Environmentalists, Prepare Now for Opportunities in Fiscal Stimulus Programs
This blog series discusses how to scale and accelerate protection of nature through an investment-oriented approach. I’m not arguing that this approach is superior to traditional efforts to save nature. Rather, I’m suggesting that this is a practical and timely way to get more dollars, more political support, and more diverse engagement on the side of nature.
The coronavirus pandemic has wreaked fiscal havoc across the globe. Now, governments all around the world are turning their attention to how best to revive their economies once the immediate danger has passed. This means that fiscal stimulus spending proposals will likely be huge and enjoy broad bipartisan support.
This is good news for supporters of green (i.e. nature-based) infrastructure. In many cases, green infrastructure investments will provide better investment opportunities than grey (ie, man-made) ones. (See my two recent blogs or my book, Nature’s Fortune.)
But is the environmental community ready to pursue fully such important funding opportunities? Personally, I don’t think so.
True, many NGOs, academics, and others are doing great work on this front. But the champions of traditional man-made infrastructure have a big advantage. Since grey infrastructure has been the go-to for so long, people pushing it have much more information at hand about what works, what doesn’t work, how much things cost, timelines, actual case studies, hard evidence, etc. This makes it easier for them to convince governments looking for a quick solution to invest in those methods. We environmentalists need to close this gap, and we need to do it fast.
How do we do it?
Here, I’ll lay out a framework for building our case. Let’s use mangrove restoration as an example. Investing in mangrove restoration will provide protection from sea-level rises and extreme weather. The top line arguments here are well known (see my blog from August 2017).
But high level arguments are insufficient now. Governments face enormous challenges and are very resource-constrained, which means they’ll want to identify the very best and most well-prepared investment opportunities. Therefore, we should expect skepticism of our innovative — but, to some large degree, unproven — mangrove restoration proposal.
Here’s how to improve our case.
First, we need to form a diverse team of environmentalists, scientists, engineers, financiers, and funders. I’ll get into that in a later blog, but for now, know that this team’s task is to put together the most informed and convincing proposal possible.
Some suggestions for what the team needs to do:
- We don’t need more high-level inspirational pitches. We’ve got that covered. We do need a complete analysis of everything we know — and, importantly — what we don’t know on our proposal.
- We also need to be more precise about what intact and healthy mangroves can and can’t do. We should mostly emphasize the good news. But let’s also be clear about the circumstances in which mangroves likely won’t provide the protection we need. Our proposal will be better with 100 percent candor and transparency. The proposal looks better, not worse, if we’re honest about what doesn’t work.
- Even if a standing robust mangrove today provides a certain amount of protection, we can’t assume a restored one will do the same. How long will the actual restoration work take? After the work is done, how long will the mangrove ecosystem need to grow to achieve full strength? What kind of protection will it provide during the interim? Will it need to be reinforced with some grey infrastructure, as well? The team needs to be able to answer these questions.
- And these, too: how detailed can our investment case be? Can we show, precisely, quarter-by quarter, year by year a) the outflow in dollars to pay for the project, b) milestones that will allow for monitoring both the work and natural growth we expect, and c) measures of risk-reduction expected to be achieved? Projections like this allow decision makers to be better informed upfront, and better able to see how things go over time, if the project is launched. It’s important to remember nothing ever goes exactly according to plan. Some initiatives outperform the plan, and others fall short. By paying close attention to both what works well and what doesn’t, we are able to learn, adjust, and improve outcomes.
Some other questions to consider:
- How does our mangrove proposal compare to the grey infrastructure alternative? Would it strengthen our proposal to include a certain amount of grey infrastructure? How would a traditional engineering analysis view our proposal?
- Scientists in academia have done tremendous work in recent years in studying natural capital. What peer-reviewed work would support or challenge our specific proposal? And how can academia support us going forward in monitoring and fine-tuning our investment over time?
- Can we develop cash-flow projections that demonstrate the return-on-investment for our proposal? We’ll need to project two financial streams. First, the total costs for building and managing/monitoring our project over the investment horizon. And second, the financial return we expect from doing so. For this project, we’re likely not generating any cash flow. But we’re avoiding future costs incurred from storms and sea level rise. We need to detail such “avoided costs.” We should also try to put a value on other ecosystem services that our project will generate (i.e. habitat for fish, carbon sequestration, runoff mitigation, etc.). Projecting along these lines is not easy, but it’s not impossible. It’s also necessary.
Doing all of the above takes a lot of work, and necessitates highly-skilled teams. NGOs are always resource-constrained and operate with extremely tight budgets. Let’s try now to persuade donors — especially institutional ones who support nature-based investment — to fund this work. I’m not talking about funding the project itself. We’re asking the government to do that. I’m talking about paying for the manpower to do all of the work noted above.
Covid-19 is an extraordinary health and humanitarian crisis. Our first priority should be to support our most vulnerable populations and the brave people on the front lines. But this is also an opportunity to progress environmental initiatives that make sense — that work for both nature and people. A move toward sustainability is even more important now that we can see the kind of damage an unprecedented crisis (like climate change) can do to our world. I use the example of a mangrove restoration here to illustrate the kind of work we need to do now. But such work is needed across the board as we pursue our top priorities. Teamwork, collaboration, and pragmatism will be essential.
In my next post, I’ll say more about how to recruit and organize the diverse team that we need to achieve this work.
The above blog is the second in a series on investing in nature. It was originally published on LinkedIn. Read the first two blogs in this series: Nature Needs Investment Bankers (March 3, 2020); Raising the Capital to Protect and Restore a Forest (March 10, 2020).
@MarkTercek is an advisor to companies, start-ups, institutional investors and NGOs on environmental strategies, organizational management, and impact investing. He is the former CEO of The Nature Conservancy (July 2008 — June 2019) and former Partner and Managing Director for Goldman Sachs (1984–2008). He believes that business can be a force for good and strives to help organizations realize benefits for both the environment and their bottom line.