We are consuming natural resources, which seemed nearly infinite mere decades ago, at a pace that Earth cannot sustain. The degradation of Earth’s ecosystems and the air, soil, water, and natural habitats we depend on, along with the looming threat of climate change, urgently needs to be addressed to protect humans and the natural world alike. Conservation finance refers to impact investment opportunities that deliver financial returns while helping protect the earth’s stock of natural capital. While most funding for conservation is still derived from public or philanthropic sources, the share of funding from private sources of capital is experiencing impressive growth, helping fill the estimated shortfall of $300-$400 billion needed to stabilize Earth’s natural processes and ecosystems that we depend upon.
As the conservation finance industry grows, so too do opportunities for investors only interested in market-rate returns, as well as those with different risk-return profiles, time horizons, thematic and geographic interests, and diversification needs. Industry growth also generates much needed data on returns and impact. Certain risk characteristics of conservation finance instruments will likely remain relevant, however, such as a lack of liquidity, climate risks, and environmental regulatory uncertainty. Other issues, such as a lack of deal-ready opportunities, high transaction costs, and a lack of property rights over natural resources, still need to be addressed with scalable and transferable project design solutions.