A very interesting recent report studies the emerging field of conservation impact investments. Defined by the authors as investments designed to return capital or earn a profit while also driving a measurable positive impact on natural resources and ecosystems, such private sector investments totalled more than $1.9 billion from 2009 through 2013, growing at an average rate of 26% during the period. Survey research found that private investors expect to deploy $1.5 billion of already-raised capital and to raise and invest an additional $4.1 billion from 2014 to 2018.
Conservation impact investments cover such areas as sustainable food and fibre production projects, habitat conservation, and water quantity and quality conservation. The research found the most rapid growth in sustainable agriculture which grew globally from grew more than 600% from 2004-2008 to 2009-2013, increasing from $67 million to $472 million. Sustainable forestry and timber grew much less rapidly, from $504 million to $710 million across the same period.
Among other findings of the research:
- The large majority of the private investments reported were made in projects located in the United States and Canada ($1.6 billion, 82%).
- Although conservation objectives appear to be the leading reason for investing in this sector,
most investors are also satisfied with financial performance.
- Private equity conservation impact investments have an average target of 10-14.9% internal rate of return.
- The biggest challenge most survey respondents identified was the shortage of deals with the appropriate risk/return profiles. Most investors stated that there is no shortage of capital for good conservation deals.
- Another key challenge is the shortage of management teams with experience in the sector.
Including several case studies, this 81 page report provides some excellent analysis for everyone interested in private sector investment in conservation. It can be found through a link on The Nature Conservancy’s web page at http://www.naturevesttnc.org/Reports/info.html. Authors of the report are from EKO Asset Management Partners and The Nature Conservancy, a US charitable environmental organization, with assistance from a team of advisors.