Fund Solutions

‘Green List’ Bonds Could Close Marine Funding Gap

Planet Tracker says creative new funding instrument can drive private investment to Marine Protected Areas.

The development of debt instruments based on the IUCN Green List of Protected and Conserved Areas could help to close a US$100 billion funding gap that is preventing marine protected areas (MPAs) from reaching their conservation goals, according to Planet Tracker. Research by the non-profit think tank has found two-thirds of MPAs have inadequate budgets to meet basic management needs and nine in ten have inadequate staff capacity.

The IUCN Green List is a global standard of best practice for area-based conservation overseen by International Union for Conversation of Nature (IUCN), which operates a certification programme for protected and conserved areas, including MPAs, that are effectively managed and fairly governed.

Launching its research at the UN Geneva Biodiversity Meetings, Planet Tracker said a “fundamental shift” in the approach to financing ocean conservation is “urgently needed”. François Mosnier, Planet Tracker’s Head of Oceans, said the Green List bonds would be a new financial instrument that would provide additional funding for MPAs, boosting their efficiency.

“MPAs are struggling and 70% fall short of their goals,” he said. “This is a major worry because it provides ammunition to those opposed to MPAs. This issue should be addressed as a matter of urgency.”

Signatories to the UN Convention on Biological Diversity met in Geneva last month to pave the way for the signing of the post-2020 Global Biodiversity Framework (GBF) ahead of COP15 in Kunming in August, but progress was widely considered to have been limited.

Alongside a new framework recently launched by the Taskforce on Nature-related Financial Disclosures, the GBF will provide guidance to corporates, investors and policymakers on managing nature risks and impacts.

The IUCN is the global authority on safeguarding the natural world and draws on the knowledge of 18,000 experts from 1,400 member entities globally, which includes governmental and civil society organisations.

Closing the gap

The aim of the Green List bonds is to bring more private sources of investment into MPA funding, complementing public and philanthropic money.

The bonds would link funding to conservation efficiency, a “key idea” for closing the gap and requiring “relatively simple steps”. These include estimating the funding required, the conservation goals to be met, establishing time-bound objectives to meet them, and deciding on a way to measure conservation progress.

While there are a number of measurement solutions, Mosnier said the IUCN’s Green list is a “robust, scalable assurance mechanism”. Protected areas apply to join the list and a group of experts assess the area.

To create a bond using the Green List, one or several MPAs in a given jurisdiction would generate a management plan, including a detailed budget and timings to be in line with Green List standards. Investors would then pay the principal to the MPA authority, which is then distributed to each MPA. The funds received would help MPAs to improve conservation efficiency so they can apply to join the Green List.

Every time an MPA attains Green List status, the MPA authority refunds investors, plus interest. If MPAs do not secure green list status, investors would receive only a portion of their investment.

By providing payment for performance and independent verification of results, the List is creating opportunities for investors and de-risking public funding, said Planet Tracker. Funding from investors will enable protected areas to achieve conservation efficiency, and therefore to join the IUCN Green List. On receipt of Green List status, investors are refunded plus interest by the relevant authority.

“Many MPAs are established with good intentions but lack sufficient management and enforcement to achieve conservation goals efficiently. These are what we call ‘paper parks’ – and there are plenty out there. But our research shows that most of them could be meeting their objectives with the necessary funding and targeted performance improvements,” said Mosnier.

“The Green List standard is creating a race to the top in terms of efficiency. By providing payment for performance and independent verification of results, the List is creating opportunities for investors and de-risking public funding. This shift will hopefully see broader recognition and reward of best practices and results in nature conservation down the line.”

Advantages for investors

Planet Tracker said the Green List bonds would offer attractive risk/reward for investors, depending on the conditions agreed and a replicable, scalable model for future investment. Mosnier added that investment in MPAs offered “spill over” benefits for economic operators in the area, with the potential to improve local communities and businesses in which investors have a stake.

James Hardcastle, Head of Protected and Conserved Areas at the IUCN, said “teething problems” over transaction costs, instrument and interest structure, and the political landscape would smooth out over time.

“The more bonds that are issued, the easier the process will become. It’s also important to recognise that it’s not a ‘one and done’ thing; marine protection best practice is constantly evolving along with our understanding of climate risks. MPAs will need to update their management plans as they go or face losing Green List status,” he said.

Mosnier added: “These Green List bonds would be similar to many ESG bonds, which have proven to be scalable and replicable. Moreover, scientific literature suggests there is a good return on investment in marine conservation projects.”

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