The Nature Conservancy’s (TNC) January 2017 report “Beyond the Source: the Environmental, Economic and Community Benefits of Source Water Protection” highlights water funds as a strategy for urban source water protection. 40 percent of source watersheds around the world show high-to-moderate levels of degradation. This can put water and food security at risk and negatively impact economic growth.
Conservation professionals have a challenging path ahead, but resilience finance makes it easier. Out of the carnage that Hurricane Andrew caused in 1992, a market for catastrophe (‘cat’) bonds was born. While ordinary bonds pay buyers interest to cover the risk of default by the issuer, cat bonds compensate buyers with higher interest rates for taking on the risk of extreme events. In the event that disaster hits, investors lose their principal.
Since 2000, residents of San Antonio, Texas have voted four times to approve ballot measures setting aside a portion of local sales-tax revenue for the city’s Edwards Aquifer Protection Program. The Nature Conservancy’s January report “Beyond the Source: The Environmental, Economic and Community Benefits of Source Water Protection” showcases San Antonio’s program as an example of a publicly financed water fund. Water funds are institutional platforms that connect upstream and downstream users through the financing, governance and management of source water protection.
The 2016 Aspen-Nicholas Water Forum, hosted by Aspen Institute and Nicholas Institute for Environmental Policy Solutions, showed the role of impact investing in bridging the financing gap in the water sector. The resulting report, “Conservation Finance & Impact Investing for U.S. Water,” offers case studies and analyses of new tools and models that are taking root in the industry. This Q&A with Martin Doyle, one of the authors of the report, dives into the realities of funding water infrastructure in the current political and economic environment.
How can the growing community of practice around natural capital approaches continue to engage, learn and adapt? The 2017 Natural Capital Symposium discussed this question at Stanford University on Mar. 20-23. A key session was titled “Securing Freshwater through Innovative Public and Private Partnerships.” This session showed examples of innovations that often required partnerships between public and/or private institutions, development banks, and civil society.
Consider this: The $400 billion in private environmental finance needed annually, according to Credit Suisse and McKinsey & Company, is eight times even the more generous current estimates of conservation finance. Practitioners and experts gathered last month at the New York City office of Credit Suisse to explore how to bridge that gap and meet the conservation objectives of the United Nations 2030 Sustainable Development Goals. Conservation Finance Network cohosted the event. Here are some key insights from the conversation.
Investors and bond issuers must improve communication in order to meet each other’s needs as the green-bond market expands rapidly. Green bonds have the potential to enhance transparency, mitigate risk, and stimulate the market toward reaching a low-carbon economy. The green-bond market is estimated to total $150 billion in 2017. This is an 85 percent increase above 2016, according to data from Climate Bonds Initiative.
Dramatic increases in investment in conservation over the last decade are the focus of a new report authored by Forest Trends’ Ecosystem Marketplace, “State of Private Investment in Conservation 2016.” The report sheds light on the many dimensions that drove growth between 2004 and 2015.
In September, Governor Jerry Brown (D-CA) signed AB 2480 into law. This bill established that “source watersheds are recognized and defined as integral components of California’s water infrastructure.” The conservation think tank Pacific Forest Trust created the bill together with its author, Assemblymember Richard Bloom (D-Santa Monica).
The most recent A Community on Ecosystem Services (ACES) conference, which sought to advance science, practice, and decision-making around ecosystem services, exhibited a variety of examples of collaboration between science and finance. The conference was held Dec. 5 - 9 in Jacksonville, Florida.