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Financial Planning > Charitable Giving > SRI Impact Investing

Private Conservation Impact Investing Growing 26% Annually

By Michael S. Fischer

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The market for conservation impact investing is surging, and private investments are expected to more than triple between 2014 and 2018, according to a new survey prepared by EKO Asset Management Partners and The Nature Conservancy’s NatureVest division.

The survey revealed that some $23 billion was committed to conservation impact investing in the five-year period from 2009 to 2013.

Private investments accounted for almost $2 billion of this market — an amount that is growing at an average of 26% annually, and is expected to reach $5.6 billion by 2018.

However, the organizations also reported that a substantial amount of potential private capital had not been deployed, demonstrating, it said, the need for a significant increase in the number of risk adjusted investment opportunities.

The study, which was overseen by a steering committee that included the David and Lucile Packard Foundation, the Gordon and Betty Moore Foundation and JPMorgan Chase & Co, was based on a survey of 56 investors, including five for-profit and nonprofit development finance institutions and 51 private investment organizations.

Respondents provided information about their impact investments for the 2009–’13 period, including intended conservation impact, size and type of investment, target internal rate of return and performance to date.

Survey participants were also asked about the structures of their investment portfolios in the period from 2004 to 2008, and their perceptions of and long-term visions for the future market for conservation-related impact investing.

Key Findings

The survey found that some $23 billion committed to conservation impact investments from 2009 to 2013 was invested in three main categories:

  • Water quantity and quality conservation: watershed protection, water conservation and storm water management, and trading in credits related to watershed management
  • Sustainable food and fiber production: sustainable agriculture, timber production, aquaculture and wild-caught fisheries
  • Habitat conservation: protection of shorelines to reduce coastal erosion, projects to reduce emissions from deforestation and degradation, land easements and mitigation banking

The report said private investors expected to deploy $1.5 billion of already-raised capital over the next five years, and to raise and invest $4.1 billion more.

Eighty percent of the nearly $2 billion already deployed by private investors came from just 10 sources.

According to the survey, the total market for conservation investment is expected to increase to $37.1 billion over the next five years.

Of the three categories of conservation investment studied, development finance institutions invested $15 billion largely in water quality and quantity projects, while private investors invested $1.2 billion mainly in sustainable food and fiber production.

Survey respondents noted a shortage of investable projects and opportunities. The report said this indicated a need for more deals with adequate risk-return ratios and more seasoned management teams.

“Our report puts real numbers to what we’ve long suspected: Private investors are deploying more capital than before toward investments that lead to both greater conservation and a definable financial return,” Ricardo Bayon, EKO Asset Management Partner and co-author of the report, said in a statement.

“But more needs to be done. What the report tells us is that this is not a money problem. The money is out there. It is about courage, ingenuity and creativity. It is about coming up with appropriate financeable deals.”

The study’s co-authors said that impact investment was one way to address the critical global deficit in conservation funding; they pointed to a Global Canopy Program report’s estimate that $300 billion annually was needed to meet the world’s conservation challenges.

They also said they were working to structure conservation opportunities that could be supported by private capital.

This year, the Nature Conservancy set up NatureVest to focus on deploying $1 billion in impact capital for conservation over the next three years. This endeavor, supported by JPMorgan Chase, will convene investors to build an investment pipeline across multiple sectors.

“Finding a way to structure private capital into conservation deals is essential if we want to attract the scale of investment needed to effectively protect vibrant ecosystems,” Matt Arnold, head of sustainable finance at JPMorgan Chase, said in the statement.

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