TY - JOUR
T1 - Impact investing in biodiversity conservation with bonds
T2 - an analysis of financial and environmental risk
AU - Thompson, Benjamin S.
N1 - Publisher Copyright:
© 2022 The Author. Business Strategy and The Environment published by ERP Environment and John Wiley & Sons Ltd.
PY - 2023/1
Y1 - 2023/1
N2 - Impact investments have the dual goals of generating profit and environmental and/or social impact from the same project or enterprise. This article examines recent impact investments in biodiversity conservation—specifically, debt finance in the form of conventional bonds and impact bonds. The proceeds of these bonds finance projects aiming to enhance forest management, sustainable agriculture, endangered species protection, ecosystem service provision, and nature-based solutions to climate change such as REDD+. The article scrutinises whether these dual goals are achievable by evaluating the financial risks and impact risks within each bond's theory of change. Risks stem from projects with vague cashflow forecasts, project sites with low or ambiguous threat statuses, and simplified impact metrics that may measure activities or outputs—rather than impact. Risk mitigation strategies involve using baselines and counterfactuals to establish additionality, and guarantors to protect investors if revenues are insufficient. Implications for biodiversity management and for-profit conservation are discussed.
AB - Impact investments have the dual goals of generating profit and environmental and/or social impact from the same project or enterprise. This article examines recent impact investments in biodiversity conservation—specifically, debt finance in the form of conventional bonds and impact bonds. The proceeds of these bonds finance projects aiming to enhance forest management, sustainable agriculture, endangered species protection, ecosystem service provision, and nature-based solutions to climate change such as REDD+. The article scrutinises whether these dual goals are achievable by evaluating the financial risks and impact risks within each bond's theory of change. Risks stem from projects with vague cashflow forecasts, project sites with low or ambiguous threat statuses, and simplified impact metrics that may measure activities or outputs—rather than impact. Risk mitigation strategies involve using baselines and counterfactuals to establish additionality, and guarantors to protect investors if revenues are insufficient. Implications for biodiversity management and for-profit conservation are discussed.
KW - conservation finance
KW - environmental finance
KW - green bond
KW - hybrid organising
KW - institutional logics
KW - sustainable finance
UR - http://www.scopus.com/inward/record.url?scp=85130256854&partnerID=8YFLogxK
U2 - 10.1002/bse.3135
DO - 10.1002/bse.3135
M3 - Article
AN - SCOPUS:85130256854
SN - 0964-4733
VL - 32
SP - 353
EP - 368
JO - Business Strategy and the Environment
JF - Business Strategy and the Environment
IS - 1
ER -