Impact investing is still a hot topic among major nonprofit groups, which look at the size of today’s global challenges and conclude that simple philanthropy is insufficient–and that only private capital invested with the promise of a social or environmental return can make up the difference.
We’ve looked at the work of the Rockefeller Foundation, which invented the term seven years ago and has made impact investments totaling more than $100 million. Now comes a report led by The Nature Conservancy trumpeting the idea for conservation purposes.
“We conservationists don’t have enough money to do what we need to do,” says TNC’s chief economist Eric Hallstein, explaining why impact investing is needed. “The size and scope of our environmental problems–from water quality to deforestation and climate change–is increasing incredibly quickly around the world and threatens our well-being everywhere.”
Hallstein says $250 billion a year is needed to meet the world’s environmental challenges–money that can’t come from donors and government alone.
The report finds a total of $23.4 billion in impact investments between 2009 and 2013. Forestry and agriculture account for about two thirds of that, with sustainable food production growing particularly fast as an investment category. “These market-based approaches are particularly appealing to investors because it’s driven by consumer demand versus policy or regulatory action,” Hallstein says.
The report also details several innovative ideas TNC is trying in the impact space. For example, it devised a reverse auction model that pays Californian farmers to flood their land in order to provide a habitat for migrating birds. It calls the temporary feeding stations “pop-up habitats.”
Another example is TNC’s program to set up 3.8 million acres of no-trawl fishing zone off the Californian coast. It bought up fishing boats and trawling permits, and it’s now leasing back the rights in return for commitments to more sustainable practices.
Hallstein also points to the way in which California’s new cap and trade system–which requires carbon emitters to buy credits for each ton of carbon they send to the atmosphere–has gone towards investments in forestry conservation.
Hallstein is an ex-venture capitalist and TNC is now led by a former managing director at Goldman Sachs, Mark Tercek. So it’s not surprising the group speaks the language of finance so fluently. Overall, the report reveals that a grand old conservation nonprofit–the nation’s largest by assets–is thinking outside the box.