Eric Hallstein, Camilla Seth, Dan Winterson: Can Impact Investing Help Save the ...

Nov 2014
Global, November, 13 2014 - A new cross-sector study examines whether impact investing can make a difference to global conservation efforts.

The answer to whether impact investing can help save the planet matters. The growing demand for food, water, and the resources that fuel our economies is rapidly degrading the natural systems critical to human well-being. We need exponentially more capital and new, innovative models for conservation and sustainable economies—so it’s important to consider how much conservation impact investing can help bridge these capital and innovation gaps, and substantively contribute to saving the lands and waters critical to all life.

The buzz around impact investing as a breakthrough solution for persistent, large-scale problems seems to extend far and wide. But there are divergent viewpoints on how impact investing might contribute to conservation—some tout it as the future of conservation; some dismiss it as a niche tool incompatible with conservation goals on a broad scale; and some even view it as a potential threat, believing that financial return objectives may trump ecological goals.

This difference in perspective stems in part from the lack of data about current activity. Information about who is investing in conservation, what they are investing in specifically, how much they are investing, and with what success has heretofore existed only in anecdotes and case studies. To address this dearth of reliable data, a group of us from diverse institutions—the Gordon and Betty Moore Foundation, the David and Lucile Packard Foundation, EKO Asset Management, the Nature Conservancy, and JPMorgan Chase & Co.—came together to conduct the first systematic analysis of the conservation impact investing market.

We examined three specific areas of conservation investing: sustainable food and fiber production, habitat conservation, and water conservation. We defined conservation impact investments as investments intended to return principal or generate profit, while also driving a positive impact on natural resources and ecosystems.

Our report, “Investing in Conservation: A Landscape Assessment of an Emerging Market,” includes data from a survey covering more than 1,300 transactions between 2004 and 2013, plus follow-up interviews with investors.  Here are our top-line findings:

- $23.4 billion of investments in global conservation opportunities were made from 2009 through 2013. Investments by development finance institutions (DFIs), such as multi-laterals and development banks, totaled $21.5 billion, while private investments accounted for $1.9 billion.
- The conservation impact investment market is nascent but expanding quickly across investment stage, type, sector, and region. While private investment accounted for a small share of the total conservation investing market, we found that it grew at an impressive average rate of 26 percent annually between 2009 and 2013. Further, between 2014 and 2018, private investors in conservation expect to deploy $1.5 billion of already-raised capital, and to raise and invest an additional $4.1 billion.
- Case studies revealed rapid business model innovation. Conservationists have relied for decades on the basic model of setting aside land or water in protected areas. The investment models discussed in our report include loans to bridge the gap until public funding can be secured, policy-enabled credit-trading platforms for carbon or water quality, and traditional private equity investments in companies producing a conservation-enabling product. Such models have the potential to attract new sources of capital and give conservationists ways to engage in working landscapes with new partners.
- Investors reported a variety of challenges consistent with an immature market. Most investors viewed high-quality deal-flow, not availability of capital, as the primary constraint to growth. Specifically, investors cited a lack of experienced management teams, inadequately developed investment structures, and a lack of standardized impact metrics as barriers.

We view this report as an important first step in portraying the conservation investing landscape, but we also acknowledge its limitations. In particular, it does not dig deeply into conservation impact analysis. Although it is much harder to measure impact, future reports must give greater weight to the assessment of conservation outcomes and the underlying theories of change. For-profit colleges in the United States can serve as a cautionary example. Driven by huge institutions such as the publicly traded University of Phoenix, enrollment in US private colleges went up eight-fold between 1980 and 2008. By tracking enrollment instead of student achievement, however, for-profit educational institutions opened themselves up to significant criticism and investor backlash.

However, this study does show that conservation impact investing is real and growing rapidly. One reason for this growth may be that it has broad appeal, as illustrated by the variety of collaborators on our study. For banks, conservation investment products represent an opportunity to deliver real financial returns. For foundations, investing in conservation through mission- or program-related investments is a way to expand the pool of available capital and catalyze engagement by new partners. For environmental nonprofit organizations, impact investing is a way to protect biodiversity in working landscapes at large scales. For all of us interested in environmental conservation, impact investing is a potential path for attracting capital at the scale of the problems we face.


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