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Conservation
Finance 2021
An Unfolding Opportunity
A collaboration between
With the support of
September 2021
Authors
Juliette Baralon, Dylan Marks, Urs Dieterich, Gaëtan Hinojosa, Christina Mallin, Martin Stadelmann
(South Pole), Suresh A. Sethi, and John Tobin de la Puente (Cornell University).
Acknowledgements
We thank American Bird Conservancy and the Cornell Atkinson Center for Sustainability (Cornell
University) for their financial contribution to the development of this report. We would also like to
thank the Global Environment Facility (GEF) for their financial support of the CPIC Conservation
Finance Initiative – led by the International Union for Conservation of Nature (IUCN) – as part of
which this report has been developed.
The survey, analysis, and final report were developed under the guidance and with the support of an
advisory group comprising Elmedina Krilasevic and Frank Hawkins (IUCN), Edit Kiss (Mirova Natural
Capital), Charlotte Kaiser (NatureVest/The Nature Conservancy), Fabian Huwyler (Posaidon Capital),
and Alan Martinez (Cornell University).
The data collection and anonymization were conducted by members of the Conservation Finance
Working Group at Cornell University. Special thanks to Brynne Merkley, Casey Martin, and Kara Guse
Conservation Finance 2021 for their help with compiling the data and reaching out to respondents and to Alejandro Delmar and
Kara Guse for thoughtful input during the process and their editorial support.
An Unfolding Opportunity We also thank Charlotte Kaiser and Andrew Tingley (NatureVest/The Nature Conservancy), Tomo
Kumahira (Komaza), Nicolas Pascal (Blue finance), and Seth Shames (EcoAgriculture Partners) for
their contributions to the case studies included in the report.
We are grateful to Nadia Kähkönen and Firda Faradiba from the South Pole communication team for
helping us improve the clarity and layout of the report.
About the Coalition for Private Investment in
Conservation
The Coalition for Private Investment in Conservation (CPIC) is a global multi-stakeholder initiative
focused on enabling conditions that support a material increase in private, return-seeking investment
in conservation. CPIC aims to facilitate the scaling of conservation investment by creating models
(blueprints) for the successful delivery of investable priority conservation projects, connecting pipeline
providers of such projects with deal structuring support, and convening conservation project delivery
parties with investors to execute investable deals. CPIC’s members range from institutional investors
to public donors, and from private project developers to conservation NGOs.
South Pole serves as CPIC’s Secretariat and Platform Coordinator.
Find out more at cpicfinance.com.
© Cornell Atkinson Center for Sustainability
2 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 3
Key Findings
The conservation finance market is growing fast – Unsuitable deal structures, lack of in-depth market
but the instruments and revenue sources considered data, and the challenge of measuring conservation Forests and terrestrial ecosystems 72% 22% 6%
are yet to diversify. impacts limit the growth of the conservation finance
market.
• Return-seeking investments in conservation are
increasing, driven mostly by greater investor • Current conservation finance deal structures Freshwater management 67% 22% 11%
awareness of the opportunities of the market, – and more particularly their small deal size
and an increasing number of professionals with and long investment terms – still hinder
relevant skills across the conservation and investments in nature, according to investors Sustainable agriculture
finance sectors. and project developers alike. Blended finance (including range and grassland management) 41% 41% 18%
• Yet the conservation finance market is still at accelerators, like the Nature+ Accelerator Fund
an early stage – the instruments used by the or Convergence’s Asia Natural Capital Design
respondents are mostly private debt and equity, Funding Window, can help to stimulate the Oceans and coastal areas
as well as real assets (Figure 1) – with few using creation of investable conservation projects. 38% 50% 13%
(including sustainable fisheries)
publicly traded instruments. The average deal • There is a disconnect between project
size remains small, with 85% of the individual developers and return-seeking investors: project
deals reported being under USD 5 million. developers lack understanding of investors’
• Financial flows are highly concentrated: 99.7% needs, such as the need within the financial
of all reported investments originated from sector for internationally recognized and applied Highly effective Somewhat effective Somewhat ineffective
seven countries alone (Australia, Germany, the standards.
Netherlands, South Korea, Switzerland, United • Measuring conservation impacts is also
Kingdom, and the USA). perceived as a key barrier by investors: Figure 2 – Self-assessment of impact from projects invested in or developed by respondents. Note: respondents could only
choose one overall performance for all their investments linked to one ecosystem. Based on data from 25 organizations.
• The primary revenue sources for conservation 70% of respondents cited the high costs of
investments are sustainable commodities (55%) quantifying impacts as a barrier, and nearly
and environmental markets including carbon and half of respondents (48%) cited the lack of
biodiversity credits (31%). standardized measurements metrics available
as an additional challenge. The future of conservation finance looks promising, as new technologies and disclosure requirements
• The effectiveness of conservation impacts become more established.
Cash and cash is sector-dependent: respondents perceive
equivalents that investments in forests and terrestrial • Supply chain-driven investments in nature are impacts measurement through remote sensing
1% ecosystems generated more effective expected to increase significantly over the and artificial intelligence.
environmental impacts than investments in coming decade, with a growing number of • Nature-related disclosure is likely to become the
Public
sustainable agriculture, oceans and/or coastal corporate funds for nature from companies norm over the next few years. Initiatives such
equity
8% areas (Figure 2). Harmonized monitoring and such as Apple and L’Oréal. With bigger financial as the Taskforce on Nature-related Financial
verification systems, such as those used for commitments, broader scopes, and the backing Disclosures (TNFD) and the EU Taxonomy will
forests within carbon markets, can help to of company-wide biodiversity and climate require the private sector to report publicly on
Real assets Private build confidence among investors and project targets, these funds will contribute significantly nature-related risks and impacts.
32% equity developers and facilitate effective conservation to the expected increase in the private capital
23% impact. available for investments in conservation.
• Shifting from project-level to landscape-
level investing will become crucial to leverage The conservation finance sector lacks multi-
synergies between the various sources and year, in-depth data on private, return-seeking
Private debt cycles of funding within the same landscape, investments in nature. The analysis covered in
36% and to multiply impacts on the ground. this report should be carried out on a regular
• New technologies are expected to play a basis and in collaboration with other relevant
significant role in increasing investments in initiatives and institutions, to provide a more
conservation. Digital innovation is giving rise to complete overview of the return-seeking
Figure 1 – Conservation investments by instrument online natural capital marketplaces connecting conservation finance landscape and to unlock
type and revenue streams. Based on data from 21 buyers and sellers, and improving conservation additional investments.
organizations.
4 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 5
Contents
Acknowledgements 3
Measuring and reporting conservation impacts 34
Key Findings 4
How investors and project developers measure impacts 34
Objectives and approach 10
Effectiveness of conservation investments 35
Overview of survey data 11
Barriers to measuring conservation impacts 36
Current state of the conservation finance market 12
Looking ahead 38
Who is investing in nature 13
A growing market 38
How they are investing in nature 14
Corporate funds for nature 39
Instruments and ticket sizes 14
Financial returns 15 From deals to landscape-level finance 42
Where we are today: mapping investment flows 17 Emerging technology for conservation impacts 43
Investments per ecosystem and revenue stream 22 Nature-related disclosure as the new norm 44
Overcoming barriers to private investment 30 Conclusion and recommendations 46
Progress in the market 30 References 48
From awareness to implementation: remaining barriers 31 List of figures 50
Unlocking private investment in conservation 32
6 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 7
Introduction
Approximately half of the world’s GDP depends on nature and its services (World Economic Forum,
2020), making the connection between thriving ecosystems and economic success abundantly clear.
Earlier this year, The Economics of Biodiversity report showed that our unsustainable use of nature is
threatening the prosperity of current and future generations, and that we need an in-depth reform of
our financial system to avoid “financing ourselves into extinction” (Dasgupta, 2021).
The urgent need to act for nature has been translated by governments into global targets to
safeguard biodiversity – with nearly 200 countries agreeing on official ‘Aichi Biodiversity Targets’ in
2010, from preventing species loss to improving the ability of habitats to sequester carbon. World
leaders have come together once more under the United Nations Convention on Biological Diversity
(CBD) process to negotiate a series of updated principles for managing biodiversity in the post-2020
period (the Global Biodiversity Framework).
Yet, more than a decade after the Aichi Targets were agreed, the international community has
failed to achieve most of them. This is in part because public financial flows do not meet the current
investment need for financing necessary conservation efforts, and continue to be dwarfed by harmful
subsidies (Secretariat of the Convention on Biological Diversity, 2020). Governments have failed to
redirect public financing toward investments that benefit nature, and still spend USD 274-542 billion
every year in agricultural, forestry and fisheries subsidies that end up harming rather than helping
nature (Deutz et al., 2020).
Redirecting public finance will go a long way toward closing the massive USD 598-824 billion annual
biodiversity financing gap (Deutz et al., 2020), but public finance alone will not be sufficient for
addressing the growing biodiversity crisis. Private sector finance, which today accounts for just
14% of global conservation investments, must also be mobilized at scale. To move much-needed
private capital toward restoring and conserving nature, we must better understand the needs and
expectations of private investors, what hinders and drives conservation investments, and which
proven solutions already exist for achieving both positive biodiversity outcomes and financial returns.
Very few reports provide a deeper look at the current state of return-seeking conservation
investments. The most comprehensive one to date was State of Private Investment in Conservation
(SOPIC) 2016, authored by Forest Trends, which provided an in-depth review of approximately USD 2
billion of private investment in specific conservation-related assets (Hamrick, 2016). The landscape
of conservation finance has changed considerably since then and is expected to undergo further
transformations as a result of growing private sector interest, increasing nature-related impact
disclosure, and technological advancements. In this first edition of the Conservation Finance report,
the Coalition for Private Investment in Conservation (CPIC) aims to provide an up-to-date analysis
of both demand and supply in the conservation finance sector. We seek to characterize what typical
return-seeking investments in conservation look like today, as well as the most promising and scalable
projects and finance mechanisms for interested investors.
We hope this report will inspire forward-thinking private sector leaders to recognize the value of
investing in nature and to take CPIC’s work across the finish line by channeling finance into deserving
projects that will preserve natural capital for generations to come.
8 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 9
Objectives and approach
Objectives manage biodiversity and maintain ecosystems • Double-counting investment flows: respondents instrument types, targeted geographies, and
This report has two objectives, in line with CPIC’s integrity.” (Deutz et al., 2020) were asked to disclose whether they invested ecosystems.
mission to bridge the divide between investment in projects directly or indirectly, through funds
and project development: Data collection and analysis and intermediaries. 88% of all investments Overview of survey data
The report is based on data from an in-depth survey reported were done directly, and 12% indirectly.
1. On the demand/investment side: to provide conducted between January and June 2021. The Based on this and an assessment of the nature Out of the 35 organizations surveyed, 28% of
a picture of what typical private investments survey targeted conservation project developers, of the respondents, the risk of double counting respondents were investors, 25% project developers,
in conservation look like, in terms of deal public and private investors, and organizations has been minimized, but it cannot be totally and 46% reported activities linked to both investing
size, expected returns, selected instruments that identified as both developers and investors. It excluded. and project development (Figure 3).
and target geographies and ecosystems. gathered data from a total of 35 organizations.
Understanding what private investors are Literature review Together, the respondents reported USD 1.33 billion
looking for in conservation projects will help The data collected are primarily related to 1) We conducted a literature review of recent reports invested in conservation in 2020 and USD 1.13 million
project developers design deals that can fit investments in conservation deployed in 2020, and on conservation finance to identify data linked to of additional investment, either private investments
those requirements. 2) investments secured for conservation projects the total size of conservation investments, common mobilized by the public investors responding to
in 2020. Some additional data were collected on barriers and enabling conditions, as well as sector- the survey, or return-seeking investments raised
2. On the supply/project development side: to investments made and projects developed between specific trends. for projects developed by the respondents (Figure
identify and present lesser-known examples of 2015 and 2019, and on predicted investments for 3). Some respondents chose not to disclose the
viable and/or promising conservation projects 2021. To illustrate our findings, we identified relevant case amounts they invested but provided non-financial
or finance mechanisms with the potential studies based on a series of criteria, including deal data, so the overall investment volume represented
to be scaled and replicated. Showcasing Not all organizations responded to all questions in size, innovation, conservation impacts generated by the respondents is arguably higher.
such examples can improve the confidence the survey. The number of respondents is specified or anticipated, and the amount of publicity the
of investors in the strength of the market by for each of the figures used throughout the report. examples had already received. In addition, we To avoid double counting, the report only analyzes
demonstrating that such projects can yield sought to provide a diverse overview of conservation in detail the USD 1.33 billion directly invested by
financial returns while achieving positive • Scope: with 35 organizations responding, the finance solutions – including by showcasing different respondents.
conservation outcomes. sample used for this report is relatively small,
and represents a small share of the overall
Definitions investments in conservation (both from private
The report uses IUCN’s definition of conservation and public sources). Nevertheless, the survey
as the “protection, care, management and used for this report includes insights from a USD 1.33 billion USD 532 million
Primarily a
maintenance of ecosystems, habitats, wildlife wide range of investors – from institutional invested in projects project secured in 2020 for
in 2020 Primarily an projects developed
species and populations, within or outside of their investors or asset managers with institutional investor developer
natural environments, in order to safeguard the clients, to family offices and foundations – Data from 28% 26% Data from 23
natural conditions for their long-term permanence” hence providing a diverse overview of the 21 organizations organizations
(IUCN, 2021). different types of return-seeking conservation
investments. The main points of difference with Significant activities
For the purpose of this report, conservation finance the SOPIC 2016 report are that no corporations related to investments
and project development
is defined as return-seeking private and public took part in the survey, while they represented
investments that intend to generate positive and 25% of the investors surveyed by Forest Trends, 46%
measurable conservation benefits. Grant-based and that over half of respondents are based in
funding is not included. While the report is primarily Europe, while most SOPIC respondents were
focused on investments from private entities, it based in North America (Hamrick, 2016). USD 600+ million
of private investments
also includes data from public investors. The terms • Outlier: although most respondents disclosed
mobilized
biodiversity finance and conservation finance are investments on a similar scale, one large by public entities
used interchangeably in this report. public investor reported significantly higher
Data from 2 organizations
investments than others. Some of the data
The biodiversity financing gap refers to “the have been analyzed without this outlier to avoid Detailed investment analysis (instruments, returns, ticket size, revenue streams, etc.)
difference between the current total annual capital skewing. Each graph specifies when this outlier Only overall amount of investments estimated
flows toward global biodiversity conservation, and has been excluded.
the total amount of funds needed to sustainably Figure 3 – Type of survey respondents and corresponding investments reported. Based on data from 35 organizations
10 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 11
Current state of the conservation finance
market
Conservation-related projects are starting to The volume of private funding is approximately Who is investing in nature investors or asset managers with institutional
draw larger amounts of public, philanthropic, and USD 18 billion per year – with only a proportion clients represent the largest category of investors,
private finance – but in-depth market data focusing of it representing return-seeking investments, Out of the respondents who invest in projects or 23% (Figure 4). This share jumps to 60% when
on return-seeking investments into nature is still though this share cannot be accurately estimated (considering both investors and organizations only the organizations that focus on investments
lacking. due to data limitations. Funding from NGOs and that invest in and develop projects), institutional are considered.
philanthropies, which traditionally is primarily grant-
The recent literature provides a comprehensive based, represents USD 2.3 billion. The remaining
overview of the overall volume of conservation USD 15.7 billion include supply chain investments,
finance: the most recent figures vary between USD biodiversity offsets, private equity investments,
133 billion (United Nations Environment Programme, carbon markets, and payments for ecosystem
2021) and USD 124–143 billion provided annually by services (United Nations Environment Programme,
both public and private sectors (Deutz et al., 2020). 2021).
Institutional
A large majority of those investments (80%-86%)
come from the public sector. Beyond the figures on the overall scale of the investor or asset
funding, finding detailed data on private, return- manager with
These investments have been growing steadily in seeking investments in nature is more challenging.
the past decade, with the third edition of The Little The SOPIC 2016 report gave an in-depth review of Other institutional clients
Biodiversity Finance Book estimating a total of USD USD 2 billion of private investments in its latest 19% 23%
52 billion of investments in nature in 2010 (Parker report, which included data up until 2015 (Hamrick,
et al., 2012). Despite this significant increase, the 2016). Since then, there has been little publicly Public entity
biodiversity financing gap is currently estimated to available data on how these investments have 8%
be USD 598-824 billion per year (Deutz et al., 2020). grown and if any additional trends can be identified.
The financing gap itself has doubled compared to
the 2014 estimate of USD 300-400 billion per year Family office or
(Huwyler et al., 2016). NGO high net-worth
15% individual
Private 8%
project
developer
15%
Foundation or
endowment
4%
Figure 4 – Type of investors among survey respondents. Other organizations include consulting firms and impact funds.
Based on data from 26 organizations.
12 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 13
2020 saw an increase in the number of major The signatories are committed to 1) collaboration
institutional players and asset managers entering and knowledge sharing, including on biodiversity The ticket size of conservation investments remains
the market, demonstrating a growing interest in metrics, 2) engaging with companies through ESG small, with 70% of all deals (or 237 individual deals) Concessionary
conservation finance. Notable examples include policies, 3) assessing the impact of the activities closed by respondents in 2020 below USD 1 million return
the HSBC Pollination Climate Asset Management they finance, 4) setting targets and 5) reporting and 85% below USD 5 million (Figure 6). Only 26 8%
announcement of a USD 1 billion asset management publicly and annually on how their portfolios deals were above USD 21 million – nine of which
venture focused on natural capital, with HSBC as contribute to global biodiversity goals (Finance for were above USD 51 million.
a cornerstone investor, and the launch of Lombard Biodiversity Pledge, 2021).
Odier’s Natural Capital strategy in November 2020
(Lombard Odier, 2020). How they are investing in nature USD
21M-50M
USD
51M-100M > USD 100M
5% 1% 1%
Beyond individual commitments, the financial sector Instruments and ticket sizes
has also formed coalitions and networks showcasing Respondents reported utilizing a diverse mix of
USD
ambitions of more nature-positive investments. instruments for conservation investments, with 6M-20M
These include the Sustainable Markets Initiative’s a focus on private debt (36% of investments 8% Market-level
Natural Capital Investment Alliance, with HSBC disclosed), real assets, such as infrastructure and return
Pollination Climate Asset Management, Lombard land (32%), and private equity (23%). Representing USD 1M-5M 92%
Odier and Mirova Natural Capital as founding only 8% of reported investments, public equity is 15%
partners. Similarly, the Finance for Biodiversity rarely utilized – likely because of the lack of data
< USD 1M
Pledge was launched in September 2020 and on the conservation footprint of public companies. 70% Figure 7 – Investments by type of returns expected. This
chart does not include one outlier. Based on data from 20
now represents EUR 9 trillion of assets under Public debt is even more underrepresented, and is
organizations.
management. The Pledge brings together 55 private only reported by one large public investor, showing
banks, insurers, asset managers, and pension funds. an underdevelopment of the market
While conservation investments are often expected
Figure 6 – Percentage of the number of deals closed in
by private investors to deliver market returns,
2020 per deal size. Based on data from 21 organizations. return-seeking public and philanthropic capital
tends to be provided at concessionary rates (Figure
Cash and cash 400 8). Over 99% of investments from NGOs, 97% of
Public debt
equivalents
investments from public sector entities, and 80% of
1%
For comparison, of the USD 47 billion of return- investments from foundations or endowments were
Private debt 118 200
Public seeking impact investments analyzed in the 2020 linked to concessionary returns.
equity Impact Investor Report developed by the Global
8% 300 Impact Investing Network (GIIN) – which includes
Mezzanine
transactions across sectors such as healthcare,
Real assets energy, and food and agriculture – the average
Private
32% Private 78 100 deal size was USD 5 million across all asset classes,
equity equity
23% ranging from USD 3 million for private debt to
USD 28 million for real assets (Hand et al., 2020).
Real assets These impact investment deal sizes hint at how
(infrastructure, 106
commodities, conservation deal sizes will likely increase as the
land, etc.)
conservation finance market matures in the next
Private debt Public equity 27
36% few years.
Cash and cash
Financial returns
2
equivalents Survey respondents are mostly expecting market-
USD million rate returns from their conservation investments.
92% of investments reported were linked to
Without outlier Outlier
market-rate return expectations, and only 8% to
concessionary returns (Figure 7). However, when
taking into account the single respondent outlier
Figure 5 – 2020 conservation investments by instrument type. Based on data from 21 organizations. Without outlier (left (a large public investor), this shifted to 76% of
hand side, pie chart) and with outlier (right hand side, bar chart). investments expecting concessionary returns.
14 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 15
Private project
100
Where we are today: mapping
developer investment flows
Institutional investor
or asset manager wit
100 Most investments disclosed by respondents originated However, without a large public outlier, the target
in Asia (skewed by the large public investor), Europe geographies of the investments reported are much
institutional clients
and North America. Only 1% of investments are from more focused on the Global North, with 53% directed
Family office or high organizations based in Latin America and Oceania, and to Europe, the US and Canada, and Oceania. Only 14%
96 4
net-worth individual no investors based in Africa answered the survey. Most of investments target Africa, and 5% of investments
investments are directed toward Africa (26%) (see also target Asia.
Other (please specify) 56 44 case study on Komaza’s Smallholder Forestry Vehicle),
Asia (24%), Oceania (17%), and Latin America, and only
Foundation or 11% of investments target Europe and the U.S. and
endowment 20 80 Canada (Figure 9).
Public entity 3 97
NGO 1 99
% of investments linked to each return type
Market-level return Concessionary return
Figure 8 – Percentage of investments disclosed linked to market rate and concessionary returns, per investor types. Based on data from
21 organizations.
However, even if public and philanthropic donors from grant funding to return-seeking impact
tend to consider conservation finance under investing (see more in Box 1).
concessionary terms, they are increasingly shifting
Box 1: How conservation NGOs are moving toward impact investing
American Bird Conservancy, a non-profit organization working on bird conservation in the Americas, has
recently developed an impact investing strategy, focusing on the development and implementation of
projects that continue to deliver maximum benefits for birds and their habitats, while generating profit
for local landowners and investors. These range from agroforestry for cacao and the production of spices,
to sustainable timber production and cattle ranching. Similarly, The Nature Conservancy (TNC) launched
NatureVest in 2014 as an in-house impact investing team, sourcing and structuring projects to support
TNC’s mission at scale.
16 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 17
288 m 115 m
9%
22%
31 m
2% Europe 1,000 m
North America 75%
38 m
3% Asia
Africa
316 m
1m
0.1% 24%
Latin America
and Caribbean
288 m Oceania
22%
0 USD
0%
345 m
26%
12 m 231 m
Investments originating from the region (USD m) 0.9% 17%
Investments directed towards the region (USD m)
Figure 9 – Map of investments made by respondents in 2020. Based on data from 35 organizations.
18 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 19Case study: Komaza’s Smallholder Forestry
Vehicle © Photo by Komaza
Description:
B equity financing. The company was recently with Conservation International. Komaza aims to
Target country: Kenya
There is a huge wood supply crisis in Africa - announced as a partner of the USD 200 million plant one billion trees, benefitting more than two
expected to hit USD 30 billion by 2030 - and thus an Apple Restore Fund, implemented in partnership million farmers in sub-Saharan Africa.
Target ecosystem(s):
urgent need for greater commercial forestry activity
across the continent. Smallholder forestry is the
Forests and optimum approach to rapidly increase commercial
terrestrial forestry production, as large-scale plantations are Impact
ecosystems not effective in scaling due to the lack of available Impacts achieved by Komaza to date Impacts targeted through the SFV
land and complex land title issues.
Komaza is a smallholder forestry business that 6 million trees planted across Coastal Afforestation: over 20,000 ha of
Instrument type:
partners with smallholder farmers to produce and Central Kenya including areas sustainable smallholder plantations within
• Private equity
sustainable timber from smallholder plantations around the Arabuko Sokoke Forest, the five years after the launch of the SFV
• Private debt
developed on a portion of their land. Under the largest remaining of the Coastal Forests
of Eastern Africa, one of 36 priority Carbon sequestration: removal of 2.7 million
Revenue streams: partnership, farmers contribute land and labor (nil
biodiversity hotspots for conservation1 tCO2e through sustainable plantations
• Commodities: timber cash cost) and Komaza contributes all inputs (e.g.,
seedlings, fertilizers), tree management expertise
1,700 ha of trees planted annually, Farmer income creation: forestry income
Launched in: 2008 – 2017 – 2022 and access to high-value timber markets. When
accounting for over 40% of commercial opportunities for 68,000 farmers in Kilifi,
Komaza started planting trees in Coastal trees are mature, Komaza harvests, processes and
tree plantation in Kenya Kwale and Nyandarua counties
Kenya in 2008 as an NGO and it has been sells the timber, and shares a pre-agreed portion of
scaling its planting activities since 2017, the value of the timber with farmers, enabling them 30,000 farmers involved in
to realize a meaningful and climate resilient income. The SFV allows long-term investors (such
when it turned into a business venture. tree planting activities through as climate and forestry funds) to finance
The first Smallholder Forestry Vehicle partnerships with Komaza. A half-
The Smallholder Forestry Vehicle is a special tree assets in the low-risk, growth phases
(SFV), a special purpose vehicle that ring- acre plot can return USD 1,000 to a
purpose vehicle that Komaza is developing to unlock over the duration of approximately 15 years.
fences tree assets from Komaza’s venture family at harvest, equivalent to six
the capital it needs to scale. By allowing Komaza Typical financial returns for commercial
business to finance them separately, is years’ cash income for a farmer in
to ring-fence tree assets through the long-term (9+ investors would be about 8-10% p.a.
expected to be launched in 2022. the Coastal region.
years) and predictable growth phase of the forestry
Investment: lifecycle and finance them separately to the rest
of the business, the Smallholder Forestry Vehicle
will enable traditional forestry and climate funds Environmental impacts Social impacts Financial impacts
USD 28 USD 33 to participate in smallholder forestry, providing the
Million Million kind of tailored patient capital that this project
needs to realize its full potential.
More information at komaza.com
Investment raised Target investment In July 2020, Komaza secured a first closing of USD Read the CPIC Blueprint on Komaza
28 million of the planned USD 33 million Series
1
According to the Critical Ecosystem Partnership Fund (CEPF). More information available at: https://www.cepf.net/our-work/biodiversity-hotspots
20 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 21Investments per ecosystem and
revenue stream
The investments disclosed are largely focused on
sustainable agriculture (49%), forests and terrestrial
ecosystems (19%), and oceans and coastal areas
(17%). Those proportions are significantly affected
when including the outlier, with a more even spread
between sustainable agriculture (35%), freshwater
management (23%) and forests and terrestrial
ecosystems (23%) (Figure 10).
Freshwater
Sustainable
management 164 300
agriculture
1%
Other Oceans and
17% coastal areas Forests and
17% terrestrial 63 250
ecosystems
Forests and Freshwater
3 300
terrestrial management
ecosystems
19% Oceans and
Sustainable coastal areas
55 106 150
agriculture
49% Other 47
USD million
Without outlier Outlier
Figure 10 – Investments by ecosystem. Based on data from 21 organizations. Without outlier (left-hand side, pie chart)
and with outlier (right-hand side, bar chart).
The Sustainable Water Impact Fund (see the
following case study) illustrates how conservation
goals can be achieved through investments in the
sustainable agriculture and freshwater management
sectors.
22 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 23Case study: The Sustainable Water Impact
Fund (SWIF) (Locks of Dunlin in flooded rice fields in Colusa, California. Copyright: Drew Kelly)
Implemented by: RRG Capital Management Description: abundance and percolate it into aquifers. Water demonstrate improved long-term resiliency of
(Fund’s Investment Manager), The Nature can be extracted from those aquifers later when agricultural production.1
Conservancy (Technical Advisor) The Sustainable Water Investment Fund (SWIF) it is needed, while the recharge basins themselves
invests in arid and semi-arid regions where trends provide important wetland habitat for migratory The innovative practices supported by SWIF have
Target countries: Australia, USA, Chile, Peru like climate change, tightening environmental birds. In Chile, the Fund has acquired avocado- and a high potential for replication across water-scarce
regulations, and rising demand for food are likely walnut-producing farms with the goal of improving regions globally because they aim to demonstrate
Target ecosystems: to have material impacts on the resiliency of their water management, and the potential to business models that enhance co-benefits between
agricultural production, water availability, and the secure one of Chile’s first conservation easements environmental outcomes and revenue generation.
natural environment. SWIF aims to address those in the upper watershed of the same basin. The Over the next several years, the Fund will continue
challenges by acquiring land and improving surface conservation easement would help protect critical growing its portfolio of projects and assess
water, groundwater, and agricultural management groundwater and surface water supplies, and in properties for acquisition, while evaluating the long-
to more sustainably meet the water supply needs of conjunction with the farming operation, aims to term environmental and social impacts of its recent
Sustainable agriculture Freshwater people and nature. Examples of direct conservation investments.
management outcomes that SWIF aims to achieve include
Instrument type: terrestrial and wetland habitat restoration, land
• Real assets protection, securing water in rivers, sustainable Impacts achieved as of end of 2020
• Private equity groundwater management, and increased water
supply for the local communities. An important goal California:
of SWIF is to demonstrate how capital can enhance • 3,194 ha of land acquired
Revenue streams:
sustainability of land, water, and agriculture as well • 57 ha of groundwater recharge basins built to assess potential for water banking
• Carbon (voluntary or compliance)
as provide competitive financial returns. • Temporary wetlands providing habitat to 23 species of conservation importance
• Other environmental markets
(biodiversity, water, etc.)
As of the end of 2020, SWIF had invested in six Chile:
• Commodities (timber, agriculture, etc.)
projects across Australia, California, and Chile. In 2,080 ha acquired in one of 34 global hotspots for biodiversity, which will demonstrate the feasibility of
California, the Fund is primarily repurposing land conservation easements in Chile, as well as sustainable agriculture practices for permanent crops, and
Fund close: April 2020
from row crop and dairy cultivation for groundwater renewable energy installations.
Investment raised: USD 927 million equity recharge facilities, seasonal wetlands, restored
natural habitat, and other potentially higher value
uses for a water-scarce region. Groundwater
facilities capture surface water during periods of More information is available in the SWIF 2020 Impact Report.
Conservation easements grant a right to a public authority or a qualified conservation organization (often called land trust) to restrict land use
1
on property not in their ownership in order to protect the property’s conservation values (Source: www.landtrustalliance.org).
24 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 25Over half of all investments made in conservation in
2020 were expected to generate revenues through
sustainable commodities (e.g., timber, sustainable
agricultural products, fish and fish food). 31% of
investments were expected to generate revenues
from environmental markets, including through
the monetization of carbon, biodiversity, and
water credits. While the carbon market is well
established, it is particularly encouraging to see
the importance of relatively recent environmental
markets (water and biodiversity) among the revenue
streams expected. Other revenue sources disclosed
include plastics/waste recycling, while ecotourism
represented 2% of all expected revenues (Figure 11).
Carbon (voluntary
or compliance)
12%
Other
12%
Other environmental
markets (biodiversity,
water, etc.)
19%
Commodities
(timber, agriculture,
etc.) Ecotourism
55% 2%
Figure 11 – Investments by revenue streams. Revenue
streams are estimated as a percentage of total revenues
expected from 2020 investments. Based on data from 21
organizations.
Combining revenue sources is an effective strategy
for lowering risk and improving the investment-
readiness of conservation projects. Blue finance’s
blended finance facilities for marine protected areas
(see the following case study) combine revenues
from commodities, ecotourism, and environmental
markets to attract private capital.
26 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 27Case study: Blended finance solutions for marine
conservation and vulnerable coastal fishery communities
Implemented by: Blue finance Description: and IUCN are structuring a USD 2.4 million blended Bf is the architect of a new investment facility that
finance facility to enhance the protection of 5,000 aggregates a pipeline of investment-ready, high-
With more than 60% of coral reefs globally under ha of coral reef ecosystems and benefit more than impact MPA projects and provides an opportunity
Target countries: Philippines, Indonesia,
threat and 500 million people depending on them 12,000 fisher households. for investors to commit concessionary capital to
Belize, Dominican Republic, Bahamas, Cabo
for food and income, mobilizing finance at scale to support ecological resilience while empowering local
Verde, Mozambique, Zanzibar
protect those vulnerable ecosystems is crucial. The solution is being replicated in six other MPAs communities.
in the Caribbean, Southeast Asia and sub-Saharan
Target ecosystem:
Blue finance (Bf) develops blended finance solutions Africa – aiming to protect over 1,000,000 ha of Bf is directly involved in “on the ground” MPA
for marine conservation, livelihood improvements marine areas while providing additional income to activities, working with local communities and
and climate change resilience. Bf works with 120,000 local fishers globally. The project will also in partnership with more than 30 conservation
Oceans and coastal areas (including
sustainable fisheries) different governments and marine protected area generate verified carbon credits from mangrove partners and financial institutions.
(MPA) co-management entities to strengthen conservation and restoration as an additional
the implementation and financing of revenue income source.
mechanisms for MPAs. As part of the solution,
Instrument type: Bf structures blended finance facilities that bring
• Private debt together grants and debt to fund the early-stage Impacts achieved
investments of the MPAs. Revenues generated from
Revenue streams: a range of sustainable sources, such as visitor fees,
900,000 ha coral reef ecosystems on the way to being effectively managed, 20 endangered
• Carbon (voluntary or compliance) ecotourism and sustainable fisheries, can create
species on the way to being effectively protected in Belize and the Philippines
• Ecotourism tangible returns for investors while ensuring the
• Other: aquaculture and fishery financial sustainability of the MPAs.
200 vulnerable coastal households benefitting from project livelihood enhancements in Belize
Investment: In Belize, Bf partnered with the Turneffe Atoll and the Philippines
Sustainability Association, Mirova Natural Capital
USD 3 USD 50 and IUCN to structure a USD 1.2 million facility to
Million enhance the protection of 132,000 ha of coral reef Financial returns: USD 0.2 million in 2020; USD 0.4 million in 2021 (as of July)
Million
ecosystems. The blended finance facility is the result
of an innovative collaboration between public sector,
private sector, NGOs and communities to make the
Investment raised Target investment
MPA financially sustainable and attract additional
Environmental impacts Social impacts Financial impacts
First investment: 2020 investments.
Investments disbursed (as of end of 2020): In the Philippines, Bf, local community partners,
USD 1.2 million Mirova Natural Capital, Global Fund for Coral Reefs More information available at blue-finance.org
Read the CPIC Blueprint on the MPA blended finance model
28 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 29Overcoming barriers to private investment
The growth of the conservation finance market is investors, and the demand for conservation From awareness to implementation:
being limited by inadequate deal structuring and the impacts from clients and/or the public (Figure 12). remaining barriers investors’ needs, and underestimate how important
lack of harmonization between metrics to measure This increasing awareness from investors – and it is to provide high project returns to attract
conservation impacts. However, the increasing particularly private investors – of the opportunities The main barrier reported by the respondents is investors, particularly when risks are high. A similar
number of professionals with the relevant skills, and risks related to nature investments was also the lack of investable deals, as the restricted deal trend is visible regarding the lack of standards to
and a mainstreamed awareness amongst investors, demonstrated in a recent Credit Suisse/Responsible pipeline continues to delay the flow of capital measure conservation impacts – this is perceived
signal positive developments for the market in the Investor study, which showed that 84% of 327 into conservation. The way the limited number of as more of a barrier by investors than it is by
past five years. surveyed asset owners and managers were very existing deals are structured, and more specifically organizations that develop projects.
concerned about biodiversity loss, and 67% were their small deal size, long investment term, and high
Progress in the market already addressing biodiversity issues to some associated risks, is an additional problem perceived Other potential barriers, such as investors’
extent in their portfolio (Responsible Investor by respondents as not having progressed in the awareness, were not considered as important to
To put the recent increase in the overall volume Research, Credit Suisse, 2021). past five years. Low returns are perceived by project respondents, in line with their perception that such
of conservation investments into perspective, the developers as less of a barrier, while investors saw awareness has progressed significantly in the past
survey tracked the evolution of indicators of market Two other indicators, namely professionals with this as more important. This illustrates that some five years (Figure 13).
progress. Those indicators were based on those relevant skill sets and standards to measure developers may lack a thorough understanding of
tracked by the Annual GIIN Impact Investor Report, impacts, were perceived as having somewhat
and adapted to the conservation finance market. improved. On the other hand, indicators related
to how conservation deals are structured, such as
The respondents indicated that two out of the nine steady or high returns and suitable exit options or Low awareness of investors
indicators included have significantly progressed securitization, were seen as not having improved in 4,5 Most important
in the past five years, including awareness from the past five years.
Lack of government 4,0
Lack of investable
incentives projects
Awareness from investors 3,5
5,0 Has significantly improved
Demand for 3,0
conservation impact
4,5 Increased
from clients/ investment/ No standard to 2,5
deal size Deal size too small
the public 4,0 measure
conservation
3,5
impacts
3,0
Government Steady/high
support for 2,5
returns of Long investment Low returns
market creation investments term
High investment risk
Figure 12 – Main Organizations that are primarily investors
indicators of Professionals Pipeline of Organizations that are primarily project developers
market growth with relevant investment Organizations that have significant activities related to investments and project development
for conservation
skill set opportunities
finance, scored Average
between 1 (has
significantly
worsened over the Standard to Suitable exit
past five years) and measure conservation option/
Figure 13 – Main barriers to investments in conservation, ranked from 1 (not important at all) to 5 (most important).
5 (has significantly impacts securitization Based on data from 35 organizations.
improved over the
past five years). A Organizations that are primarily investors
score of 3 represents Organizations that are primarily project developers
no significant
change. Based Organizations that have significant activities related to investments and project development
on data from 35
organizations. Average
30 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 31perceived risk mitigation through blended finance • A USD 200 billion increase per year in (National Authority of Environmental Licenses),
Unlocking private investment in and technical assistance for project preparation international financial flows from all sources to 2020).
conservation as key enabling conditions, while investors and developing countries.
organizations identifying as both investors and 2. Technical assistance for project preparation and
The factors with the biggest potential to unlock project developers favored enabling policies and In addition, the fourth main goal of the Framework risk mitigation through blended finance
private investment in conservation vary depending frameworks, such as incentives and standards is to close “the gap between available financial
on the type of respondents: project developers (Figure 14). and other means of implementation, and those Given that the lack of investable deals is the main
necessary to achieve the 2050 Vision” (CBD COP barrier pointed out by respondents, it is no surprise
Risk mitigation through
Secretariat, 2021). that technical assistance for project preparation
blended finance comes high on the list of enabling conditions for
While the draft text seems ambitious on paper, investments. Often, technical assistance requires
4,5
organizations such as WWF have suggested convening multiple stakeholders – funders with
M
ost otherwise, and claim that the amount of different expectations, such as philanthropies
im
po finance highlighted in the text is a “significant and impact investors, as well as technical experts
4,0 rt
an
t underestimation” (WWF, 2021). In addition, concrete – thereby rendering such deals more complex.
and smart national policies and subnational Technical assistance can be integrated into blended
regulations need to underpin the Framework for it finance schemes that improve the risk/return profile
3,5
to achieve the targeted changes. Therefore, a key of investments and thereby crowd in private capital
focus will be engaging the policymakers of all CBD to finance sustainable development.
parties and building capacity at the national and
Better tools and 3,0
Enabling policies subnational level. Blended finance is essential to making transactions
frameworks
and frameworks investment-ready through design-stage and
for monitoring
(incentives
and reporting
standards, natural
National policies have proven effective at technical assistance grants. These can, for example,
impact driving investments in conservation. An example help develop proofs of concept, baseline and
capital accounting, etc.)
is Colombia’s biodiversity offset regulations, monitoring, reporting and verification systems
under which every organization implementing an – particularly crucial for projects that must
infrastructure project (such as mining, oil, or gas) is demonstrate environmental impacts. Other types
obligated to offset any detrimental environmental of blended finance, including guarantees and risk
impacts by financing restoration and protection insurance and concessional finance, aim to reduce
projects. Introduced in 2013, the regulation has since risks for commercial investors by covering losses, or
Technical assistance for
project preparation
supported the emergence of a national biodiversity aim to reduce the interest rates of financing and
offsets market, with 486 projects developed to date. facilitate access to cheaper capital (Earth Security,
Organizations that are primarily investors An additional regulation requires projects that use 2021).
Organizations that are primarily project developers water resources to invest 1% of the total project
Organizations that have significant activities related to investments and project development
costs in water conservation strategies. 380 related For an example of how blended finance can support
Average projects have been developed as a result (ANLA project preparation and mitigate risk, see Box 2
below.
Figure 14 – Factors with the biggest potential to unlock private investment in conservation, ranked from 1 (not important at all) to
5 (most important). Based on data from 35 organizations.
Box 2: Nature+ Accelerator Fund: project preparation and risk mitigation through blended finance
1. Enabling policies and frameworks official draft released by the CBD COP Secretariat
in July 2021 sets out 21 ambitious targets for 2030,
Blended finance vehicles and funds bring together mixed public and private expertise to attract
Effective, ambitious, and long-term policies and including: private capital. Launched in November 2020, the Nature+ Accelerator Fund is a collaborative effort
regulations are key to improving the attractiveness by IUCN, Mirova Natural Capital and the GEF that supports the development of investable projects.
of investing in conservation. There have been a • Redirecting, repurposing, reforming or It was inspired by CPIC and benefits from its extensive network of project developers and advisory
number of encouraging policy developments in 2020 eliminating incentives harmful for biodiversity, firms to identify new investment opportunities.
to support the scale up of investments in nature, in a just and equitable way, reducing them by at
including the EU 2030 Biodiversity Strategy, with least USD 500 billion per year. Harmful subsidies The Accelerator aims to leverage a USD 8 million anchor investment from the GEF to develop a
binding targets for nature restoration expected to in the agricultural, forestry and fishing sectors portfolio of USD 200 million in transformative, scalable and financially viable nature-based solution
be announced before the end of 2021 (European are currently two to four times higher than projects. To address the barriers linked to project preparation, the Accelerator offers three financing
Commission, 2020). the annual investments in conservation and windows, taking projects from seed financing (convertible notes or repayable grants up to USD
represent a major opportunity for increasing 100,000, and simplified and shorter screening and investment processes) to venture phase (tailored
More changes are planned at the next CBD COP, nature-positive financial flows (Deutz et al., financial instruments, up to USD 10 million per project, following a typical two-step investment and
with the adoption by its 196 parties of the post- 2020). due diligence processes). By supporting projects from their early, feasibility stages to commercial
2020 Global Biodiversity Framework. The first stage, and providing small-scale investments, the Accelerator can fill an important gap in project
preparation (IUCN, 2020).
32 | CPIC Conservation Finance Report CPIC Conservation Finance Report | 33Measuring and reporting conservation The diversity of external standards (Figure 15) that using different metrics leads to an inability
shows a lack of harmonization – highlighted as a key to compare different investment opportunities,
impacts
barrier by respondents (Figure 17). While standards particularly pre-investments.
must be adapted to specific projects, there is a risk
SDGs (Sustainable Development Goals)
Measuring the conservation outcomes of projects, when considering a project for investment, 50% of
both before and during the life of the investment, is respondents use external criteria, while the other Voluntary carbon standards (Verra, Gold Standard, etc.)
accompanied by a host of challenges. However, new half use internal criteria. The most commonly used
metrics and standards are helping to standardize external metrics and frameworks include well Sectoral certifications (ASC, FSC, MSC, etc.)
reporting and create a shared language between established standards, such as the Sustainable
Other
return-seeking investors and project developers. Development Goals (SDGs), voluntary carbon
standards, and sectoral certifications such as the IFC (International Finance Corporation) environmental
How investors and project developers Forest Stewardship Council (FSC). Other tools and Social Performance Standards
measure impacts include standards developed by specific national IBAT (Integrated Biodiversity Assessment Tool)
agencies (e.g., US Fish and Wildlife Services,
IFRS (International Financial Reporting Standards)
Beyond generating financial returns, conservation Australian Biodiversity Standards), Operating
investments must also demonstrate positive, Principles for Impact Management, and the PRI (Principles for Responsible Investment)
durable and substantial biodiversity outcomes. Biodiversity Footprint Financial Institutions (BFFI),
While approximately half of respondents reported a methodology launched by ASN Bank in 2016. IRIS+
a lack of standardized metrics for impact Organizations that favor internal criteria usually
measurement as a key barrier, all but one said base those on existing international standards STAR (Species Threat Abatement and
Restoration) metric
that they do measure conservation impacts, both – such as the IFC Performance Standards – but
0 2 4 6 8 10 12
before investments and during the lifetime of the adapt them to specific projects and investments,
Number of responses
investments – or in the case of project developers, to mitigate the lack of granularity often associated
for the projects that they develop. with higher-level standards. Newly launched
Figure 15 – External standards used by respondents when considering a project for investment or to monitor the performance
metrics, such as the Species Threat Abatement and of their own projects. Some organizations can select several standards. Based on data from 29 organizations.
However, the tools respondents utilized to Restoration (STAR) metric, are also used by several
measure conservation investment impacts varied respondents (see Box 3).
substantially and lacked a consistent approach: Effectiveness of conservation made were highly effective, while 10% were
investments somewhat effective – with the remaining 23%
corresponding to investments that had not been
Respondents were asked to assess the overall made during the period 2015-2019, or for which
impacts of their investments and/or projects impacts were not/could not be measured.
depending on whether their investment or project
Box 3 – New tool: Species Threat Abatement and Restoration (STAR) metric was somewhat ineffective (targets not met), However, when asking respondents to rate the
somewhat effective (targets partially met), or effectiveness of their investments and projects
highly effective (targets fully met or exceeded). across conservation sectors, we found that it varied
Developed by a consortium of 54 institutions led by Newcastle University, IUCN, the Biodiversity Respondents believe that 67% of all investments depending on the targeted ecosystems (Figure 16).
Consultancy and BirdLife International, the STAR metric quantifies the contribution of
investments to reducing species extinction risk. STAR is based on the IUCN Red List of Species Forests and terrestrial
and considers both threat abatement in existing habitats and the restoration of lost habitat. It ecosystems 72% 22% 6%
is applicable to sites, corporate footprints, commodity sourcing areas, and administrative units
such as provinces and countries. It enables a comparison between these geographical units, for Freshwater
instance in portfolios. management 67% 22% 11%
Sustainable agriculture
By using STAR for ex-ante impact measurements, investors, companies and governments (including range and 41% 41% 18%
can target and adapt their projects and investments to avoid or reduce negative impacts on grassland management)
biodiversity, and maximize benefits. Ex-post impacts can also be assessed once the intervention
has been delivered. Oceans and coastal areas
38% 50% 13%
(including sustainable fisheries)
Highly effective Somewhat effective Somewhat ineffective
Figure 16 – Self-assessment of impact from projects invested in or developed by respondents. Note: respondents could
only choose one overall performance for all their investments linked to one ecosystem. Based on responses from 25
organizations.
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