Impact Investing for Coastal Conservation: Bridging the Gap

This paper provides a framework for conservation financing in coastal areas that could leverage private sector interests with conservation needs. A few examples of successfully implemented private investments in conservation initiatives are included. Conservation investing is a subset of impact investing, and is defined as “investments in companies, funds, and organizations with the goal of generating a financial return and beneficial environmental impact.” The paper describes the opportunities and challenges surrounding using private investment capital for natural and nature-based shoreline management approaches such as habitat restoration, conservation, and coastal resilience strategies.

The paper outlines the evidence that conservation within coastal and marine areas is underfunded within the United States. Conservation financing, which is a growing field, represents an opportunity to cover some of this deficit. Given the many benefits that coastal ecosystems provide, it should be an attractive area for investors.

However, making conservation attractive to private investment is challenging. By definition, conservation finance must create an environmental benefit. This requires that the benefit be measurable and clear. The authors write, “coastal managers need to find ways to develop better methodologies for measuring benefits in a standardized and consistent way so that projects are not only easier to communicate to investors, but are an attractive form of investment.” Additionally, impact investments are expected to garner financial returns and the authors explore some of the challenges around creating appropriate risk-return profiles. Finally, many services that ecosystems provide have long been viewed as services that should be free because they are public goods. As a result, “only a few legal frameworks have established market-based instruments that allow for conservation funding through the purchase and sale of credits that offset the environmental impact of certain activities.”  However, models do exist including voluntary carbon markets.

At the end of the article, the paper lists successful examples of private investment approaches:

1) a debt-swap to finance marine conservation in the Seychelles;

2) the Vibrant Oceans Initiative to support sustainable fisheries, and

3) the Althelia Ecosphere Sustainable Ocean Fund that is investing in marine conservation.  

The appendix also outlines some examples of investment approaches, including the Texas Coastal Exchange which sought to provide an efficient means for private, philanthropic, NGO, and public entities to invest in nature-based flood mitigation following Hurricane Ike in 2008. The appendix also includes three hypothetical cases: financing nuisance flooding through the insurance industry, an explanation of a resilience bond, and a flood mitigation bond.

 

Related Organizations:

  • Restore America’s Estuaries

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  • Best practice

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