From sustainable “blue economy” projects to restoration projects for wetlands, streams, and animal habitats, conservation-related projects have been drawing a significant amount of investor money in recent years. Investments that produce a financial return and a “measurable environmental result” climbed 62% from 2013-2015, a new report found, indicating that traditional divisions between conservation, philanthropy and for-profit finance may be withering.
“I think it’s a mixture of both redefined conservation money–perhaps originally intended for philanthropy–and new sources of finance that are entering this space,” says Kelley Hamrick, author of the report, in an interview with Co.Exist. “We are seeing more foundations and public organizations turn to impact investing as a way to stretch their dollars. [They] play a large role in incentivizing private investment, either through guarantees, taking first loss, or providing in-kind support.”
The analysis comes from Forest Trends, a Washington D.C. nonprofit, and is based on data from 128 banks, companies, fund managers, family offices, foundations, and nonprofits involved in conservation investing. Sustainable food and fiber–like timber production projects, for example–accounted for the greatest share of capital committed between 2004 to 2015 ($6.5 billion) followed by habitat conservation ($1.3 billion) and water ($400 million).
It’s not that the investments are exclusively environmentally motivated. About a third of investors surveyed expect returns of 5%-9.9%. Around half of for-profit investors expect 10% or more–a decent return by any measure. This is a marked departure from the very recent investing landscape; the Forest Trends report noted that conservation investing was “unthinkable to most mainstream investors just five years ago.”
While the recent growth in conservation investing is undeniably a good thing, it’s not guaranteed to continue as an upward trend. The Forest Trends report pointed out that a lack of “available deals with appropriate risk/return profiles” is hampering further growth in the field. The small number of perceived investment opportunities is the key limiting factor in investors pledging more funds, the report added.
In Forbes, Anna Field wrote that “conservation investors are hungry for investments that fit their interests. But they feel there aren’t enough that make the grade.” Improving grazing practices, improving agricultural soil quality, investing in high-quality food–these are all potentially viable investment areas. But for now, there’s still not enough data on the track record of conservation investments, Field added. Investors want standardized due diligence, and essentially more hand-holding before they’re going to part with their money.
That’s where big data could play a role, Field noted. Organizations will need to find a way to systematically analyze the effects of conservation investments, and leverage the findings to attract more investors to new projects. The Nature Conservancy, working with JP Morgan Chase, is already doing so: The NatureVest platform, which launched in 2014, is setting up an investment pipeline to directly support projects in line with the Nature Conservancy’s mission, like Livestock to Markets, a program that supports cattle herders in Kenya. That kind of partnership between a conservation nonprofit and a financial firm is a promising development to ensure that investor funds are directed and managed effectively–and it could signal a way to keep this positive trend going.