ARLINGTON, Virginia, November 7, 2014 (ENS) – The first survey of conservation investing reveals a fast-growing market that totaled $23 billion in the five-year period from 2009-2013. Private investments accounted for almost $2 billion of this market.
Conservation investments, also called conservation impact investments, are intended to return principal or generate profit while driving a positive impact on natural resources and ecosystems.
The report, “Investing in Conservation: A landscape assessment of an emerging market,” is the first data-driven study of the market for conservation-related investments based on direct feedback from investors.
The findings are drawn from a survey of 56 investors, including five for-profit and nonprofit development finance institutions and 51 private investment organizations.
Most of the investments were made in three main areas: water quantity and quality conservation; sustainable food and fiber production; and habitat conservation.
The report was co-authored by EKO Asset Management Partners and The Nature Conservancy’s NatureVest division. It was overseen by a steering committee that also included the David and Lucile Packard Foundation, The Gordon and Betty Moore Foundation, and JPMorgan Chase & Co.
“Our report puts real numbers to what we’ve long suspected – private investors are deploying more capital than before toward investments that lead to both greater conservation and a definable financial return. But more needs to be done,” said Ricardo Bayon, EKO Asset Management partner and co-author of the report.
“What the report tells us is that this is not a money problem. The money is out there. It is about courage, ingenuity, and creativity. It is about coming up with appropriate financeable deals. If we’re successful, it will mean that billions of new dollars will flow into efforts to improve sustainable food supplies, protect habitats, and achieve water conservation around the world,” Bayon said.
Based on the data considered for this study, the total market for conservation investment is expected to increase to $37.1 billion over the next five years.
Dan Winterson at The Gordon and Betty Moore Foundation, said, “We decided that rather than wait and react to investment ideas that came our way, we needed to proactively understand the landscape of conservation impact investments. While there are inevitable gaps in the data – especially on the conservation impact side – I think this report is an important step as the first systematic attempt to provide a comprehensive fact base of activity in the conservation investing field.”
The authors calculate that private investments in this space are expected to more than triple over the period 2014-2018. Private investments are growing at an average of 26 percent annually, and are expected to reach more than $5.6 billion by 2018.
Of the nearly $2 billion already invested by private investors, 80 percent came from only 10 sources, the survey finds.
Private investors expect to deploy $1.5 billion of already-raised capital over the next five years, and to raise and invest an additional $4.1 billion, the report projects.
Overall, the $23 billion was spent on projects in three main categories:
• Water quantity and quality conservation, including investments in watershed protection, water conservation and stormwater management, and trading in credits related to watershed management
• Sustainable food and fiber production, including investments in sustainable agriculture, timber production, aquaculture, and wild-caught fisheries
• Habitat conservation, including investments in the protection of shorelines to reduce coastal erosion, projects to Reduce Emissions from Deforestation and Degradation (REDD+), land easements, and mitigation banking
Of the three categories of conservation investment studied, development finance institutions invested most in water quality and quantity projects, $15 billion, while private investors invested largely in sustainable food and fiber production, about $1.2 billion.
“Impact investing is gaining huge attention recently – yet the environmental side of impact investing remains under-represented and understudied, especially as compared to the more established social investing sector,” said Susan Phinney Silver, manager of program-related investments, the David and Lucile Packard Foundation.
“This report came together with the goal of helping impact investors understand future conservation investment opportunities and partnership opportunities across investor classes,” she said.
Respondents told the authors they see “a shortage of investable projects and opportunities,” indicating that they need more deals with adequate risk-return ratios and more seasoned management teams.
Matt Arnold, who heads the Sustainable Finance division at JPMorgan Chase & Co., said, “Finding a way to structure private capital into conservation deals is essential if we want to attract the scale of investment needed to effectively protect vibrant ecosystems. JPMorgan Chase is proud to have worked side by side with our research partners, and we did so to sharpen our own understanding of this growing market – as well as to put a flag in the sand that shows our commitment to this critical emerging area for investment.”
Impact investment is one way to address the critical global deficit in conservation funding.
In 2010, the International Union for the Conservation of Nature, IUCN, said that to halt biodiversity loss $300 billion per year must be invested in conservation by the year 2020.
Yet current levels of investment, mainly from governments, multilateral agencies, and philanthropic sources, total only about $50 billion, according to the new study.
To address the shortage of conservation impact investment opportunities, the study co-authors are working to structure conservation opportunities that can be supported by private capital.
In 2014, with support from JPMorgan Chase & Co., the Nature Conservancy launched NatureVest, a dedicated division focused on deploying $1 billion in impact capital for conservation over the next three years by convening investors, developing and executing innovative financial transactions, and building an investment pipeline across multiple sectors.
For example, NatureVest is mobilizing an $80 million debt-swap for the government of the Indian Ocean island nation of The Seychelles in exchange for their commitment to enhance marine conservation and climate adaptation. The organization aims to replicate this model to help other small island nations invest in marine conservation efforts that will limit the risks and costs posed by climate change.
Marc Diaz, managing director of NatureVest, said, “As conservation and the value of nature become a stronger focus for impact investors, public and private dollars can be used together for greater impact in environmental projects. This research reveals what many have suspected – that impact investors are using substantial, fast-growing amounts of money to support sustainable food and fiber production, as well as water and land conservation, and will continue to do so for years to come.”