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Impact Investing for Conservation & People

By - Nov 6 2014

Conservation SmallTwo hundred and fifty billion dollars: that’s the gap between the estimated need to support global conservation efforts and what’s currently devoted to these activities annually, according to a recent study.

That gap is on my mind this week as Inter-American Development Bank (IDB) President Luis Moreno and I meet with other members of the Latin America Conservation Council (LACC), a group of CEOs and leaders working together to improve water security, sustainable food security and infrastructure needs across the region.

Latin America faces the same conservation funding shortfall as the rest of the world. The Nature Conservancy (TNC) and the IDB have collaborated for more than 20 years to protect nature and improve people’s lives across Latin America and the Caribbean. Together we are developing new ways to close that funding gap, and to better connect natural capital—the resources people get from nature—with human well-being.

One example is the Latin America Water Funds Partnership, launched by the IDB, TNC, FEMSA Foundation, and the Global Environment Facility (GEF) in 2011 to protect important water supplies. The Partnership leveraged $5 million in initial seed capital from GEF into a $27 million commitment through public and private donors. 7 million acres of watersheds were restored across nine water funds in Ecuador, Colombia, Peru, Brazil, and Mexico.

A water fund works like this: big water users –utilities, industries, companies– invest in a fund that protects nature upstream to ensure clean, safe drinking water for residents as well as bigger consumers. Companies save money by preempting the need for costlier water treatment in the future. Clean water remains available for local communities. And more habitat is conserved for wildlife.

Now, the model has been replicated across 32 cities in Latin America. Next up, TNC is exploring how to export water funds to China and Africa to help more cities develop sustainably.

There is huge opportunity to scale up conservation work through innovative investments like this in natural capital. Support from private philanthropy and public funding remains critical, but imagine how much more we could accomplish by unlocking a new avenue for investments that protect nature.

Indeed, there is a growing appetite for innovations that allow people to support conservation in different ways. Investors have also expressed interest in directly financing specific assets—fisheries, livestock, floodplains, forests and more.

That’s why TNC, with founding support from JP Morgan Chase & Co., launched NatureVest earlier this year. NatureVest is a new platform for impact investments thatdeliver both financial returns and clear environmental benefits. This stems on the 2010 launch of our impact capital strategy with ongoing support from the Robertson Foundation, and the development of a global network of projects with additional support from the Grantham Foundation for the Protection of the Environment. Building on TNC’s 60+ year history of on-the-ground conservation work, we have identified a menu of projects with high potential to scale up an intial investment.

A great example is the Colombia Sustainable Cattle Ranching Systems Fund (SCR). Cattle ranching is a primary cause of deforestation and water pollution in the Amazon rainforest. In the Colombian Amazon, most ranchers have small-scale cattle farms with limited access to traditional finance. In partnership with local farmers, the Fund finances the capital investments and tools needed to help ranchers convert to sustainable cattle ranching practices. This can triple the meat or milk yield of a ranch, and also improves water quality, habitat for wildlife and carbon sequestration. We are also working closely with companies that source milk and meat to provide purchase guarantees to farmers, which becomes a source of repayment to the fund. A fully scaled project would include capital from a combination of debt, impact equity, and philanthropy.

We are proud of the projects we have in the NatureVest pipeline. In the coming three years, we seek to deploy several hundred million dollars in capital towards the conservation of nature. To this end, we’ll develop impact investing opportunities for watershed conservation, agriculture, green infrastructure, forests, fisheries and more.

We believe this model can help us get significantly more conservation done in Latin America and beyond. But getting impact investment right will require strong collaborations between investors, philanthropists, public funders, financial institutions like IDB and the conservation and NGO community.

Over the past sixty years, TNC has always sought new ways to scale up our conservation results. The stakes are too high not to explore new models of funding. By combining the power of private philanthropy, public funding and impact investing capital, we stand a better chance of closing that $250 billion gap in conservation funding.

Follow Mark Tercek on Twitter: www.twitter.com/MarkTercek

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