ETFs for the Amazon? LBOs for Biodiversity?

Now let’s talk about the money.

  1. More capital and lower cost capital for conservation
  2. A big ramp up in metrics, accountability, and finding out what works and what doesn’t

Memory Lane

What did these financial deals for nature look like?

  • A leveraged buyout of nature to protect precious forestland. In 2015 TNC purchased 165,000 acres of precious land in Washington’s Cascade Mountains and Montana’s Blackfoot River Valley for $134 million with only 5% of the capital provided by donors. The rest of the purchase price — a full 95% — was very low-cost debt. That’s stretching philanthropic dollars very far! Our partners at JPMorgan were great advisors.
  • Health insurance for coral reefs to repair damage from extreme weather and storms. SwissRe, marine scientists, and TNC dealmakers together with the government and the tourism business worked hard for this big win.
  • Debt-for-nature-swaps to fund huge marine conservation projects like this one in the Seychelles. Again, donor dollars are stretched very far through both deal structure and deal-making (i.e., buying back sovereign debt at big discounts). TNC recently announced another one of these spectacular deals — this time for Belize. These transactions are not easy, but they are a powerful way to scale marine conservation.
  • Water investment funds to pay for ongoing restoration and protection of watersheds. In these deals, ecosystem service beneficiaries (for example, beverage companies who need ample clean water) are persuaded that paying up to protect nature will pay off for them by ensuring a high quality supply of water.
  • A $1 billion buy-out fund co-led by PE firm RRG and TNC to protect water in the arid west. Why not use the play that’s making fortunes for Wall Street, but this time with nature as a full co-beneficiary?
  • Impact investors provide all of the capital (zero philanthropy) to pay for upgrades of nature in Washington, DC to address excess water and also bring some much-needed nature to the inner city in my hometown. Environmental/Impact investment bank Encourage Capital was a savvy partner with us.
  • Cash flow from sustainable timber, carbon capture, and recreational leases allow for $130 million of investor capital to buy 253,000 working forestland in Appalachia.
  • A tech accelerator focused on nature-based startups aiming at both financial and conservation outcomes (with ace partner Techstars).
  • Apple, Conservation International and my former firm, Goldman Sachs, recently announced their Restore Fund to make investments in forestry projects with the goal of both removing carbon and generating attractive investment returns. The team looks great — cross-sector collaboration (i.e., tech people, bankers, conservationists) like this usually produces good new ideas. I look forward to seeing how the fund performs and expect positive outcomes.
  • WWF, the Brazilian government, various multilateral banks and savvy philanthropists teamed up on this $215 million bridge loan to protect 150 million acres of the Brazilian Amazon Rainforest. Wins like this are just what we need for 30x30. (This good case study shows how this deal structure was used earlier very successfully by TNC and superb partners to protect 1.3 million hectares of terrestrial habitat and 1 million of marine habitat in Costa Rica). We need more deals like these.
  • Rare led an ambitious and bold impact investment fund to support small scale fisheries in Southeast Asia.
  1. They stretch financial resources — allowing more protection of nature per dollar.
  2. They bolster accountability, measurement, and transparency since reporting against milestones is mandatory.

What’s holding us back?

  • Transactions costs are high
  • Widely accepted standards for measuring impact are lacking
  • Many projects are very speculative
  • Cash flows are not always available
  • Beneficiaries of “green infrastructure” are often unwilling to pay for the ecosystem services they receive
  • Nature is inherently dynamic and doesn’t always behave as predicted.

To Do list:

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Former CEO of The Nature Conservancy CEO. “Nature’s Fortune” author. Family man, yogi, ice climber, vegan.

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Mark Tercek

Mark Tercek

Former CEO of The Nature Conservancy CEO. “Nature’s Fortune” author. Family man, yogi, ice climber, vegan.

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