If the Net Impact 2015 session “Conservation Finance: Investing in Nature at Scale” was any indication, conservation finance is now in the thoughts of investors, business-school students, and change makers around the world. The conference, which took place in Seattle in Nov. 5-7, explored a wide range of up-and-coming social-impact topics.
Given the rapid growth of interest in this subject, coupled with shifting regulations in the United States and around the world, it is unsurprising that conservation finance has been gaining substantial traction.
Net Impact conferences provide professional development for students interested in business sustainability. The conservation finance workshop was created as a primer for students unfamiliar with the space. The session served as a starting point for students to begin brainstorming different ways they could create social and environmental impacts.
Dave Chen, principal and CEO of Equilibrium Capital, and Joe Whitworth, president of The Freshwater Trust, hosted the workshop. Both speakers said the recently changing nature of regulation in this space will be key in aiding the growth of the field in the coming years. Another common theme the speakers both kept emphasizing was that the time is right for conservation finance.
Chen kicked off the conversation by saying that the changing nature of how a company views “responsibility” is more often seen as an opportunity than a burden today. This is where conservation finance and other unique models of investing capital can come into play.
Investors are able to leverage their capital to do more than just generate a return on investment for their clients. Today’s investors are now able to use capital to protect land and ensure that valuable ecosystem services are provided in the future.
Chen used the example of the United States Department of Labor’s modification to the Employee Retirement Income Security Act in October as one sign of the shifting times. Prior to this ruling, fiduciaries were not allowed to consider environmental, social and governance (ESG) factors when making investments. However, the importance of ESG factors has now been recognized. Therefore, the door is now open for an expansion of conservation finance projects and impact-focused investments.
He also said the department’s ruling went hand in hand with President Obama’s presidential memorandum, which was released just days later. It encouraged the formation of public-private partnerships to invest in and protect natural environments.
Both announcements demonstrated the shifting view of the federal government and regulators. Conservation finance and impact investing are now seen as necessary means of preventing future environmental degradation and possibly ensuring long-term economic stability.
Conservation finance is not just taking off in the United States. Both speakers said the United States-China Joint Presidential Statement on Climate Change was an indicator that change will be coming to China as well. This will be particularly impactful for investments that can reduce the country’s carbon use and help improve environmental quality.
In addition, Chen said the Bank of England’s statements about the impending risk of climate change are another example of the shifting tides in the investment community. Both speakers said that major investment firms around the world are increasingly recognizing the importance of impact investing and conservation finance and are dedicating more resources to these practices.
Both speakers said that the combination of regulatory drivers and industry awareness seemed to have created a synergy that can catalyze the expansion of conservation finance. With continued regulatory support and a growing number of industry investments, conservation finance seems well-positioned to become a more prominent investment field in coming years.