Welcome to the Conservation Finance Guide. The overall goal is to provide practical tools to support the rapid expansion of sustainable finance mechanisms that generate long-term funding for biodiversity conservation.
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Financial Efficiency
To navigate directly to a Category of Finance Mechanisms within “Financial Efficiency”:
Financial efficiency includes a series of strategies and mechanisms that produce enhanced conservation results (or sustainable development) relative to cost. They can be efficiency gains through operational, fiscal, or social mechanisms yet they are all designed to improve the impact to cost ratio. This is a crosscutting series of tools that can be applied in many organizations, projects, programs, and other situations. Financial efficiency strategies can be implemented in combination with almost all of the other mechanisms described in this taxonomy.
To navigate directly to a Class of Finance Mechanisms:
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Management effectiveness can be defined as strategies and mechanisms that improve the outcomes of management activities though seeking more effective measures, activities, and operations relative to the available budget. Increasing performance relative to expenses can have the same impact as increasing revenue in terms of conservation outcomes. Some examples of cost effectiveness measures include improved human resources management, technology upgrades and maintenance, improved strategic planning, etc. Enormous financial efficiency and effectiveness gains can be achieved through improved public procurement efforts. Governments outsource many activities and investments and through approaches such as green procurement and generally improved oversight of outsourcing, large costs savings and improvement in efficiency can be achieved. One example of an in-depth analysis on cost effective conservation was a cost-benefit analysis performed for soil and water conservation measures in Tanzania (Tenge et al. 2005).
Cost Effectiveness Measures
Numerous cost-effectiveness measures can save money and improve outcomes for government, civil society organizations, and private businesses. Solutions that institutionalize cost effectiveness analysis can be done through regulatory practices, organizational or national policy approaches, and changes in organizational culture or planning practices.
Cost effectiveness measures through regulatory institutionalization
The institutionalization of cost-effectiveness analysis in regulatory practices -for example guiding procurement or investment- can better guide management in pursuing cost-effective decisions.
Cost-benefit Analysis
Cost-benefit is an approach to decision making that includes documenting and evaluating quantified (if possible) economic costs and benefits of a specific policy, program, law or regulation. This analysis supports the identification of the most economically efficient approach to policy and programmes and can help identify and manage social and environmental risks. The use of cost-benefit analysis can be mandated prior to the determination of any major policy or programme. Guidance on when and how to use cost-benefit analysis can be introduced through internal organization regulations or by law.
Technology Upgrade and Maintenance
Business strategies aimed at switching to more cost-effective and environmentally friendly technologies (e.g. fuel efficient cars, energy efficient buildings, improved agricultural methods, etc.) Maintenance strategies are also included when they can expand the life of certain assets. While cost-effective, these strategies might require an initial capital expenditure. They are usually encouraged through internal company policies, regulatory measures or through providing targeted access to capital.
Financial and operational mergers
Merging two or more organizations can produce economies of scale and allow public and private organizations to substantially reduce operational and financial costs. For example, operational costs can be reduced by merging environmental trust funds and protected areas authorities with similar mandates. While not specific to biodiversity, these measures can and should be considered by conservation organizations. The resources saved can be reinvested in conservation.
Human Resources Management
Better management of human resources can improve an organization's effectiveness and efficiency and is critical to achieving cost-effectiveness. A vast literature is available on strategies to improve the management of human and social capital, including through, for example, monetary and non-monetary performance incentives and training. One example is reviewing and enhancing the human resources strategy for a protected area system. While not specific to biodiversity, these measures can and should be considered by conservation organizations. The resources saved can be reinvested in conservation.
Non-State Protected Areas
Formal protected areas governed (and in many cases owned and managed) by a non-state entity such as indigenous peoples and/or local communities; private individuals or organisations; or a combination of these with state involvement. This model allows for the state to forego costs of land purchase in order to establish a protected area, and often results in the management costs of the protected area to be shared between the state and the non-state entity, or carried entirely by the non-state entity.
Nudging
To influence individual’s behavior in a biodiversity favorable direction using psychology rather than financial incentives. The most cited example of a nudge is the etching of the image of a housefly in the men’s urinals at Amsterdam Shiphol airport. Nudging has been applied in natural parks to reduce that incident of visitors bringing home stones by simply changing the text of the signs. In Finland forest owners' landscape management preferences were nudged to improve social efficiency of PES schemes for biodiversity conservation which increased aggregate service provisioning. Can work as a complement to increase the effect of other solutions such as different forms of protected areas and eco- tourism.
Outsources Strategies
The public and private sector outsources part of their operations to more efficient or knowledgeable business partners. The process usually requires the set up of a competitive bidding process and of a quality control process to oversee external partners' performance. It is widely used in both the private and public sector to benefit from economies of scope and scale. While not specific to biodiversity, these measures can and should be considered by government and conservation organizations.
Enhance local budget execution
Local revenues, budgeting and spending impact biodiversity through managing land use, natural resource exploitation, local protected areas, and financing biodiviversity supportive programmes and projects. Guidelines for increasing effectiveness and biodiversity impact of local budgets can enhance impact and direct funds to biodiversity.
Reducing Harmful Impact of ODA
Improve safeguards, standards, policies, screens and their application to minimize potential harmful social and environmental impacts caused by ODA and related aid.
Enhance Public Budget Execution
Measures promoting quality spending of committed funds and removing related obstacles to effective spending. Effective budget execution (also termed delivery) is a percentage of annual public budget allocations that are actually spent by government agencies and can vary from as low as 40 percent to as high as 90 percent. Related obstacles are often due to delays in financial flows or capacity constraints. Incentives (e.g. staff incentives) and support (i.e. additional capacity) can be provided to increase the delivery. While not specific to biodiversity, these measures can and should be considered by conservation organizations.
Remove Barriers for public budget execution - internal
Internal barriers for timely and effective budget execution are often related to financial planning capacity gaps, weak accounting systems, systemic corruption practices, and the absence or poor design or individual performance and incentive systems. These barriers can be addressed through organizational capacity development (people and systems). While not specific to biodiversity, these measures can and should be considered by conservation organizations.
Remove barriers for public budget execution-external
External barriers for timely budget execution are often related to relationships among the treasury and the spending agencies. They may refer to the timing and amount of transfers as well to the clarification and strengthening of management responsibilities. While not specific to biodiversity, these measures can and should be considered by conservation organizations.
Result based budgeting
Planning and strategic management tool seeking to link budget allocations with anticipated results. The introduction of result based budgeting (RBB) contributes to achieving cost-savings and better defining priorities in the allocation of scarce public or private resources. While considered a best practice worldwide, only a few countries fully implement result based budgeting. It can also be referred to as performance based budgeting or outcome-based budgeting. Its introduction in conservation can help to mobilize additional public resources as well as to increase spending effectiveness. Results based budgeting is defined as a budgeting process which revolves around a set of predefined objectives and expected results, which, in turn, justify the resource requirements linked to outputs, and where actual performance is measured using objectively verifiable indicators.
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Public private partnerships (PPP, 3P, or P3) are described by the World Bank Group as “a long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance” (World Bank Group, Accessed January 10th, 2020). In conservation finance, PPPs have been used for improving the efficiency of protected areas management, commercial concessions in protected areas and other sites of interest, watershed management, and a range of other situations. The difference between PPP and pay for service mechanisms is that PPPs are usually established as long term mechanisms whereas pay for success is usually a one time offering (that can be repeated).
One successful example of a PPP is California’s Marine Life Protection Act (MLPA) which led to the effective redesign of the state’s marine protected area network. State environmental agencies signed a Memorandum of Understanding (MOU) with a private non-profit foundation that outlined specific roles for each organization (Fox et al. 2013, Kirlin et al. 2013). The role of the private foundation (the Resources Legacy Fund Foundation) was primarily to raise charitable funding for the network, as well as provide support staff and facilitate stakeholder input in the planning process. Their efforts raised $19.5 million in donations which was combined with $18.5 million in public funds (Living Oceans Canada, 2014). Another important example for conservation is African Parks – an organization that has taken on the management and financial costs for a range of protected areas in Africa.
Social and development impact bonds
A public-private partnership or performance-based financial tool that allows private (impact) investors to provide upfront capital for traditionally public projects that deliver social and environmental outcomes. If the project succeeds, the investors are repaid by the Government (Social Impact Bonds), an aid agency, or other philanthropic funder (Development Impact Bonds) with capital plus interest. If the project fails, the interest and part of the capital is lost. While commonly referred to as a "bond", the solution replicates in essence a payment-for-results scheme. It cannot be compared to commercial bonds, green bonds or other impact bonds as an instrument except in that it seeks to repay capital and provide interest. The approach is also referred to as pay-for-success in the United States and as a social benefit bond in Australia. It can be applied to conservation.
Conservation impact bond (payment for results)
A social and development impact bond where resources are linked to a conservation outcome.
Development impact bond (payment for results)
A social and development impact bond where resources are linked to a development outcome.
Wildlife impact bond (payment for results)
A social and development impact bond where resources are linked outcomes featuring the protection or conservation of wildlife.
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Integrated accounting and integrated reporting (IR) seek to better integrate all forms of capital (financial, manufactured, social, human, natural) into financial reports for companies and for governments. Natural capital accounting and reporting can offer essential insights into a company’s risks and opportunities (see Natural Capital Coalition). Integration of natural capital (and other capitals) into government’s “system of national accounts” - the same system that tracks GDP and other economic indicators - provides government decision makers with a more complete picture of a country’s assets and resource flows. A recently published article in Science magazine tracked the progress of natural capital accounting efforts in countries around the world. Natural capital accounting is becoming increasingly relevant as nature-based solutions are further explored as effective tools for sustainable development.
The Natural Capital Project at Stanford University is a highly valuable source of information on natural capital that works togeher with decision makers looking to invest in nature based solutions and also provides publicly accessible tools for natural capital accounting and valuation.
Natural capital accounting-national accounts
National-public-natural capital accounts measure the stocks of natural capital and flows of services supplied by them. Methodologies and international standards exist for calculating forests, land and water accounts, while more experimental exercise are being piloted for biodiversity and ecosystems. The incorporation of natural capital into national accounts can support better financial and economic decisions as well as influence spending allocations in the long term.
Promoting Natural capital accounting
To encourage the incorporation of natural capital into national and enterprise accounts can support better financial and economic decisions as well as influence spending and investment in the medium to long term. Natural assets are the “the naturally occurring living and non-living components constituting our biophysical environment." They produce ecosystem services that provide great economic benefit to humanity and the planet but tend to receive inadequate financing of policy support. Better economic accounting for natural capital can assist policy makers better incorporate ecosystem services and natural capital in decision making.
Natural capital accounting-natural capital protocol - corporate natural capital accounting
Every business impacts and depends on natural capital to some degree and will better manage risks and opportunities associated with natural capital if they seek to integrate natural capital accounting into decision making. All impacts and dependencies create costs and benefits for the business and society. Understanding these connections can better inform corporate decision makers, investors, and clients. The natural capital protocol provides detailed guidance to enterprises.
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Mainstreaming biodiversity in development is a broad category of strategies that supports the alignment of diverse interests towards multiple sustainable development objectives. The division of various initiatives into silos of separate priorities, institutions, and programs results in high levels of inefficiency in government budgeting, development finance and many other aspects of development. Strategies that improve alignment of diverse actors in the development space can lead to large cost savings and greater efficiency of spending. Some examples for conservation include prioritizing nature based solutions to climate change, integrating watershed management with urban development, integrated planning for SDG targets at the national level, etc. Development of policies that require biodiversity to be protected or compensated are also examples of such mainstreaming (see Compensation and Offsets).
One of the best documented cases of effectively mainstreaming biodiversity is the Working for Water program in South Africa. This project was initiated in response to harmful impacts of invasive plants on water resources and related ecosystems. It worked to mainstream considerations of invasive species into national strategies, policies, and legislation, as well as with local governments and stakeholders. The initiative resulted in tens of thousands of jobs being created to address invasive plants, and millions of hectares of invasive plants being removed (Redford et al., 2015).
Debt-for-Nature Swaps
Through debt restructuring agreements, governments are able to write off a proportion of their foreign held debt. The savings accrued will be channeled into domestic conservation initiatives and climate adaptation programs. This often entails the establishment of a Conservation Trust Fund to channel the funds. Debt-for-nature swaps can target both official and commercial lending, with the former being the most common scheme.
Aid Coordination Strategies
Aid coordination strategies (and/or institutions) can help to improve and guide strategic proposals as well as deliver resources in a more effective manner. Aid coordination strategies are usually established at national and sector levels (e.g. environment).
Increase Biodiversity Component of Climate Aid
Biodiversity related financing within official public assistance provided for climate change mitigation and adaptation. Public climate finance is counted separately from general ODA due to the promise of additionality made by developed countries in climate agreements. Biodiversity may be featured in climate donor strategies more prominently (e.g. Germany or Norway) as clear co-benefits exist with climate adaptation and in many cases with mitigation measures as well. Additional allocations to biodiversity require evidence for climate results out of biodiversity focused interventions (e.g. ecosystem based adaptation) and political lobbying. Climate finance is delivered bilaterally (e.g. German International Climate Initiative-IKI) and multilaterally (e.g. the Green Climate Fund).
Penalties and other compensation for unplanned environmental damage
Compensation paid by a company and/or individual condemned for an environmental crime and/or unintentional damages to the environment. Prevalent environmental crimes include illegal wildlife trade, illegal waste, manmade disasters and spills, etc. Charges can include fixed fines, remediation costs, and economic damages. The compensation is usually determined by the law. The amount of the compensation might be determined by an assessment of economic loss and remediation costs.
Compensation for planned environmental damage
Financial or other compensation paid by companies, private individuals, or governments for planned environmental damage as part of infrastructure or project development. Compensation levels and forms of compensation are usually determined by law and can be fixed amounts, calculated relative to investment or company sizes, or based on remediation costs and economic damages.
Increasing Official Development Assistance (ODA)
Increasing ODA flows through better programming and delivery, training on grant preparations or other targeted efforts. Official agencies, including state and local governments, or their executive agencies channel aid to recipient countries with the objective to address environmental challenges. The donor(s) transfers financial resources to awarded programmes and projects directly or indirectly through accredited agencies, private companies, and civil society organizations (NGOs). Although the most common disbursement is grant financing, funding may come in a variety of forms, including concessional loans, guarantees and equity. For the latter modalities in particular, OECD guidelines can be applied to define the type of aid provided.
Increase biodiversity related bilateral ODA
ODA may be provided bilaterally, from donor to recipient. Biodiversity may be featured in bilateral donor strategies (e.g. Germany or Norway) but priorities vary greatly and change frequently among donors. Additional allocation usually requires the provision of evidence for results and political lobbying. Priorities can be negotiated both nationally and internationally.
Multilateral ODA
Biodiversity related financing in ODA channeled through a multilateral development agency such as the United Nations or the World Bank. Biodiversity may be featured in multilateral donor strategies. Additional allocation requires the provision of evidence for clear results and political lobbying. Priorities are negotiated both nationally and internationally. The Global Environment Facility and the Green Climate Fund are among the largest multilateral providers.