2016 Report Finds Private Investment in Conservation Has Reached $8.2 Billion, Representing 62% Growth in the Sector in Just Two Years
This report builds upon the 2014 publication, Investing in Conservation: A landscape assessment of an emerging market, and tracks the burgeoning field of conservation investing – investments that aim to achieve environmental conservation objectives while also delivering a financial return – in sustainable food and fiber production, habitat protection, and clean water. Despite significant growth in commitments and investors’ expectations to raise increasing amounts capital for these categories going forward, the report echoes earlier findings that it is challenging to identify conservation investments with the right mix of risk and returns.
- Conservation investing experienced dramatic growth after 2013, as total committed private capital climbed 62%2 in just two years from $5.1B to $8.2B.
- Investments in sustainable food and fiber led the way, accounting for $6.5B in private capital committed during the decade covered by the report. Another $1.3B went to habitat conservation, while investments in improving water quality or quantity totaled $400 million (M).
- Investors have confidence in stable returns, as 31% of all respondents anticipate rates of return between 5% and 9.9%. Among for-profit respondents, half expect returns of 10% or more, suggesting that conservation-oriented investments are performing well when compared with traditional strategies.
- Over $3B in additional private capital remained on the table in 2015 as investors continued to seek out deals that met criteria for both environmental and financial returns. A majority of respondents identified a lack of deals with the right mix of risk and returns as the biggest obstacle to the future growth of conservation investing. Still, almost all of these investors said they planned to raise or reallocate more capital for these investments in the next three years than they had in the previous three.
- Private capital is beginning to reach emerging markets. While the vast majority of investments in habitat and water conservation remained concentrated in North America, private finance for sustainable food and fiber production was more evenly dispersed between North America (33%), Latin America (29%), Oceania (19%), and Africa and Asia (about 9% each).
The report, “The State of Private Investment in Conservation 2016: A Landscape Assessment of an Emerging Market,” was conceived of and supported by an Advisory Committee comprised of representatives from JPMorgan Chase & Co., The Nature Conservancy, the Moore Foundation, the Packard Foundation, Encourage Capital, Credit Suisse and Cornell University. The report was authored by Forest Trends’ Ecosystem Marketplace, and presents findings from a survey of 128 banks, companies, fund managers, family officers and non-governmental organizations.
First-of-Its-Kind Report Finds $23 Billion Global Market for Investing in Conservation, $2 Billion from Private Investors
This 2014 report documented the first-ever survey of conservation impact investing and revealed a market of approximately $23 billion between 2009-2014. While the report found that investments in this space were expected to more than triple between 2014-2018, findings also indicated that a substantial amount of potential private capital had not been deployed, demonstrating a need for a significant increase in the number of risk-adjusted investment opportunities.
The survey shows that the approximately $23 billion committed to conservation impact investments from 2009-2013 fell into three main categories:
- Water quantity and quality conservation, including investments in watershed protection, water conservation and storm water management, and trading in credits related to watershed management
- Sustainable food and fiber production, including investments in sustainable agriculture, timber production, aquaculture, and wild-caught fisheries
- Habitat conservation, including investments in the protection of shorelines to reduce coastal erosion, projects to Reduce Emissions from Deforestation and Degradation (REDD+), land easements, and mitigation banking
Other Key Findings:
- Of the three categories of conservation investment studied, Development Finance Institutions (DFIs) invested largely in water quality and quantity projects ($15 billion), while private investors invested largely in sustainable food and fiber production (about $1.2 billion)
- Of the nearly $2 billion already invested by private investors, 80% came from only 10 sources
- Private investors expect to deploy $1.5 billion of already-raised capital over the next five years, and to raise and invest an additional $4.1 billion
- The total market is expected to increase to $37.1 billion in the next five years
- While there is not a shortage of money for conservation impact investment, surveyed investors say there is a shortage of investable projects and opportunities for impact investment in the market. They say that they need more deals with adequate risk-return ratios, and seasoned management teams
The report, “Investing in Conservation: A landscape assessment of an emerging market,” was co-authored by EKO Asset Management Partners and The Nature Conservancy’s NatureVest division. It was overseen by a steering committee that also included the David and Lucile Packard Foundation, The Gordon and Betty Moore Foundation, and JPMorgan Chase & Co. The report presents findings from a survey of 56 investors, including five for-profit and nonprofit development finance institutions (DFIs) and 51 private investment organizations.