Restoring forests, wetlands and wildlife habitat is
exciting. Leave it to the bankers to make financing such
environmental projects downright boring.
As climate concerns and other environmental anxieties mount,
Wall Street and global bankers are hammering the complexities
of conservation into the kind of mature, repeatable financial
products bankers sell every day. That the payments are driven
by revenues from carbon credits,
green bonds and sustainable commodities production is an
Earlier this year I attended an invitation-only gathering of
bankers and conservationists at Credit Suisses New York
offices, across the street from Madison Square Park.
The mantra of this event is, scalability,
repeatability, investability, said John Tobin, the
financial institutions global head of sustainability
affairs. Also speaking at the conference were senior executives
from Goldman Sachs Group,
JPMorgan Chase & Co. and big environmental
organizations such as the
Participants at the conference voiced a common theme:
Clients want cookie-cutter deals worth billions of dollars in
timber, agriculture and
water, along with multibillion-dollar infrastructure bond
We get meaningful inquiries right now about
Where can we allocate more capital? said
Kyung-Ah Park, head of the environmental markets group at
Goldman Sachs. Camilla Seth, executive director of
JPMorgans social and sustainable finance group, agreed,
noting that the financial institution has a growing set
of clients who are asking for product in this area.
The bankers and conservationists at the conference agreed
that some sectors of the conservation market are just about
ready to tap mainstream capital to bankroll large-scale
restoration and conservation. Only about $52 billion per year
flows to conservation projects, the bulk of it via public and
philanthropic funds. Thats far short of the $300 billion
to $400 billion needed per year for conservation efforts.
Some offerings have already gone mainstream. Green bond
issues tripled to $36.6 billion from a year earlier. Originally
pioneered by the World Bank and other development finance
institutions, more and more municipalities, states and
corporations are getting into their own bond offerings. Said
Park about green bonds: This is as plain-vanilla as it
gets right now.
Other emerging revenue streams for investors include
sustainable read, premium-priced
food, certified timber and the sale of
credits for carbon storage and other green services such as
the cooling of wastewater runoff through river restoration.
To be sure, fundraising continues to be tough for many
funds. Carbon markets have been volatile, and policy risks
remain maddeningly high. Yet even with the still low market
prices for carbon credits, some forest preservation deals
Californias cap-and-trade market has become one of
the largest new sources of capital for sustainable forestry
One such example is $2 billion, Sydney-based fund manager
New Forests financing and development of the first forest
carbon project registered on the California market. Another is
the 105 million ($122 million) raised by the
Luxembourg-headquartered Althelia Climate Fund to help back new
production of certified sustainable cocoa, coffee and other
products, as well as forest carbon credits for the voluntary
markets in Europe. Althelias fundraising included
15 million from individual investors through special Nature Conservation Notes issued by Credit
Suisse, one of the first such offerings to be available to
noninstitutional investors as well.
Beyond carbon, other ecosystem markets are growing as well.
A private nutrient bank, another green financial institution,
helped farmers around the Chesapeake Bay reduce phosphorus
runoff and sell credits to the Commonwealth of Virginia to
offset the impact of a transportation project for half the
price of a traditional storm water project. In Oregon the
Freshwater Trust is cooling the Rogue River with shade from
native trees and shrubs, paid for by credits from the city of
Medford, which needed to mitigate warming caused by wastewater
The ecosystem markets are starting to work, says
Jason Weller, chief of the Natural Resources Conservation
Services, a unit of the U.S. Department of Agriculture.
Theyre coming to life.
If such transactions can become routine, this Earth Day
could be marked by a planetary turn from degradation to
restoration. We will know we have succeeded when more
people realize that conservation can also be an investable
proposition, that you really can make money in
conservation, said Credit Suisses Tobin.
Nature has to pay for itself. The good news is that it
David Bank is the editor and CEO of ImpactAlpha , an information service
on green and socially responsible investing in San