Investing in nature
October 18, 2016 admin-iia
By Rich Gilmore
Country Director, The Nature Conservancy Australia
45 miles north of Manhattan, the icy water of the Mianus River carves a steep gorge on its way to Long Island Sound. 350-year-old hemlocks shade its cool, damp banks and fallen hardwoods provide bridges for the bold across fast-running cascades.
61 years ago, the famed explorer, naturalist and oceanographer Gloria Hollister formed a coalition of concerned citizens that succeeded in saving this north-eastern nirvana from loss to housing sprawl. In doing so, Gloria could hardly have foreseen that the Mianus River Gorge Reserve – now designated a National Natural Landmark – would inspire the protection of immense landscapes separated by mountains, oceans, and decades.
Equally transformative to what Gloria saved, was how she did it. The Nature Conservancy, then just four years old, provided the newly-established Mianus River Gorge Conservation Committee with a $US7,500 loan to help finance the purchase of the gorge. The loan was made on the proviso that it be repaid – with interest – for use in other conservation efforts.
Though impact investment didn't bear its modern name in 1955, the revolving loan fund that resulted – the Land Preservation Fund – was among the world's first impact investments for nature and it remained The Nature Conservancy's principal conservation tool for more than four decades.
Those decades saw spectacular growth in private land conservation in the United States. From the treeless prairies of the Badlands to the sandhills of the Atlantic coast, the Conservancy now holds five million acres of land and easements for conservation. Thousands more independent land trusts have emerged to acquire land and easements for conservation.
Private land conservation also took root globally. In Australia, the support of visionary philanthropists including David Thomas and Rob McLean allowed the Nature Conservancy to invest more than $10 million to help buy and protect some of Australia's natural jewels in partnership with Bush Heritage Australia, the Australian Wildlife Conservancy and Trust for Nature. Today, those organisations, along with others including South Endeavour Trust and the Tasmanian Land Conservancy, collectively own and manage almost 100 private conservation reserves.
Traditional land acquisition will remain a critical conservation tool for many years to come. In an increasingly complex and resource-competitive world, however, setting aside ecologically valuable land is alone insufficient to ensure the long-term prosperity of people and nature. The modern threats posed by climate change, food and water scarcity, invasive species, biodiversity loss and urbanisation are so profound the Conservancy has been driven to develop conservation strategies in new and varied ways and to create systemic change at the largest scales.
As the pressures on nature increase, so does the pressure on our capacity to fund nature's conservation. Buying land without a productive use is capital intensive in the short term and comes with a significant unfunded management expense (and opportunity cost) in the long term. At the same time increasing demands on public finances, especially in health and social services, create an ever-widening gap in government and philanthropy's ability to finance conservation.
A 2014 report by Credit Suisse, WWF and McKinsey sought to put a figure on that gap. The report found as much as US$300 billion per annum in new conservation funding needs to be unlocked to arrest global biodiversity decline. That's a lot of money, but two important factors give cause for optimism.
Firstly, the characteristics of natural assets make them readily investable. Numbers of trees, volumes of water, tonnes of carbon and hectares of farmland are all easily measured, valued and invested, often without the need to create complex new financial instruments.
Secondly, while emerging markets for services like pollination, biodiversity and nutrients may enable even more markets-based opportunities, the future for investing in nature has already arrived. Over the past decade, informed by its policy experts and 600 staff scientists, The Nature Conservancy has supported or established a range of innovative financial solutions including Debt-for-Nature Swaps in Costa Rica and the Seychelles, community-driven livestock markets in Africa, fisheries buyouts in the US and most recently a stormwater retention bond in Washington DC.
This evolution was given increased impetus in 2013 with the establishment of NatureVest, the Conservancy's dedicated impact investment unit. Seed funded through an ongoing collaboration with JP Morgan, NatureVest works across the Conservancy and with collaborators around the world to source and structure investment products, engage impact investors to source impact capital in effective, scalable ways and share its successes, failures and lessons in order to build a stronger community of support for investing in nature.
The Conservancy's goal is to put to work at least $US1 billion of impact investment capital by 2020 across five priority business lines: green infrastructure for urban stormwater management, water markets, debt restructuring for climate adaptation, sustainable agriculture and fisheries and working landscapes. Locally, the Conservancy-sponsored Murray-Darling Basin Balanced Water Fund, managed by Kilter Rural, is providing secure water for agriculture, restoring threatened wetlands and paying a return to investors. The Fund's second capital raise towards its $100 million fund size is now underway, with Evans and Partners engaged as lead manager.
Critically, as the conservation movement continues to advance the role of the private sector, it will do well to remember the ingredients that made Gloria Hollister's campaign to save Mianus Gorge a success so many years ago. Strong science, generous philanthropy, reliable public funding and evidence-based policy remain the cornerstones of conservation success. Impact investing provides the opportunity to leverage these ingredients and deliver outcomes for people and nature at the planetary scale.
Agriculture, Australia, conservation, environment, impact investing, Murray-Darling Basin Balanced Water Fund, Nature, The Nature ConservancyAustralia, Blog, Uncategorized, USA