Using Debt Investment to Link Livelihood Improvement and Environmental Conservation Initiatives

The rural poor’s most valuable assets are often intact environmental resources. A fundamental gap exists between the conservation and extractive value placed on those assets. Environmental mortgages narrows that gap by melding innovative microfinance approaches with incentive structures that encourage environmental stewardship. It does so by explicitly linking a lending program focused on livelihood improvement to the quality of an environmental asset, resulting in long-term incentives for stewardship.

We have developed a framework that leverages debt investment as a tool for value transfer in biodiversity conservation. Debt investment, modeled after microfinance initiatives, is a potential tool to sustainably protect biodiversity resources by responsibly transferring value to low-income communities and nations. Microfinance approaches to poverty alleviation have been spectacularly successful over the last two decades; those approaches have also been cost-effective. Building on those approaches, debt investment could be used to simultaneously address biodiversity conservation and poverty alleviation. Environmental mortgages combine a performance-based direct conservation scheme with a microfinance approach of economic development. In the many cases when direct equity investment is not strategically or socio-politically feasible, debt investment may be the best alternative means to transfer value to biological assets in low-income nations. Intergovernmental agencies and conservation organizations could develop programs to offer lines of credit based on and collateralized by a community’s intact environmental assets.

ACS’s environmental mortgages program was recently chosen as a finalist for The Marketplace on Innovative Financial Solutions for Development Competition held by the World Bank, the Bill & Melinda Gates Foundation, and Agence Française de Développement.

More information on ACS’s environmental mortgages program:

◆ An article in SEED Magazine entitled Why environmentalism needs high finance.

◆ A two-page concept note on environmental mortgages.

◆ A recent paper in the journal Conservation Letters describing the concept of environmental mortgages in detail, Debt investment as a tool for value transfer in biodiversity conservation.

◆ A recent ACS report on the potential of environmental mortgages in the tropical Pacific, Opportunities for using debt investment to link livelihood improvement and environmental conservation initiatives. A case study examining the tropical Pacific.

Partners: Commonwealth Scientific and Industrial Research Organization, Australia; South Pacific Regional Environment Programme, Samoa; Yayasan Pulau Banyak, Indonesia; Social Enterprise Associates, USA