutrality. Last July, Mirova agreed to acquire Althelia Ecosphere, which has put together deals that combine carbon credits and sustainable commodities such as rubber in Indonesia, cocoa in Ivory Coast and cattle in Brazil.

“Rehabilitating degraded land, protecting vital ecosystems and empowering sustainable business around the world,” says Mirova’s CEO, Philippe Zaouati, “can be achieved along with competitive market-level returns.”

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