Oct. 20, 2016

Coalition taps private sector to help nature pay for itself

The global community is spending only about 15 percent of what it must to conserve natural habitats for future generations, according to a new global consortium headed by Cornell and three other world-class institutions. The consortium is betting private investors, if presented with the right opportunity, will see the benefit of boosting that number.

Cornell has partnered with Credit Suisse, The Nature Conservancy and the International Union for Conservation of Nature to co-found the Coalition for Private Investment in Conservation. The coalition also includes more than 20 supporting members, from financial institutions to environmental organizations to national governments.

The group’s goal is to help preserve the world’s most important ecosystems by creating new opportunities for private investment in conservation and sustainable development.

“The only sector that has the financial heft to really address the conservation imperative is the private sector,” said John Tobin-de la Puente, professor of practice at the Charles H. Dyson School of Applied Economics and Management and at the Cornell Institute for Public Affairs. Tobin is heading up Cornell’s involvement in the coalition.

“A lot of investors and institutions are saying, not only does this represent a business opportunity, but also this is important,” he said. “We want to be able to leave our grandchildren healthy ecosystems.”

The coalition estimates that the global community must spend between $300 and $400 billion per year to adequately conserve the world’s ecosystems. But only about $50 billion to $52 billion a year is spent, most of which comes from governments and charities.

The private sector can help fill that gap, Tobin said.

“If we could channel just 1 percent of new and reinvested capital from the global investment markets – from institutional and private investors – toward conservation finance or other forms of investment in natural capital, we’d be able to fill that gap,” he said.

The private sector can turn a profit from conservation in any number of ways, from park-use fees and ecotourism to sustainable commodities like shade-grown coffee.

Green infrastructure is another example. In the 1990s, New York City had to decide whether to spend billions of dollars on a water treatment plant or on an alternative: buy up land in the Catskills to ensure the city’s watershed was safeguarded with healthy forests, and few chemical inputs. The city chose the forests – and saved billions.

But current strategies are only half the story, said Tobin, an environmental biologist with 20 years of experience in the international finance industry.

“I firmly believe that there hasn’t been enough smart, structured thinking dedicated to finding and unlocking the cash flows that are inherent in healthy, conserved natural ecosystems,” he said. “If we bring some of those smart finance types around the table together with nongovernmental organizations that know how things operate in individual protected areas, we could develop solutions that we have not thought of yet.

“A lot of the exercise here is trying to bring smart people from the finance sector, multilaterals and NGOs to sit down and think, ‘OK, how do we get nature to pay for itself?’” he added.

Cornell’s work in the coalition will stem largely from a new institute, the Initiative on Responsible Finance, directed by Tobin and David Ng, professor of finance at Dyson.

The coalition will develop blueprints for investment transactions, from new investment models to funding pipelines, that deliver environmental and financial returns. It will also have a hand in communications, convening partners and conducting research, in which Cornell will have a key role. That could range from basic research about conservation finance to evaluating the effectiveness of transactions and quantifying reliable estimates of their positive environmental impact.

Students will also play a significant role in these activities, Tobin said.

“I hope to give opportunities to both Cornell Institute for Public Affairs students and Dyson School students to get their hands dirty on some of this stuff,” he said.

The coalition was announced in September at the International Union for Conservation of Nature’s World Conservation Congress in Hawaii.