Loans
Once a source of income has been attached to a conservation project, it enables access to “debt financing” in the form of government and private sector loans or bonds. It is important for this enabling income to be consistent over time because it allows investors to trust that if they loan an organization more money than it has today for a given project, the investor can be paid back in the future. Loans can take various forms with the most frequent being short-term bridge loans, which are typically repaid by government grants or fundraising.
Learn More on Bridge Financing
Pay for Success
Payment for success financing is being utilized in Ohio’s Wayne National Forest. Upfront costs for a trail system are repaid by taxes on increased tourism activity around the conservation area.
The Iowa Soil and Water Outcomes Fund also employs a pay-for-success model when it pays farmers to implement practices that improve water quality and carbon sequestration and then sells the water outcomes to government to meet their effluence limits and the carbon outcomes to corporations to meet their sustainability targets. In a third application of this model, the Forest Resilience Bond, the upfront costs of forest thinning to reduce catastrophic fire on a national forest and sedimentation downstream are reimbursed by a public agencies and a water utility that might otherwise face much higher expenses in treating water quality. (see Duke case study)
View the Duke Case Study
Ecosystem Service Markets
Conservation-oriented approaches to more traditional real asset investments (e.g. timber, agriculture, and ranchland) are an increasing area of focus. Carbon markets can be a source of revenue for land trusts and landowners.
CFN Toolkits
Water Funds and Clean Water State Revolving Funds
Water is another ecosystem service that has been monetized in various initiatives across the country. Examples include the support by New York City to protect its watershed to minimize the probability of having to spend much more to treat polluted water downstream, or the Portland Water Authority’s funding of upstream forest protection to keep the water clean.
Though largely focused on “grey infrastructure” and difficult to access for many communities, Clean Water State Revolving Funds have been a source of revenue for certain conservation projects (for example, the State of Pennsylvania’s Clean Water State Revolving Fund supported a Lyme Timber forestland investment).
Blended Finance
Increasingly, conservation projects are combining various sources of public funding and private investment to increase the scale of protection and restoration initiatives. One celebrated example is the Forest Resilience Bond, which mobilizes private capital to complement existing public funding to finance ecological restoration of forestlands in the Interior West (see Duke case study).
Regardless of where you and your team are positioned in the conservation space, conservation finance is a powerful, interdisciplinary toolset to have at your disposal. It combines the frameworks of banking, investing, community development, philanthropy, and government to maximize conservation outcomes.
Toolkits
