When the Zoological Society of London in July unveiled a $50m “rhino impact bond” the response was “off the charts”, according to Oliver Withers, the organisation’s head of conservation finance.
“It got to the point that we were not in a position to handle all the queries,” he said of the first such initiative dedicated to the protection of a species. “What it made clear to us is there is huge investor demand for conservation finance products.”
The excitement has spread beyond ZSL, which is the Financial Times’ 2019/20 seasonal appeal partner.
Credit Suisse, an investment bank that had expressed an interest in the bond, has become an adviser on the transaction and PwC, the auditing firm, has come on board. The scheme, which uses the “outcome payments””model that has been used to finance health and education, rewards investors if rhino populations in five targeted areas in South Africa and Kenya increase over five years.
Experts in conservation and finance say the reaction shows wildlife conservation finance, for decades largely the preserve of wealthy donors and governments, has massive potential to attract institutional investors, helped by growing public awareness of the delicate state of the planet.
” I think we’re at the dawn of something new,” said Giles Davies, founder of Conservation Capital, the finance company arranging the rhino bond. “It’s been led by climate issues and a rushing realisation that something has to be done and everyone has to play a role.”
Nepalese women living on the edge of Suklaphanta national park were given seed funding and advice to buy smaller herds of more productive cattle and create sustainable pastures © ZSL
But they stress the response to the bond also highlights the challenges.
Marisa Drew, chief executive of Credit Suisse’s impact advisory and finance department, describes wildlife conservation as being at the “frontier of frontier investing”, even for people “who are investing for a return while also trying to achieve a positive outcome”.
A scarcity of mechanisms for institutional investors to deploy their capital and the difficulty of putting a monetary value on the environment are two of the main reasons for this, she said.
Tens of billions of dollars are invested in conservation annually, according to the Coalition for Private Investment in Conservation (Cpic), a global partnership of interested parties, but much of that is spent on forestry and water rather than wildlife. It estimates that more than $400bn is needed each year to reverse decades of declining populations.
The potential interest is also demonstrated by the rapid rise of green bonds and loans, most of which are focused on renewable energy, buildings and transport. These have increased from under $50bn globally in 2015 to more than $200bn in the first 10 months of this year, according to data from the Climate Bonds Initiative, a non-profit organisation.