FROM W ALDEN TO W ALL S TREET FRONTIERS OF CONSERVATION FINANCE James N. Levitt • Director, The Program on Conservation Innovation at the Harvard Forest • Research Fellow, Ash Institute, Harvard’s Kennedy School of Government • Coordinator, Conservation Leadership Dialogue, Lincoln Institute of Land Policy Ash Institute Online Chat, 2/27/06 1
“Though I do not believe a plant will spring up where no seed has been planted, I have great faith in a seed. Convince me that you have a seed there, and I am prepared to expect wonders.” H ENRY D AVID T HOREAU 2
Investment in conservation is an expression of our faith in the future Faith in the future of essential natural systems and awe-inspiring natural wonders Faith in the future of our families and communities And, increasingly, faith in the ability of well-conceived investments to yield reliable financial returns We are, in essence, planting seeds that should bear fruit for many generations 3
Keeping the faith can be difficult in the face of daunting challenges Federal conservation programs have seen budget cuts (for example, the Land and Water Conservation Fund); in many states, budgets for land and biodiversity conservation are also down from recent peaks (for example, in Massachusetts) Global declines in wildlife populations continue apace Estimates are that, if we are to establish a comprehensive national network of conservation lands, annual capital investments in conservation would have to double or triple Is such growth in capital availability for conservation even conceivable? 4
With i innov nnovation i n in n conser ervat ation n financ nce, e, it is indeed c ndeed conc oncei eivabl ble Cont ontributor ors to o thi his l line of ne of thi hinking includ ude: e: Pat at C Coady oady, former US Executive Director, World Bank; Partner, Coady Diemar Partners, DC & New York • Pet eter S Stei ein, General Partner, The Lyme Timber Company, Hanover, NH • Je Jeff Mo More re, Partner, The Accord Group, Washington, DC (for more, see www.islandpress.org ) 5
What is landmark conservation innovation? The classic example is the creation in 1872 of the world’s first national park at Yellowstone, following the 1864 precedent at Yosemite. The National Park idea has proved to be: Nov ovel el, , demonstrating a spark of creativity Sig Signif ific icant from a policy or strategic perspective Meas easurabl bly ef effective, using an objective metric Trans nsfer erab able to other organizations/jurisdictions, and Endur nduring ng, for more than 130 years. 6
Where and when did we first invest in land conservation in North America? 7
Consider Boston in the 1630s Puritans reformers, led by John Winthrop in Boston, came to Shawmut at Reverend Blackstone’s invitation Having brought the company charter to Boston, the Mass. Bay 1756 Map of Boston Company assumed the right of self-governance John Winthrop 8
These self-governing people taxed themselves to raise money to buy open space in 1634 A creation of of the he peo people : Boston’s freemen voted to tax each household to buy Blackstone’s land for a Common; it was used to pasture privately owned cows, for a common military training ground, and soon thereafter for public recreation Regul gulat ated ed by the peopl ople : in 1640, Bostonians passed the first of several ordinances regulating the Common’s use, avoiding any “tragedy of the Commons” (a phrase of the 1960s) Man anaged for or the he peo people : by the 1660s, town constables were sending the “local gallants and their marmalet-madams” home from evening strolls by 9 pm 9
And with ongoing citizen stewardship, the Common “shall not perish from the earth” Boston’s citizens have repeatedly defended the Common from the British soldiers and developers Neighboring properties, from the State House to private residences, benefit enormously from the 1756 Map of Boston Common’s amenities 10
We are seeing similar initiatives in the early 21 st century Massachusetts Community Preservation Act: the “Great and General Court” of Massachusetts in 2000 devolved to cities and towns the right to tax themselves to raise money for conservation, historic preservation & affordable housing 100 cities and towns have adopted the CPA since then, unknowingly retracing the Puritans actions of 1632 Conservation bonding initiatives have succeeded with enthusiastic voter approval from coast to coast in the past decade (see Ernest Cook and Matt Zieper, Ch. 3) 11
The CPA’s impact has continued to grow in financial scale & geographic scope CPA Funding (in Thousands) $25,000 As more towns and cities approve the Community $20,000 Preservation Act, total funding levels continue to $15,000 increase -- $10,000 from: $26 million in 2002 $5,000 to: $50 million in 2005 $- FY 2002 FY 2003 FY 2004 FY 2005 Recreation Historic Housing Open Space 12
Aldo Leopold and conservation incentives Leopold is considered the father of wildlife management (Yale, USFS, Wisconsin) He was deeply engaged in conservation on both public (co-founder of the Wilderness Society) and private land 13
Aldo Leopold understood the importance of federal land protection... “Let me be clear that I do not challenge the purchase of public lands for conservation. For the first time in history we are buying on a scale commensurate with the size of the problem. I do challenge the assumption that bigger buying is a substitute for private conservation practice. 14
… but knew that cross-sector collaboration was essential to reach conservation goals “Bigger buying, I fear, is serving as an escape-mechanism – it masks our failure to solve the harder problem. The geographic cards are stacked against its ultimate success. In the long run, it is exactly as effective as buying half an umbrella. …The thing to be prevented is destructive private land use of any and all kinds. The thing to be encouraged is the use of private land in such a way as to combine the public and private interest to the greatest degree possible… 15
… and he accurately predicted the need for innovation in the field “This paper forecasts that conservation will ultimately boil down to rewarding the private landowner who conserves the public interest. It asserts the new premise that if he fails to do so, his neighbors must ultimately pay the bill. It pleads that our jurists and economists anticipate the need for workable vehicles to carry that reward.” -- Aldo Leopold, “Conservation Economics,” Journal of Forestry, 1934 16
Ecosystem services markets are emerging – and raising substantial amounts of capital Consider just two examples: Private companies are competing to provide restored wetland and wildlife mitigation banks in Collier County, Florida (see Chapter 10) Corporations (e.g., TIMOs) and private individuals are investing in sustainable forestry projects that benefit from the sale of conservation easements 17
We know that there are three essential elements to conservation innovations in the 21 st century Hum uman r an res esou ources – the people needed to implement the great ideas (Pat Coady, Chapter 2) Nat atur ural r res esou ources – the resources meriting protection (Peter Stein, Chapter 5), and Fi Financ nancial r res esou ources – the financial and budgetary resources required to pay for the initiative (Jeff More, Chapter 11) 18
< End of introduction > 19
Where are we going in conservation finance? Watch five areas: 1. Traditional local and state bond facilities (Land Vote) 2. Novel tax incentives (transferable credits, NMTC) 3. Conservation investment banking (debt swaps, issuance of corporate paper by largest players) 4. New budgetary tools (Infrastructure, Farm bills) 5. New markets (mitigation markets, emissions trading) 20
New seeds will be planted… expect wonders 21
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