September 13, 2016

New Finance Model Brings Extraordinary Conservation Measures to Life

Aerial view of river winding through rainforest

In 2007, Costa Rica President Oscar Arias declared “peace with nature” and laid out a visionary goal to expand and secure Costa Rica’s national parks, wildlife preserves, and protected seascapes. Many thought the ambitious plan had little chance of success. After three years, the Costa Rican government, conservation NGOs, foundations, and experts joined forces to permanently protect more than 2 million hectares of sensitive habitat — a project named “Forever Costa Rica” — and came up with $57 million in funding for it. As TIME magazine acclaimed, it was “conservation work on a much bigger scale than the world had seen before.” That record was broken in 2014. After 16 years of planning and fundraising, the Brazilian government, NGOs, and public-private funders came up with the largest conservation deal in history: the Amazon Region Protected Areas (ARPA) for Life program, a $215 million deal to secure the resilience of 60 million hectares of 100 areas in the Brazilian Amazon in perpetuity. How were these deals possible?

Project Finance for Permanence

Financial stability is critical in conservation work. These two big deals were reached through a financing strategy called “Project Finance for Permanence” (PFP), an innovative approach to permanent or full funding of large conservation areas. It organizes and finances complex, expensive, and well-defined areas to maintain and protect them with a single closing. Funds are held back until the target amount as well as the disbursement milestones for the government to lead the implementation are reached; everyone involved comes together and signs one agreement. Such deals enable a holistic approach to conservation by crafting environmental, financial, and organizational capacity throughout the participatory process. The PFP is built on three cornerstones: political commitment to a visionary idea, strong investment strategy and rigorous financial plans drawn from Wall Street practices (project finance), and unmatched collaboration between governments, NGOs, and public and private funders.

Lessons Learned for Collective Impact

The idea for the conservation project needs to germinate early on in a political leader’s term in order to secure the requisite support and mobilize resources. Although ambitious, it is possible to close the PFP deal within a single administration’s term (i.e., four to five years). The PFP should be aligned with the country’s environmental goals and international commitments, as well as become a solution to the country’s major socio-environmental threats. Cases show that it is very helpful to have initial commitments to at least one-third of the fund before announcing the idea. To draw the most donors, a mechanism to measure the project’s performance and an accountable government that is open to innovative ideas are necessary. It is also important to have a diverse group of partners, not simply from the environmental sector but also economic and social sectors. In the project’s management, the most important technician would be the deal broker. As the main contact with the stakeholders, the deal broker needs to have political and cultural sensitivity and excellent team management skills with strong international and regional networks.

Hope for Replication

The World Wildlife Fund estimates the annual cost of managing existing protected areas to be USD 2.5 billion per year, whereas the current spending is only USD 800 million per year. The PFP can help address this discrepancy. Conservation areas need to be well designed and managed, sustainably funded, and politically supported — the PFP process addresses all of these components. Three PFPs have been completed thus far and two are currently in development. The model seems to be replicable not only for conservation projects in other parts of the world but also in large-scale social projects or peace processes that require an effective collective impact. I look forward to further innovations.

The views expressed in the Government Innovators Network blog are those of the individual author(s) and do not necessarily reflect those of the Ash Center for Democratic Governance and Innovation, the John F. Kennedy School of Government, or of Harvard University.

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