By Jessica Dempsey, University of British Columbia
Conservation finance, private equity funds, land and rainforest bonds: all are attempting to ‘unlock’ the supposed trillions of dollars waiting around to finance the global environmental agenda. [fn] UNEP (2011) and World Bank (2015). [/fn] A recent report by Credit Suisse, World Wildlife Fund and McKinsey claims that conservation could generate all the funding needed to conserve worldwide biodiversity if main investor segments, including high-net-worth individuals, retail and institutional investors, allocated only “1% of their new and reinvested capital to conservation”. [fn] Credit Suisse/World Wildlife Fund/McKinsey & Company (2014), p. 16. [/fn] That is, it is claimed that the equivalent of a teeny-tiny spit in a large bathtub could save us all from degraded ecosystems.
While seductive, the last quarter century of international conservation efforts is riddled with exciting promises to generate financial returns from conservation. But these promises never seem to materialize at any scale, although they are always followed by another set of exciting promises: rinse and repeat.
Going back at least 30 years, the first promise is that of ‘gene gold’. This dream is perhaps best articulated within the 1987 Our Common Future, which, during the then-emerging biotechnological revolution, viewed the vast genetic resources of the tropics as an almost limitless source of wealth, wealth that could fund biodiversity conservation. The famed report predicted that the economic value in genetic resources “is enough to justify species preservation”. [fn] World Commission on Environment and Development (1987), p. 155. [/fn] Meaning: the incentive to sell the genetic information in tropical forests to pharmaceutical and agricultural companies would outweigh the value of other opportunities, in say, timber or the land for agriculture. Such dreams of win-win-win finance – with positive environment, development and profit outcomes – also found their way into the Convention on Biological Diversity (CBD), ratified in 1992.
Enthusiasm for bioprospecting as a revenue source for conservation in the tropics perhaps peaked in 1991 when pharmaceutical giant Merck signed a 10-year, US$ 1.3 million deal with the Costa Rican National Biodiversity Institute (INBio). But INBio notwithstanding, bioprospecting has largely failed to deliver on its promises of both profits and conservation. [fn] See, e.g., Firn (2003) and Burtis (2008). [/fn] And a 2012 assessment found that it generated only a meager US$ 50 million for conservation. [fn] Parker et al. (2012) [/fn]
Even as people were hanging their hats on the promise of biosprospecting in the CBD negotiations in the late 1980s and early 1990s, chief International Union for Conservation of Nature (IUCN) scientist Jeffrey McNeely and others like the former director of the Millennium Ecosystem Assessment Walter Reid were already seeing the writing on the wall, arguing for a focus on calculating and including the indirect economic values of biodiversity. [fn] McNeely (1988) and McNeely et al. (1990) [/fn] Such indirect values referred to ecosystem functioning and services, services that, when calculated, “may far outweigh direct values” like genetic resources. These might include services of carbon sequestration and water purification.
And so quickly following on the toes of “gene gold”, is REDD+ gold, which promised that sale of carbon sequestration would generate revenue to save tropical forests (and many other ecosystems). The peak of this promise is perhaps the 2008 Eliasch review, commissioned by the United Kingdom. Released just prior to the Copenhagen climate conference (COP 15), the review suggested that including REDD in a well-designed carbon trading system could provide the finance and incentives to reduce deforestation rates up to 75 percent by 2030. One scenario modelled by the review predicted that US$ 7 billion could be generated by the carbon markets by 2020. [fn] Eliasch (2008). [/fn] The most recent Ecosystem Marketplace “State of the Forest Carbon Market” report reports that the forest-based emission reduction market peaked in 2014 with US$ 257 million in value, down to a measly US$ 120 million in 2016. [fn] Hamrick/Grant (2017). This figure cited for 2016 excludes revenue from the Australian Emissions Reduction Fund, which transacted US$ 509.5 million dollars. But it is a not a traditional market as there is only one buyer, the Australian government who awards emission reduction contracts by reverse auction. [/fn] It seems we hit peak forest carbon market before anything close to peak oil. [fn] Despite its low revenue, it is crucial to note that REDD is not benign for all communities; depending on the project it can result in land dispossession and further entrench social inequities. For an overview see Holmes/Cavanagh (2016). Another recent academic paper summarizes that REDD+ projects have faced issues of “insecure land tenure, elite capture of incentives, equity concern between recipients of payments and beneficiaries of ecosystem services, uncertainty over conditional based incentives” (Clark et al. (2018), p. 341). [/fn]
REDD seems dead, although continues in a zombie form: now folks are betting on inclusion of forest carbon offsets in the aviation industry emission reduction scheme and proclaiming the wonder of new financial technologies, namely blockchain. REDD will not die completely, but remains in a state of ever-promise, always around the corner.
Conservation finance gold
And now we are living through another phase of promise – this time focused on financial institutions and mechanisms: from bonds to private equity all now promising to solve what is a giant failure of governments.
Yet, the evidence on this front is also not looking good. While there are difficulties assessing the entire field which is highly fragmented and also often privately held, my own and others scoping research shows that these capital flows are tiny in relation to the size of the problems, and essentially infinitesimal in the world of capital flows writ large. [fn] Dempsey/Suarez (2016). See also Clarke et al. (2018). [/fn] As CIFOR scientists recently conclude, “Expecting such a shortfall [in funding for SDGs, including biodiversity conservation] to be picked up by the private, or indeed any other sector, is arguably misguided and clearly represents the current disconnect between stated ambitions and reality”. [fn] Clarke et al. (2018), p. 338. [/fn] So far, the return-generating (meaning for-profit) conservation finance sector faces serious challenges scaling up, a problem readily recognized by the sector itself. As the Conservation Finance Alliance concludes, “The overwhelming majority of the financial sector has yet to show interest in biodiversity conservation”. [fn] Conservation Finance Alliance (2014), p. 4. [/fn] Or as NatureVest and their co-authors plainly state, conservation investments are much “less competitive compared to competing market opportunities.” [fn] NatureVest/EKO Asset Management Partners (2014), p. 12. [/fn]
For the most part, the capital that is flowing is of a particular sort, deployed by investors who are ok with low liquidity (assets that can be bought and sold quickly are liquid) and who are willing to take no to low return that is often highly risky, investment terms unpalatable to most investors. [fn] Dempsey/Suarez (2016). [/fn] And in order to make such low-return, high risk investments, the whole enterprise relies on the deployment of public and charitable capital that essentially “de-risk” the investments (known as blended capital).
Furthermore, the global geographic distribution of biodiversity finance, both public and private, is uneven. One report concludes that the United States, Canada, Europe, and China “generate and receive the majority of the world’s biodiversity finance”. [fn] Parker et al.(2012), p. 109. [/fn] The Global South, on the other hand, receives far less biodiversity finance: Africa receives 6 percent, Latin America and the Caribbean receive 6 percent, and Asia (not including China) receives 7 percent of overall global biodiversity finance. Similarly, a more recent survey of private investment in conservation found that 92 percent of the private investment found in their survey originated from U.S.-based investors and that across the three areas of conservation investment examined (green commodities, habitat, and water), Canada and the United States received 82 percent of this finance. [fn] NatureVest/EKO Asset Management Partners (2014). [/fn]
From gold-seeking to justice-seeking
Given a shortage of political will, private capital and financial innovation are presented as the plausible and pragmatic approach to solving persistent environmental problems and wealth inequalities. Yet I suggest we understand ‘conservation finance gold’ the most recent attempt to achieve positive environmental and social outcomes that are return-generating, the latest in a more than quarter century effort.
And it does feel like history repeats itself. At its 2018 meeting in Davos, the World Economic Forum released a report calling for the 4th Industrial Revolution, a revolution propelled by new scientific and technological capabilities that will, the document proclaims, “enable society to realize the full value of nature and catalyze a new, inclusive bio-economy”, inclusive for humans and nonhumans on earth. [fn] World Economic Forum (2017), p 4. [/fn] What is on offer in that report sounds remarkably similar to that the found in the 1987 Our Common Future.
Another day, another bio-economic or green financial revolution, a so-called ‘revolution’ that is always just around the corner: “selling nature to save it” is always promissory, always just out of reach, existing in swirling clouds of hype that project hockey-stick like growth and political-economic transformation that most often flounder, even on their own terms. [fn] Selling nature to save it is a term first used by McAfee (1999). [/fn] Placing our faith in this approach is equivalent to burying our heads in the sand while crossing our fingers for good luck, a far cry from pragmatic and plausible.
What is the other path? For decades, activists and critical environment-development academics have understood so-called “underdevelopment” and ecological degradation as a problem created via ongoing imperial and colonial relations: rich countries and individuals have accumulated their vast wealth by extracting resources (and disposing waste) beyond their borders, over hundreds of years. This conceptualization of the problem suggests we must do more than “unlock” private capital; it suggests redistribution – payments for ecological debt (PED). The concept of ecological debt is about showing how value accrued in the Global North has depended inextricably on devaluation in the Global South. It is inherently about linking distant places and rectifying cumulative historical geographical inequalities. [fn] For an overview of the concept see Warlenius et al. (2015). [/fn] Rather than promoting a kind of trickle-down theory of economic “green” development, PED is based upon redistribution and reparations.
Might the conservation world rally around PED? Payments to those conserving biological diversity would thus not be for “ecological services” produced, but rather be debt payments made by those who have taken up disproportionate space of the global commons. How might such debts be paid? In a recent book, Ashley Dawson provocatively suggests that payments might flow through a guaranteed income supplement for inhabitants of nations who are owed “biodiversity debt”. While surely controversial, Dawson argues that such incomes should flow not through the state, but rather to people directly, given that so many governments are captured by resource extraction interests. Dawson argues that such direct repayments of debt “would entitle the indigenous and forest-dwelling peoples who make these zones of rich biodiversity their homes with the economic and political power to push their governments to implement significant conservation measures”. [fn] Dawson (2016), p. 91. [/fn] Could conservation organizations and holders of capital facilitate not the development of tourism lodges that compete against each other and return in profit, but rather support a transnationally organized union or movement of “conservation labourers” who might collectively demand higher payments for ecological debt?
These ideas are not silver bullets, holy grails, or miracle cures. There is no such thing. But we live in a desperate time of countless human and nonhuman tragedies, on a planet that is less lively, less bio-culturally diverse by the year – an earth, as Donna Haraway writes, “full of refugees, human and not, without refuge.” [fn] Haraway (2015), p. 160. [/fn] Such a tragedy is a wholly political problem demanding a political solution, which suggests our time and energy is best spent building powerful movements and organizational infrastructures that can move capital and states towards less extractive directions.
Jessica Dempsey is Assistant Professor with the Department of Geography at the University of British Columbia.
Burtis, Patrick (2008): Can bioprospecting save itself? At the vanguard of bioprospecting’s second wave. In: Journal of Sustainable Forestry 25(3-4), pp. 218-245.
Clark, Robyn/Reed, James/Sunderland, Terry (2018): Bridging funding gaps for climate and sustainable development: Pitfalls, progress and potential of private finance. In: Land Use Policy 71, pp. 335-346.
Conservation Finance Alliance (2014): Supporting biodiversity conservation ventures: Assessing the impact investing sector for an investment strategy to support environmental entrepreneurism.
Credit Suisse/World Wildlife Fund/McKinsey & Company (2014): Conservation finance: Moving beyond donor funding toward an investor-driven approach. Zurich.
Dempsey, Jessica/Suarez, Daniel Chiu (2016): Arrested Development? The Promises and Paradoxes of “Selling Nature to Save It”. In: Annals of the American Association of Geographers 106(3), pp. 653-671.
Dawson, Ashley (2016): Extinction: a radical history. OR Books. New York.
Eliasch, Johan (2008): Climate change: financing global forests.
Firn, Richard D. (2003): Bioprospecting – why is it so unrewarding? In: Biodiversity and Conservation 12:2, pp. 207-216.
Hamrick, Kelley/Grant, Melissa (2017): Fertile ground: state of the forest carbon finance 2017. Washington, D.C.
Haraway, Donna (2015). Anthropocene, Capitalocene, Plantationocene, Chthulucene: Making Kin. In: Environmental Humanities 6, pp. 159-165.
Holmes, George/Cavanagh, Connor J. (2016): A review of the social impacts of neoliberal conservation: Formations, inequalities, contestations. In: Geoforum 75, pp. 199-209.
McAfee, Kathleen (1999): Selling nature to save it? In: Society and Space 17(2), pp. 133–154.
McNeely, Jeffrey A. (1988): Economics and biological diversity: developing and using economic incentives to conserve biological resources. Gland: IUCN.
McNeely, Jeffrey A./Miller, Kenton/Mittermeier, Russell A./Reid, Walter V./ Werner, Timothy B. (1990): Conserving the world’s biological diversity. Gland: IUCN.
NatureVest/EKO Asset Management Partners (2014): Investing in conservation: A landscape assessment of an emerging market.
Parker, Charlie/Cranford, Matthew/Oakes, Nick/Leggett, Matt (2012): The little biodiversity finance book: a guide to proactive investment in natural capital (PINC), 3rd Edition. Oxford: Global Canopy Foundation.
UNEP (2011): Towards a green economy: Pathways to sustainable development and poverty eradication. Nairobi.
Warlenius, Rikard/Pierce, Gregory/Ramasar, Vasna (2015): Reversing the arrow of arrears: The concept of “ecological debt” and its value for environmental justice. In: Global Environmental Change 30, pp. 21-30.
World Bank (2015): Joint report on multilateral development banks’ climate finance 2014. Washington, D.C.
World Commission on Environment and Development (1987): Report of the World Commission on Environment and Development: Our common future. New York: Oxford University Press.
World Economic Forum (2017): Harnessing the Fourth Industrial Revolution for Life on Land. Cologny/Geneva