Conservation Finance: How can we scale up investments towards SDGs 14 and 15? (Part 2)


By Helen Avery. First published in Euromoney

Which financial tools for conservation?

John Tobin was a tropical ecologist doing arboreal and biology studies under Edward Wilson, spending his time in the treetop canopy collecting insects for research. It was up one of these trees that Tobin felt called to conservation and, realizing he needed practical skills, he followed a three-year law degree and then took a job on Wall Street so he could better understand where the money needed for conservation would come from.

He ended up as global head of sustainability at Credit Suisse.

Now a professor of management at Cornell University, Tobin is one of a rare few who can straddle the worlds of finance, conservation, ecology and academia. He speaks the language of each sector – and they are entirely different.

“Their pace of work is different, the way they work is different and they don’t understand each other,” says Tobin. “While conservationists grasp the bigger picture of the threats to nature and what nature needs, they have little understanding of how business or the real economy operates. And on the other side you have bankers and investors who don’t understand the science, and see nature as unmeasurable and risky.”

If the collective goal is to move finance into the conservation of natural resources, then these fields need to start understanding one another so that they can work together.

Partly driven by this motivation, Tobin co-founded the Coalition for Private Investment in Conservation (CPIC), along with Frank Hawkins at the International Union for Conservation of Nature (IUCN), Deutz at The Nature Conservancy (TNC) and Fabian Huwyler (then at Credit Suisse). 

While conservationists grasp the bigger picture of the threats to nature and what nature needs, they have little understanding of how business or the real economy operates   - John Tobin, Cornell University

Its goal, through a collaboration of the public, conservation and private sectors, is to drive private capital into the restoration and conservation of nature. It is working with think-tank the Paulson Institute (founded by former US treasury secretary and conservationist Hank Paulson) on the funding gap and how it might best be filled.

“The good news is that from our research we can see that fund flows in foreign aid towards saving ecosystems have doubled to about $10 billion annually,” says Deutz. “The problem is that we estimate the amount needed to be $250 billion, and the majority is going to have to come from the private sector.” 


Tobin says: “It’s easy to just throw in the towel when you see that kind of gap. But if we can tap into just 1% of new and reinvested capital from private sources, that gap would be filled.”

CPIC approached some of Credit Suisse’s clients in 2014; their response was that if capital was safe and doing something positive for the environment, then the appetite from the buy side would be there.

CPIC now has approximately 60 member institutions that include conservation NGOs, impact investment funds and platforms, consultants, universities and research firms, as well as the European Investment Bank and UN Development Programme. 

What was missing was investable product, chiefly because conservation NGOs had only worked with donor money. But about the same time CPIC was being put together a shift had begun. NatureVest was formed in 2014, for example – an investment arm of TNC with the mission of creating investment opportunities in nature.

“We have to access that world,” says NatureVest’s managing director, Charlotte Kaiser. “There is no other way. All the research shows how much we need to do, and we’re just not getting near it. We need to see natural capital as an investable asset and not a charity case, and certainly not an asset of no value at all.”

Indeed, impact investments, where (in this definition at least) for-profit investors are prepared to accept low financial returns or a little more risk in exchange for positive environmental and/or social impact returns, have proved a good bedfellow for conservation.

But it has not been easy.

“We thought we would do a deal and the money would come,” says Kaiser, “but what emerged was that you can create a very compelling business case with a return, but if it is novel or a risky business model, it will not go through investors’ screens.”

Indeed, excluding sustainable forestry and sustainable aquaculture, impact investments in marine or land-based conservation have been minimal, according to impact-investment data platforms.

Hawkins, director of the North American office at the IUCN, says that one of the challenges for investors is that the data available doesn’t match investors’ need for impact measurements.

“We can talk about the number of hectares protected, the jobs created, we can even talk about carbon sequestration rates, but we’ve not been able to truly put a figure on biodiversity impact, so that we could say: ‘Yes, your investment in this rainforest initiative prevented the extinction of these frogs and lemurs.’”

That may be coming however. The IUCN is working on a species conservation metric that will help companies, the financial sector, countries and even individuals quantify their contribution.

“Biodiversity can seem esoteric in a way that maybe carbon isn’t because we’ve put metrics around the latter,” says Hawkins. “We’ll have something in the next few months to increase investor appetite and show how we can collectively achieve global targets such as the Sustainable Development Goals.”

Deal flow does seem to be picking up.

“I don’t think that risk appetite has changed necessarily, but the universe of those investing has increased,” says MaryKate Bullen, director of sustainability and communications for sustainable forestry investor New Forests.

We need to see natural capital as an investable asset and not a charity case, and certainly not an asset of no value at all   - Charlotte Kaiser, NatureVest

Recent headline-grabbing deals include the Seychelles blue bond, launched last year. Calvert Impact Capital, Nuveen and Prudential were the main impact investors in the $15 million bond to help the island state replenish its fish stocks and protect its reefs, among other conservation aims.

The recently announced $50 million Rhino impact bond is another example of a new tool for investing in nature.

Furthermore, as the notion of ‘conservation’ has expanded, so too have the potential ways in which to invest in nature.

“People have thought of conservation as protected areas or protected species,” says Kemper at the World Bank, “but now it also includes protecting our ecosystems and biodiversity everywhere, so conservation can include sustainable forestry, sustainable farming and sustainable water use. It could mean reducing waste to prevent pollution. There are many ways in which we can invest in preserving natural capital.”

Land regeneration and a shift to sustainable or regenerative agriculture are providing impact investment opportunities in New Zealand and in the Amazon, for example.

These funds are all highly innovative in their design, using new financial tools such as outcomes-based payments or registering as carbon-offset projects to increase funding. But they therefore tend to be unscalable.

Because they are incredibly new, the up-front cost of research and time on the ground meeting with various stakeholders tends to be paid for by NGOs or multilateral organizations – such as the World Bank in the case of the Seychelles blue bond.

To help ease this up-front burden, CPIC’s members have been creating ‘blueprints’ – essentially case studies of deals done or ready to go – that could result in easier replication of the investments and that allow financial institutions to step in with loans or investments more comfortably.

“Financial institutions aren’t good at doing the long-term background work required to develop new financial instruments,” says Tobin. “Bankers have to meet their annual budgets, so there is huge disincentive to work on novel deals that can take a long time to execute, are legally intensive, and may ultimately lead nowhere – because new directions are always risky. They want something where there can be a level of certainty that results will be delivered in a few months.

“CPIC members provide 80% of the work that is needed to get done for a deal to close – the preliminary work on the deal structure, the types of investors, enabling conditions, etcetera – and then private institutions can pick that up and hopefully take it across the finish line,” he adds.

Yet while ticket sizes seem to be growing and more deals can be expected – certainly from NatureVest and impact investment houses such as Althelia and Conservation Capital – impact investing in this form is not going to get close to meeting the $250 billion a year needed for conservation – not in the short term at least.

“What we are all looking to figure out is what can be scaled and replicated, as well as being innovative,” says Abyd Karmali, managing director and climate finance executive at Bank of America Merrill Lynch.

He says his bank has been looking at creating a financial solution around water for some time to complement the work it has already done – a $5 million zero-interest loan to WaterEquity’s WaterCredit Investment Fund 3.

He also points to the forestry carbon bond that BAML co-arranged in 2016 as a structure to be explored further. The $152 million bond issued by the IFC had an enabling factor in which BHP Billiton provided a floor price for carbon.

“That experience showed us it is quite difficult to do something so bespoke and small and relatively illiquid that attracts investors,” says Karmali. 


Much larger sums of investment money need to be moved, but without being able to show large investors their natural capital-risk exposure or biodiversity footprint, it is challenging to motivate them.

One way may be big deals in formats large investors are already comfortable with – green bonds, for example.

In September, the Conservation Fund launched a $150 million green bond that is perhaps the first pure conservation green bond of its kind. And it is as plain vanilla as you can get – a 10-year bond with a 3.4% coupon, rated A3 by Moody’s, with a green bond opinion by Sustainalytics. Goldman Sachs is the bookrunner.

Proceeds are being used to increase the scale of the Working Forest Fund, which invests in sustainable forestry and protecting natural ecosystems through the permanent conservation of at-risk working forests.

“The money will not be used for headquarters, general purposes or as a substitute for spending an endowment,” says John Gilbert, chief financial officer of The Conservation Fund. “It will go into specific forest conservation projects that would not be possible without the proceeds – so you could say it’s the greenest bond out there.”

The proceeds will help fund in its long-term plan to conserve five million acres of forests in the US over 15 years.

What the bond’s very plain vanilla structure enabled, however, was institutional investor involvement – insurance companies and large asset managers, as well as family offices and impact investors.

Gilbert points out that for some impact investors it was too plain even: “Some investors just like to be in smaller, more esoteric deals.”

However, it will be hard to replicate the bond because The Conservation Fund is a unique organization.

“We create outcomes with dual benefits of economic development and conservation of critical natural resources,” explains Gilbert. “We act as a financier of conservation properties on behalf of the US government, states and non-profits.”

Its portfolio has more than $800 million in assets and $500 million in conservation land. But he adds that there is a lot that could be learned from the bond, given it has brought conservation into the green bond realm. Green bonds have tended to be the domain of clean energy.

Gilbert says he hopes the green bond market will adopt more deals that deliver clear environmental and economic outcomes at scale.

Biofin’s van den Heuvel says it has been working with countries on the possibility of issuing a green bond to finance protected areas and identify other biodiversity opportunities within green finance frameworks. 

Changing behaviour

The nascent transition bond market could also serve to move bigger chunks of funding through the large-scale transitioning of land use away from unsustainable to sustainable, or even regenerative, practices.

Beef supplier Marfrig’s $500 million transition bond from ING and BNP Paribas in July this year could offer an example. Its proceeds are being used to buy beef from cattle ranchers who comply with non-deforestation criteria.

Rabobank is working with development banks and UNEP on a deal where it can provide up to $700 million in loans to farmers moving to sustainable practices in developing countries. 

Together these deals show that the financial markets can be used to change behaviour towards conserving nature, as well as to finance companies that are transitioning supply chains.

Credit Suisse announced in September its collaboration with the Climate Bonds Initiative to develop a framework to spur the growth of a ‘sustainable transition bond’ market.

Marisa Drew, chief executive of the impact advisory and finance department at Credit Suisse, says this is where the large-scale change will be.

“Companies are slowly starting to understand their impact on natural capital and ecosystems through their supply chains, and are wanting to transition those to be aligned with the UN’s Sustainable Development Goals, which includes helping preserve our natural resources. Where we as a financial industry can play a role is by helping them do that.”

It echoes the earlier point of Bakker at the World Business Council: that financial institutions need to start developing models to help finance company’s transitions. Drew says it may require a form of blended finance whereby the private sector steps in at the end.

“We need to look at everything,” says van den Heuvel. “Biodiversity credits, carbon offsets, payments for ecosystem services, impact investments, bonds, equities, taxes, lotteries, crowdfunding. We have to be open to it all.

Companies are slowly starting to understand their impact on natural capital and ecosystems through their supply chains, and are wanting to transition those to be aligned with the UN’s Sustainable Development Goal   - Marisa Drew, Credit Suisse

Indeed, it is clear that it is going to take the collaboration of the private sector, scientists, academics and the public sector to truly get private capital moving. Many bankers interviewed for this article that were yet to be involved in any conservation-specific deals say that the incentives are just too small to build teams committed to small-scale transactions. Credit Suisse is still the only bank member of CPIC.

Deutz suggests we “need to change market mechanisms or provide incentives” – such as a Green Supporting Factor. Indeed several former bankers-turned-conservationists say that the change won’t come without regulation.

CPIC’s Huwyler adds: “We’re just not going to be able to save our natural resources by taking small incremental steps. Just ‘doing a little better’ is not going to be enough. We have to crack natural capital valuations and build them into the entire market.” 

Human-driven crisis

And so it comes full circle. To move large-scale financing towards protecting and restoring natural resources, financial institutions need to be able to put a price on nature so they can begin to understand the risk and opportunity that nature-related investments hold.

Or they need governments and central banks to offer them support and incentives to start lending to or investing in companies and projects that themselves support conservation.

As yet, very few banks have stepped forward to lead the way. At the launch of the UN Principles for Responsible Banking (PRB) in New York during Climate Week in September, of the 15 or so bank chief executives that discussed their role as a signatory at BNP Paribas’ PRB event, only one mentioned the word ‘biodiversity’. That was Jean-Laurent Bonnafé, chief executive of BNPP.

The French bank has announced it will be making several commitments in the field of biodiversity, and early this year dedicated €6 million to a climate and biodiversity initiative programme that supports eight scientific research projects until 2022.

There are others joining it, but for the most part the focus has been clean energy and carbon because it has been an easier nut to crack. It’s not enough.

We’re just not going to be able to save our natural resources by taking small incremental steps. Just ‘doing a little better’ is not going to be enough. We have to crack natural capital valuations and build them into the entire market   - Fabian Huwyler, CPIC

Kaiser says it is the inertia of the financial industry that concerns her most: “There’s an old adage: ‘No one gets fired for buying IBM stock’. It means no one wants to go against the tide, least of all in the financial industry. But we have been slow to recognize exactly how volatile the world is about to get.”

Indeed, there are those in the financial industry who are trying to sound the alarm that we don’t have until 2030 – the timeline many are currently working to.

Jeremy Grantham is co-founder and chief investment strategist of Grantham, Mayo, & van Otterloo, a Boston-based asset management firm with over $66 billion in assets. He is also a conservationist and this August announced he is dedicating 98%, about $1 billion, of his personal wealth to fight climate change.

“My pitch is this,” he says. “We are in the race of our lives between technological progress and increasing environmental damage. Use your influence as a portfolio manager, as a boss, as a banker to push for behaviour change directed to saving our planet – that includes your clients. This isn’t something trivial – this is the future of our children and grandchildren, and yet people sit around chatting about their Christmas bonuses. Work with NGOs. Demand policy change. Work with others. Be useful.”

There is perhaps no one better than Thomas Lovejoy to sum up the urgency of what is required from bankers, investors, finance ministers and central bank governors. He is known as the ‘godfather of biodiversity’ having coined the word in the 1980s.

A conservation ecologist who began working in the Brazilian Amazon in the 1960s, Lovejoy has served as director of conservation for WWF-US where he originated the idea of debt-for-nature swaps and went on to be the chief biodiversity adviser to the World Bank.

Today Lovejoy is a senior fellow of the United Nations Foundation. He advises foundation leaders on biodiversity and environmental science, and is a professor at George Mason University.

His message is simple: “The living planet and its diversity of life is fundamental to a sustainable and promising future for humanity. We are in the initial stages of a human-driven crisis, the likes of which has not been experienced in the history of life on Earth and which is neither necessary nor inevitable. We need to wake up to the peril and the promise – and lift our eyes above our immediate surroundings and self-interests to scope out the path to sustainability for humans and all forms of life.”

The original article can be found here: