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Conservation Finance describes the practice of raising and managing capital to support land, water, and resource conservation. Conservation financing options vary by source from public, private, and nonprofit funders; by type from loans, to grants, to tax incentives, to market mechanisms; and by scale ranging from federal to state, national to local. Conservationists have traditionally relied upon private, philanthropic capital in the form of solicited donations, foundation grants, etc., and public, governmental funds in the form of tax incentives, ballot measures, bonding, agency appropriations, etc., to fund conservation projects and initiatives. Although governments and philanthropists provide a moderate amount of funds, there is a shortage in the capital required to preserve global ecosystems. On an annual basis, investors must allocate $300 to $400 billion to meet worldwide conservation needs. From this amount, funders only provide approximately $52 billion per year to conservation finance. Increasingly, conservationists are embracing a broader range of funding and financing options, leveraging traditional “philanthropic and government resources with other sources of capital, including that from the capital markets." These non-traditional sources of conservation capital include debt-financing, emerging tax benefits, private equity investments, and project financing. These additional sources of leverage serve to enlarge the pool of financial capital available to fund conservation work worldwide and, as this financial capital is invested, the asset portfolio of conserved land, water and natural resources is grown.
Green Bonds
Green bonds are liquid investment vehicles that raise capital for conservation efforts and environmentally stable practices in general. Investors commit their capital to these bonds and the money is then allocated towards green initiatives. Investors range from private corporations and firms to municipalities and even state governments. Conservation efforts include preserving endangered watersheds and rainforests. Over time, the investors would hypothetically receive a profitable return from these initial investments. Many financial professional argue that these green bonds symbolize a historic shift from investing in fossil fuel-based industry to climate change mitigation. They speculate that this would attract more investors and create more diversified portfolios among this base. The first Green Bond initiative was San Francisco's Solar bonds authority to finance both conservation and local renewables, placed on the ballot and approved by voters in 2001 and incorporated into its Community Choice Aggregation program. In the late-2000s, the World Bank Treasury and the IFC pioneered these investments. In 2013, the IFC issued about $3.7 billion worth of green bonds to the private sector. Green bonds also consistently achieve high security ratings from bond rating agencies. For instance, the bonds issued from the IFC and the World Bank generally receive AAA/Aaa. This indicates a high level of quality and security for investors who seek to enter this market.