Conservation Finance - what does it entail?

Must the tree of life be linked to money?

By Dr Eugenie Regan (*) - 

As part of my Cambridge Judge Business School hashtag#executivemba studies, I'm trying to get my head around conservation finance. What better to do on my holidays than write an overview of the different types of conservation finance?! I found it useful to write this overview and I hope it's useful to others too :-) hashtag#sustainablefinance hashtag#greenfinance

What is conservation finance? It seems to be a buzz word at the moment but it isn't clear what it actually is. Don't we all need money to undertake conservation activities? Does that mean any money that is used to fund conservation is conservation finance?

A recent report from the OECD 'Biodiversity: finance and the economic and business case for action' provides a very useful conceptual framework of biodiversity finance or conservation finance - shown below. When we talk about conservation finance we often are referring specifically to innovative financing models outside of direct government expenditure (public) or philanthropy (private). In other words, not the usual ways that conservation is financed but rather the innovative ways that conservation can be funded.

A conceptual framework for biodiversity finance and other types of incentives and support (from the OECD 2019 report 'Biodiversity: finance and the economic and business case for action.'​)

A conceptual framework for biodiversity finance and other types of incentives and support (from the OECD 2019 report 'Biodiversity: finance and the economic and business case for action.'​)

Here are some interesting examples:

Debt for nature swaps:

In 2018 the Seychelles swapped $22m in sovereign debt for protecting nearly one third of its ocean area. The debt was bought at a discount by The Nature Conservancy from the UK, France, Belgium and Italy. Two new protected areas have been established as a result. One around Aldabra is 74,000 sq km and bans all extractive uses, from fishing to oil exploitation. The second is 134,000 sq km, centred on the main Seychelles island of Mahe and allows controlled activities but banning certain fishing activities. Here's an interesting article in The Guardian on this debt for nature swap.

Payment for ecosystem services (PES):

Payments for ecosystem services (PES) are based on a relatively simple concept - to pay landowners to protect their land in the interest of ensuring the provision of some “service” rendered by nature, such as clean water, habitat for wildlife, or carbon storage in forests. Bosques Pico Bonito in Honduras is a for-profit company that generates carbon credits by planting native trees and then sells these credits through the World Bank's BioCarbon Fund to countries aiming to offset their carbon emissions. The company is jointly owned by investors and the communities in the area. Community members earn income and share profits from implementing the sustainable forestry practices that capture carbon. The company's mission is to 'be a recognized world leader in establishing and managing business models that achieve commercially attractive triple bottom line results in the areas of sustainable forestry, environmental and biodiversity restoration & protection, and social equity.' A noble mission!

Bonds, loans, equity:

The Seychelles are on a roll! Maybe the debt for nature swap inspired them? In any case, in October 2018 the Republic of Seychelles launched the world’s first sovereign blue bond. My corporate finance bible (literally my bed-time reading during the MBA corporate finance course - much to the amusement of my husband!) defines a bond as 'an instrument that most governments and major corporations use to borrow money' or an IOU (literally "I owe you"). They raised $15m from international investors, the proceeds of which will include support for the expansion of marine protected areas, improved governance of priority fisheries and the development of the Seychelles’ blue economy. Interestingly, this blue bond is partially guaranteed by a US$5m guarantee from the World Bank (IBRD) and further supported by a US$5m concessional loan from the GEF which will partially cover interest payments for the bond. Therefore, lowering the risk for investors and making the bond a more attractive investment.

The Althelia Biodiversity Fund Brazil (ABF Brazil) is an investment fund dedicated to making pioneering impact investments in the Legal Amazon. Through the fund, Mirova Natural Capital Limited aims to deploy US$100m of blended finance into sustainable activities that protect, restore or otherwise improve biodiversity and community livelihoods. ABF Brazil invests in "sustainable businesses, cooperatives, NGOs and other entities that have a positive impact on biodiversity and communities in the Amazon, building resilience in forest ecosystems & communities, and harnessing the Amazon forest’s natural capital to generate real assets and create sustainable economic growth and livelihoods". Returns are generated from loan repayments, profit sharing arrangements, sale of equity, dividends, carbon or a combination of one or more of these instruments. So this is fund represents both loans and equity in the diagram above (as well as PES if returns come from selling carbon credits, for example). It is focused on private finance.

Impact Investing:

Washington, D.C. had a problem. Like many cities with antiquated sewer systems, it was under orders from the Environmental Protection Agency to reduce stormwater runoff that threatened the region's water quality. Their original plan was a $2.6 billion tunnel system to keep overflow out of local rivers. Partway through the project, however, they realised that green infrastructure initiatives would cost much, much less - $25 million. In order to finance this work, they launched Washington D.C.'s $25m Environmental Impact Bond in 2016. It is an example of a Social Impact Bond where investors put up the money that is used to address the problem and, if the agreed targets are met, the investors are paid back with interest. Unlike normal bonds (see above), the financial return of the investment is tied directly to the success of the project. Investors investing in these types of initiatives are known as 'impact investors'. Read more about this bond here.

Another example of impact investing is the new Rhino Impact Bond coordinated by the Zoological Society of London and Conservation Capital. This five-year $50m 'bond' is the world's first financial instrument for species conservation. Another example of a Social Impact Bond, the investors will be paid back their capital and a coupon if African black rhino populations in five sites in Kenya and South Africa increase over five years. The donors (including the Global Environment Facility) commit to paying back investors when specific outcomes are achieved by the rhino protection service providers. So the money ultimately comes from philanthropy but the coordinators are hoping that finance to pay back the investors will also come from other sources such as tourism.

I hope this article was a useful overview of conservation finance. It's certainly helped me clarify these different concepts :-)


Please note once and for all times: The concept to BUY, SELL or to individually OWN land - or anything else on Earth that a person has not created - is completely alien to any Indigenous culture. To have left this path of the old ways has brought much evil and human suffering into this world, to the oppressed communities and to you.



Conservation finance: can money be made from conservation?

By Dr Eugenie Regan (*) - 30. December 2019

There are ways for hashtag#conservation to be financially attractive. However, these are innovative business models and require us, as conservationists, to think outside of the box. We like to talk about innovation but is our sector truly innovative? We talk a lot about needing more money - but are we willing to adopt other ways to finance conservation? hashtag#financeinnovation hashtag#greenfinance

In my earlier article on the different types of conservation finance (above or here), there was a distinction between public, private, and public and/or private finance. But it's not so clear exactly who is paying out the financial return on the investment, if indeed there is a return.

Most conservation finance isn't expecting a financial return

Firstly, most funding of conservation is simply given with no expected financial return - think of a government funding a national park for the benefit of its citizens or a foundation giving a grant to help conserve a species. Neither are expecting any money back - although they are expecting an outcome associated with that money - such as the species population increases or the national park is maintained.

Typical cash flow patterns from a conservation finance vehicle (From Credit Suisse 2016 report titled 'Conservation Finance From Niche to Mainstream: The Building of an Institutional Asset Class'​)

Typical cash flow patterns from a conservation finance vehicle (From Credit Suisse 2016 report titled 'Conservation Finance From Niche to Mainstream: The Building of an Institutional Asset Class'​)

Outcome-related payments:

The Rhino Impact Bond is a good example of this type of conservation financing. In this case, the up-front money for rhino conservation activities are privately financed. However, public money, such as from the Global Environment Facility, is promised at the end of the project as long as specific conservation outcomes are achieved. The private financiers, in that case, get all of their money back plus interest. All financed by public money. This is a type of blended finance. However, it is ultimately public or philanthropic money that pays.

Do financial returns on conversation activities truly exist?

So is there a way to finance conservation without resorting to public or philanthropic money? Is there a way to have financial returns on conservation activities?

The diagram above from the Credit Suisse 2016 report 'Conservation Finance From Niche to Mainstream: The Building of an Institutional Asset Class' shows an number of potential cash flow patterns from conservation activities. They are:

  1. Invest up front, manage, and sell

This approach often used by timberland investors, for example the Working Forest Fund. They identify and buy important at-risk private forests. Once it owns a forest, the Fund develops a sustainable harvest plan along with wildlife and habitat restoration plans. These protect the forest while also maintaining local forestry jobs. Simultaneously, the Fund begins the process of securing a permanent conservation easement that will forever block fragmentation or commercial development of the forest. These easements provide for public access and recreation along with continued timber harvesting according to sustainable forestry best practices. Once the easement is secured, the Working Forest Fund resells the permanently protected forest to a private or public buyer, recovering all its invested capital for redeployment in another forest acquisition.

2. Invest up front and generate recurring returns

Shrimp farming is the example given in the Credit Suisse report and there's been remarkable success in this area. This quote from the Mangroves and Markets project “Thanks to the project’s trainings on better farm management practices my shrimp production has increased by about 20% compared to last year“ highlights the financial returns that can be achieved alongside environmental outcomes. MAM I helped protect 12,600 ha of mangrove forest and MAM II is now underway.

3. Invest gradually and build returns

The Meloy Fund deploys private capital to enterprises that can create value for fishing communities by improving upstream margins through supply chain efficiencies, waste-reduction, aggregation, and value-added processing, or providing fishing-related employment alternatives, such as ocean-based sustainable aquaculture. Interestingly, the Fund partners with Rare (a conservation organisation) and their global fisheries recovery program, Fish Forever, to break apart the tragedy of the commons that has led to overfishing.

4. Invest continually and generate recurring returns

The Naivasha-Malewa Project in Kenya is an example of payments for watershed services. In this case, payments are made annually to individual farmers - a fixed sum of US$17 per participant. In exchange for the payment, farmers agreed to activities such as rehabilitation and maintenance of riparian zones, establishment of grass strips/terraces to reduce runoff and erosion on steep slopes, reduced use of fertilisers and pesticides, and agroforestry/tree planting. Farms selected for the scheme were those on steep slopes where no soil/water conservation measures were already in place.(Ed.: This project alredy faltered.)

There are ways for conservation to be financially attractive. However, these are innovative business models and require us, as conservationists, to think outside of the box. We like to talk about innovation but is our sector truly innovative? We talk a lot about needing more money - but are we willing to adopt other ways to finance conservation? Are we willing to embrace disruptive innovation in our sector? Perhaps we are facing Christensen's innovation dilemma!

(*) Author:

Dr Eugenie Regan

Dr Eugenie Regan - Manager: Integrated Biodiversity Assessment Tool | studying for Cambridge MBA


Shane Ward - Regenerative land use and soil health consultant : Action Ecology

This question sits at the nexus of the modern conservation paradox - and I suppose more broadly the larger economic question we must eventually grapple with (what’s it actually ‘for’?). If economic activity and conservation are at cross-purposes, then by getting better at playing the opponent’s game & talking their language (“ecosystem services”, “natural capital”), we stop addressing the fundamental point that the natural world is required for our survival & wellbeing and thus has intrinsic value (not to mention any rights living organisms might have to exist) and side step the moral/ethical issue in favour of a pragmatic one (price of everything, value of nothing). On the other hand, if we maintain the high ground all we do is have a bird’s eye view of its wholesale destruction by rapacious economic plundering. If a balance has to be struck, then by all means make it attractive to those who don’t care about living things, but we must never lose sight of the strategic need to reconnect people with where we’ve come from - a living part of and dependence on the natural world. If we fail at that and just reinforce profit as the ultimate decider, then any ground gained will be lost when a better deal comes along or markets shift.

Understanding the Innovator’s Dilemma

By Xenios Thrasyvoulou (*)


Picture credit:

“The Innovator’s Dilemma” is one of the most — if not the most — important books chronicling how innovation takes place, and why its common that market leaders and incumbents fail to seize the next wave of innovation in their respective industries. The book is so good, that even after having read it multiple times, I pick up something new from the text. The most important excerpt in my opinion captures the key essence on the Innovator’s Dilemma:

“The reason [for why great companies failed] is that good management itself was the root cause. Managers played the game the way it’s supposed to be played. The very decision-making and resource allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies: listening to customers; tracking competitors actions carefully; and investing resources to design and build higher-performance, higher-quality products that will yield greater profit. These are the reasons why great firms stumbled or failed when confronted with disruptive technology change.

Successful companies want their resources to be focused on activities that address customers’ needs, that promise higher profits, that are technologically feasible, and that help them play in substantial markets. Yet, to expect the processes that accomplish those things also to do something like nurturing disruptive technologies – to focus resources on proposals that customers reject, that offer lower profit, that underperform existing technologies and can only be sold in insignificant markets– is akin to flapping one’s arms with wings strapped to them in an attempt to fly. Such expectations involve fighting some fundamental tendencies about the way successful organizations work and about how their performance is evaluated.”

A common misinterpretation is that incumbents fail to develop these disruptive technologies or embrace them due to the inability of the organization to adapt operationally or technologically. In other words, management is unable to identify new trends, develop new ideas and reorganize to bring these new technologies to market. This interpretation, however, is plain wrong and the opposite is shown to be true.

What the theory — and the extensive evidence — in fact support is that incumbents often are the ones to spot and develop new technologies while easily reorganizing themselves to do so. The problem is they fail to value new innovations properly because incumbents attempt to apply them to their existing customers and product architectures — or value networks. Often new technologies are too new and weak for the more advanced and mature value networks that incumbents operate.

This leads to the ROI needed to advance the innovation to be seen as low. In other words, management acts sensibly in rejecting the continued investment in these new technologies and act in the company’s best fiduciary interests. Moving into new markets is rejected as they are seen as too small to make a dent for them and their cost structure prohibitive to enter at sensible margins.

Therefore, new entrants (often founded by frustrated ex-employees of the incumbents) with little or nothing to lose when they enter the market. Initially these small upstarts don’t pose a threat — the new entrants find new markets to apply these technologies largely by trial and error, at low margins. Their nimbleness and low cost structures allow them to operate sustainably where incumbents could not.

However, the error in valuing these technologies comes from what happens next. By finding the right application use and market, the upstarts advance rapidly and hit the steep part of the classic “S” curve, eventually entering the more mature markets of the incumbents and disrupting them.

In essence, the smaller markets are the guinea-pigs and test labs that help the technologies advance enough to play in the big boys league. In many cases the entry-point markets are left behind as the new technologies move into higher margin upmarket territory disrupting due to their superior performance.

Technology leaders evaluating whether to invest in new and immature technologies must do so with a futuristic frame of reference. The key question is, if these technologies found new customers and new markets which may in themselves be small and insignificant (now and in the future), could they mature enough to make inroads into our playing field and have our lunch? And if so, does investing in them today at the risk of cannibalizing ourselves make sense in the longer term? Hence, the innovator’s dilemma.

(*) Xenios Thrasyvoulou is the founder of and




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