It is probably no surprise to you that the career of saving species and restoring habitat is not a lucrative line of work. The conservation sector is global, stretching between the governments in the superpowers of the world down to the small nonprofits in local communities in the Global South. Conservationists are the civil servants talking policy in the halls of Parliament and the volunteers planting trees in your neighborhood park. Conservation is vast, it's non-profit and it's struggling to finance itself. In this blog piece, I explore conservation's financial crisis and how the solution may be private investment and the adoption of an emerging technology.
According to Emerton, Bishop and Thomas in 2006, governments have traditionally funded conservation, stretching thin the allocated resources to those at all levels. But as decentralisation became the norm and government funding became more difficult to secure, BNGOs (Big Non-Governmental Organisations), like WWF and the Nature Conservancy, adopted the role of distributing funds to those with a cause. However, the increasing human pressure on the planet, caused by such things as climate change and an ever growing need for agricultural land, placed a greater demand on BNGOs to fund the rising number of conservation projects around the world.
Kaiser in 2015 estimated that between roughly US $76 and $440 billion is required to fund each and every conservation project on Earth every year. This large range is due to the fact that determining the exact amount of funding needed each year to meet conservation goals is uncertain. We can't predict that a drought may hit a region, killing all the saplings recently planted, for example. Because conservation relies primarily on BNGOs for funding, which in turn rely primarily on donations, the actual amount of funding distributed to conservation projects per year is, sadly, only about US $50 billion.
This obvious discrepancy between the funds needed and the funds received creates an urgent need for out-of-the-box thinking. If relying on private citizen donations and government funding isn't enough, what other sources can be tapped into? Perhaps private capital could become the new norm of financing conservation. This concept was explored by NatureVest and EKO in 2014, finding that between 2009 and 2013, US $23 billion of conservation funds received actually stemmed from private capital. Further, US $1.9 billion of this came from private investment.
Investment - now that's interesting.
Distinct from government funds and donations, investments require the recipient to payback the investor after a period of time, often with interest. This is known as a return on investment. It can be financial or, in the case of impact investment, a decreased financial repayment coupled with a positive societal or ecological impact. This incentivises an individual to fund an idea, a project or a company. Schrötgens and Boenigk reported in 2017 that by 2020, impact investors would invest between US $400 and $1000 billion in NGOs. Let us recap quickly to remind ourselves of Kaiser's top-end estimate of US $440 billion required to fund conservation each year. Increasing investment attraction, then, seems like a pretty good way to meet conservation's financial need.
But conservation is just one non-profit sector. Relief aid for natural disasters, food and medical distribution and education outreach are just some of the other non-profit divisions competing for impact investment. How can conservation attract this source of funding to help end the financial crisis?
Perhaps conservation projects should be presented as an opportunity for investment. This means ditching the idea that nature can only be associated with intrinsic value, or the value that humans associate with lions or Yosemite National Park for simply existing. Although some investors may be motivated by intrinsic values, ultimately, this value generates no financial return on investment, or an investment opportunity, alone. Presenting nature in financial terms, such as an asset, service or capital, has been argued against, but framing nature in this way extends the appeal of conservation to those that are not moved by intrinsic value lures.
Let's explore Dr. Paul Jepson and colleagues framework further. Presenting a river valley as a spatial asset that can generate multiple forms of value, such as the financial value gained through ecotourism supported by those that do see the intrinsic value of the landscape or the increased property value generated through preservation of the habitat. Further, the restoration and preservation of a river valley can provide the ecosystem service of natural flood protection, something that can also be given a financial value. The opportunity to invest in the conservation of a river valley with the return on investments including increased property value, a stronger local economy from the ecotourism businesses that may follow and decreasing the financial risks of property damage caused by flooding is a stronger investment opportunity than simply stating the need to protect a landscape based of the intrinsic value some people believe it has.
Beyond framing a goal as an investment opportunity, a potential investor may need to be assured that return on investment will be achieved, especially non-financial returns. This is not only important to impact investors who are motivated by, what Scheuth in 2003 denotes as the "feel good" motivation, but also, as Dillenburg, Greene and Erekson state in 2003, by businesses that need to present proof of their corporate social responsibility to their investors. An increase in housing prices in a restoration area may be easily measured, but such things as ecosystem health and species recovery, which can occur over long periods of time, are less easily measured. The returns on many conservation investments, therefore, require investors to maintain some level of trust with investment recipients. Young and colleagues state that trust can be built through consistent, accurate and transparent data collection and reporting. Often times, conservation organisations turn to third-party audits of certification schemes to provide proof-of-goal-achievement. However, this comes with an added cost, which may decrease the appeal of an investment opportunity.
It seems then, that the key to attracting investment to tackle the conservation financial crisis relies on framing conservation goals as investment opportunities and providing investors with non-financial returns in the form of proof-of-goal-achievement in a quick, cheap, reliable and transparent way. While the first requires the adoption of a neoliberal approach to conservation, the latter could be achieved by the adoption of an emerging technology.
Although not yet widely adopted in conservation, smart contracts have been utilised to automate investments in a secure, low cost, transparent way. Smart contracts, when combined with blockchain technology, are essentially computer programmes that automate the transfer of funds, simple data and digital representations of objects. While the returns on investment in a conservation setting differ vastly from most traditional investments, the adoption of smart contracts by conservationists should be further explored and implemented. Additionally, the integration of other technologies, such as the use of satellite imagery, artificial intelligence and Internet of Things, may attract further investment as these technologies have potential to increase the efficiency, and therefore decreasing the cost, of conservation data collection and analysis.
Tackling biodiversity loss relies on funding conservation. It's time to secure alternate financing as public funds grow scarce. Attracting impact investment seems like a pretty smart move and perhaps utilising emerging technologies, such as smart contracts, can help us secure the longevity of our planet.