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Conservation Finance - Moving beyond donor funding toward an investor-driven approach
This report analyzes the investor perspective in conservation finance and attempts to bring together the demand side (i.e., the need for conservation funding) and the supply side (i.e., the availability of investments with conservation impact) because so far, not much attention has been given to the perspective of investors and their investment approaches. The report was written by Credit Suisse, WWF and McKinsey and presented at the World Economic Forum in Davos.
(c) GNF
The study concludes that the primary reasons why conservation projects are underinvested in include the facts that (i) the monetary and conservation benefits of conservation programs are not sufficiently well identified or standardized; (ii) that environmental benefits are, without regulatory intervention, often externalities for the investors involved; and (iii) that conservation projects are not set up with the same focus on return/impact maximization and replication as are traditional business models.
Conservation finance can activate and scale up cash flows from conservation activities. However, to meet the global need for conservation funding, investable cash flows from conservation projects need to be at least 20-30 times greater than they are today, reaching USD 200-300 billion per year, if we assume that current government and philanthropic funding at least doubles.
For that purpose, scaling up conservation projects into investable programs will require a professional management approach that fosters connectivity, sharing of best practice and rapid replication. Organizations experienced at financial management of large for-profit projects will have opportunities here and should make good use of expert non-governmental organization (NGO) support. In addition, the local communities involved in such projects often need to develop more business acumen and financial literacy to roll out projects at scale and be able to participate in their development.
Finally, a role can be played by banks and asset managers. They have an opportunity to incorporate conservation finance into their impact investment offering, by making the topic of conservation a fixed part of the advisory process and by developing new conservation-related investment products for their clients. Equally, the field would profit from the same rigorous approach to project diligence and selection, as done in standard portfolio management.
You can find the English study here.
A German study will be available in about two months.