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Response to "Making Conservation Finance Investable"

The government plays an important role in creating an environment that is conducive to conservation financing.

The article by Fabian Huwyler, Juerg Kaeppeli, Katharina Serafimova, Eric Swanson, and John Tobin is a sign of, and a useful addition to, the movement to use a constructive cocktail of policy and investment to catalyze growing pools of capital for conservation.

At Imprint Capital, we work with large foundations and families working to build impact portfolios and financial institutions working to support such clients. We see many of the same dynamics outlined in the article. Specifically:

Show me the money. We would echo the need for underlying cash flows. The report highlights one pathway—strong, conservation-minded ownership, plus targeted sustainable revenue lines (e.g. ecotourism), plus help from policy driven payments-for-ecosystem-services. What is also needed is an exploration of the different dynamics of having strong economics for core ecosystem management (e.g. sustainable forestry where we find ourselves co-investing with commercial investors) as opposed to more “layered” revenue streams. This was a significant part of the last Conservation Working Group meeting, which explored investment theses developing around emerging REDD (Reducing Emissions from Deforestation and Forest Degradation) and other deforestation-oriented strategies.

It takes two to tango. Government can do more than subsidize. Government policy, ranging from direct regulation to softer mechanisms, such as helping to drive consumer demand towards more sustainable products, can change investment economics without the government having to write a check.

Parsing investor preferences. Capital preservation (risk) is more central for some investors than is the anticipated rate of return. Less discussed is liquidity, a particular challenge given the long-term nature of most conservation assets. Impact product design efforts should try to learn lessons from the success of impact notes programs (one to three-year secure debt instruments with low yields) from groups such as the Calvert Foundation, The Nature Conservancy, and others.

Role of environmental NGOs. The collaboration between sectors that is at the heart of the article is evidence of the significant roles high-capacity environmental NGOs can play. We might not be as quick as the authors, however, to suggest that NGOs ought not to create investment products. Their expertise, networks, and strong balance sheets make them intriguing actors in this puzzle—how to mobilize capital for real conservation results—that many of us are working to solve.

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