Asking the Right Questions to Advance Conservation Finance in Frontier Markets

The international community has deemed biodiversity and ecosystem protection to be a priority sustainable development goal (SDG). The significant loss in biodiversity and the degradation of ecosystems threatens global security and basic access to food and water.  Achieving this goal and protecting the health of global ecosystems will require significant investments 20 to 30 times greater than the conservation capital invested today. This translates to a $200–300 billion annual shortfall in conservation financing. To meet this ambitious investment target, frontier market problem-solvers need to ask the right questions to mobilize new conservation finance mechanisms that can scale impact and work in an international context.  These questions are critical in defining the pathway forward.

Who loves the land?

Who cares enough about land to finance its protection?

Individual philanthropists have long donated to help local land trusts to purchase land or conservation easements. Consumers, too, have accepted voluntary surcharges that fund local preservation projects.

Some groups are committed to promoting the public benefits of land. Local, regional, and national governments preserve forested lands in a watershed in order to protect drinking water supplies, and some have designed tax structures to incentivize this protection. NGOs and foundations, too, regularly provide in-kind resources, grants, or loans (often at concessionary, or below-market, rates) to conservation projects because doing so aligns with mission objectives, such as protecting habitat. While charitable and committed capital have vital roles to play, they alone are unable to bridge the financial gap to achieve global conservation objectives.

What cash flows can land generate?

The gap between existing conservation finance and the growing need represents just 1 percent of annual global private sector investments. Tapping this private capital is essential to meeting global conservation needs, but it will demand mechanisms that can satisfy more stringent requirements for financial returns and impact.  Projects that support sustainable land management practices that produce food, timber, carbon credits, or other ecosystem services are likely to be the types of investments that could produce the returns and the impact that would be required for a private sector investment.  One example is the USAID ECOFISH program that is focused on improving ecosystems to support sustainable fisheries.  As part of this project, Resonance linked private sector partners to local fishing communities to develop new conservation-compatible local enterprises, including cultural and ecotourism development, seafood value addition such as seaweed chip processing, and the restoration of mangroves, coral reefs, and fisheries.  The project was a win for investors, provided funding for conservation initiatives, and created measurable benefits to the local communities.

As development practitioners eager to move away from short-term projects and toward long-term solutions, we must also ask:

What is required to make conservation finance mechanisms function in the international context?

Unfortunately, many conventional tools for conservation finance―especially those that require regulatory recognition, enforcement, and tax incentives―do not yet exist in many emerging markets. These are the very places that are home to much of the world’s most biodiverse ecosystems.

Resonance is working to bridge implementation realities with the needs of conservation investors. For example, we are exploring how to use Resonance’s extensive experience in identifying, designing, and facilitating multi-party strategic partnerships in developing contexts to facilitate Payments for Ecosystem Services (PES) schemes. This includes identifying buyers and sellers with the capabilities and incentives to pay, raising awareness about the community benefits of conservation, supporting logistics and project design, reducing initial transaction costs by leveraging finance, and uncovering innovative partnerships (such as ways to incorporate ICT, or aggregate smallholders) to make PES schemes possible.

Resonance’s approach to conservation finance is to ask the right questions to identify opportunities. Who loves the land? Who cares about the benefits it provides? What cash flows can it generate? And how can conservation finance mechanisms function in the international context?

Resonance understands that bridging the conservation financing gap is the key to achieving the prosperous, just world of healthy ecosystems, vibrant communities, and thriving markets that we envision.

by Claire Swingle

Ms. Swingle is a Project Analyst in Resonance’s Burlington, VT office, where she supports projects in the Natural Capital Practice and business development related to conservation and natural resources management. Specific projects include the USAID Land Technology Solutions Project, USAID Ghana Sustainable Fisheries Management Project and USAID/RDMA Oceans and Fisheries Partnership Project in Regional Southeast Asia.