Creating Investments Delivering the Triple Bottom Line
Environmental conservation faces serious financial challenges. The long-term nature of environmental and sustainable development programs requires a focus on building reliable and long-term sources of funding. The majority of current funding paradigms, however, are short-term in nature. Reliance only on traditional donor and public sector funding is risky and leads to chronic funding gaps. Creating new and innovative financing mechanisms linked to markets can contribute to a diversified funding base, play a complementary financing role for conservation activities, and provide investment opportunities with much-needed incentives for private investors to contribute to the conservation of biodiversity and ecosystem services.
Impact investments, investments intended to create positive impact beyond financial return, are an emerging asset class. A central challenge to impact investing is the ability to scope, vet, and measure investments with respect to social and environmental impact. Further, institutional investors tend to prefer larger project volumes than usually delivered by single conservation activities and their financing mechanisms. Given this challenge, ACS has identified the need to develop a portfolio approach for the further promotion of innovative financing projects that would provide market solutions for biodiversity conservation challenges. We are working with our network to create a portfolio of a variety of projects that cover a spectrum of return profiles. Some projects may have minimal financial returns but high social and environmental benefits. Other projects may have somewhat lower biodiversity benefits but deliver a moderate financial return, while some will deliver both attractive returns and biodiversity and social benefits. We will also seek to identify projects that attract more venture capital-type investors who will accept higher risk investments with the hope of higher returns in the future (e.g., buy habitat credits today to sell in the future at a higher price).
Our objective is to build a portfolio that balances risk, yields a return that is attractive to impact investors, and generates the resources necessary to sustainably finance biodiversity conservation initiatives.
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