Market News

 February 27, 2007
The Business Case for Biodiversity

 Financing conservation projects with capital from institutional investors will gain importance in the coming years, and the market for so called ethical -- especially ecologically sustainable - investments is growing consistently, says a new study from PricewaterhouseCoopers (PwC).

Sustainable Investments for Conservation - The Business Case for Biodiversity asserts that through financial engagement of sustainability-orientated investors it could be possible to raise additional money for the financing of conservation.

The study, conducted on behalf of WWF Germany, investigates the extent to which projects which conserve biological diversity can be run in an economically profitable way, so that they attract the necessary capital from private investors ('sustainable investments'). The result is an innovative entrepreneurial concept for preserving biological diversity that invests in privately run, profit-orientated nature conservation projects worldwide.

The study starts with the assumption that many nature conservation projects are economically viable, i.e. make a profit, and therefore constitute an interesting investment opportunity. This concerns in particular those nature conservation projects that are able to ensure the long-term protection of valuable natural areas and therefore biological diversity by means of strictly-controlled sustainable use of individual natural resources.

The concept of 'protecting through sustainable use' is also one of the priority aims of the UN Convention on Biological Diversity and is regarded by all the big nature conservation organisations as a meaningful and necessary supplement to the usual conservation concepts. The World Bank, the OECD and the WWF have identified five natural land use concepts that are simultaneously fulfilling economic as well as ecological and social criteria: sustainable ecotourism, sustainable natural forest and plantation management, afforestation projects that generate CO2 reduction certificates under the 'Clean Development Mechanism'(Kyoto Agreement), and the sustainable use of wild animals and organic farming.

This study focuses on the following questions:

  • What is the market situation and competitive environment for sustainable investments?

  • How can projects that promote nature conservation be designed to be profitable and what are the main factors that must be fulfilled in order to achieve this?

  • What are the political, legal and macro-economic opportunities and risks that need to be observed in connection with such foreign investments and what measures are needed to take account of them?

  • How can a company which is supposed to preserve biological diversity be structured under company and tax law considerations?

The continuing destruction of nature and loss of biological diversity have reached alarming proportions, notes the study. Previous measures, such as extending conservation areas, have proven to be insufficient in halting this trend. In the apparent conflict of interest between conserving nature on the one hand side and economic development on the other, nature conservation usually comes off worse.

Implementation of projects which protect through sustainable use and the concept of 'sustainable development' make innovative solutions for the long-term financing of conservation areas and the management of important natural resources more necessary than ever before, says the study. The model of "Sustainable Investment Holding" is put forward as suitable for coordinating such a strategic collaboration between institutional investors and environmental organisations.

Read the study here.

Source: PricewaterhouseCoopers.