At the end of last year news emerged of an important project in the Seychelles. NatureVest, an American based organization, is in the process of negotiating a debt-for-nature swap, where NatureVest will buy, at a discounted rate agreed with creditors, $80 million of Seychelles foreign debt in return for long-term commitments to create one of the world’s largest Marine Reserves. Profits from this deal will go into establishing a special fund in the Seychelles that will pay out money for marine conservation and climate change adaptation work.
Debt for nature swaps are not new. They were developed in the mid 1980s by WWF, and represented a way of leveraging the impact of conservation organisations. They became popular because of the assumption that crippling debt hindered developing countries in saving their nature, and creditors became happy to shift some of their debts at a discount, because it was becoming clearer that many developing countries were unable to repay loans. These deals gradually fell out of favour in the 2000s when debt reconstruction and cancellation gained pace and there was growing research suggesting the benefits of debt for nature swaps were not overwhelming – these arrangements have been criticised for benefiting conservation organisations rather than the debtor country, and shifting large areas of land into the control of environmental groups in ways that has not always been empowering or beneficial for local communities.
A debt for nature swap in Seychelles is therefore not particularly new. However, what is different is that the deal is being financed through private investors, and that NatureVest is set up exclusively to tap into new financial markets for nature conservation. This deal can therefore be seen as one of the most ambitious efforts by environmental groups to turn to private capital to save marine ecosystems and fisheries. Other emerging projects being brokered by NatureVest in the US and Palau include buying fishing rights from governments and then selling them back to fishers on the condition they fish responsibly, or simply keeping the fishing rights so as to stop fishing all together.
This turn towards ‘financialisation’ in the marine sector has become increasingly evident in the last years. Sian Sullivan explains what this financialisation of conservation work entails: First, the modelling of both conservation practice and understandings of non-human natures in terms of banking and financial concepts. This sometimes referred to as ‘market-based’ tools for conservation, of which eco-labels and payment for ecosystem services are good examples. The second is the turn to banks and financiers as a new source of capital and investment for conservation. It is this second aspect that is really taking off now.
The case for ‘impact investments’
The Nature Conservancy, the world's biggest environmental NGO and JPMorgan Chase, America’s biggest bank, created NatureVest in 2014. It I also advised by EKO Asset Management Partners that specializes in ‘impact investments’ – the term used to describe investments that are profitable, but supposedly have a positive social or environmental effect. NatureVest forms part of a larger coalition of like-minded organisations that also formed 50in10. The same organisations are at the forefront of the World Bank initiated Global Ocean Partnership. As we described in an earlier post, they all share similar, and unconvincing, views on the causes of overfishing and marine ecosystem damage and they are agreeing on what needs to happen to sort this out.
One of the most important justifications for turning to financial markets – or impact investors – for extra funding is that traditional sources of aid are stagnating. According to these leading environmental organisations, this represents a major threat to saving marine ecosystems. NatureVest, along with EKO, published a report on this as one of its first major publications, entitled “Investing in Conservation”. The forward was written by the CEO of Commercial Banking at JPMorgan Chase and he described that:
"I have spent much of my career working with the Natural Resources investment banking group at JPMorgan Chase, and the issues surrounding the health of our ecosystems resonate strongly with me. Mobilizing private capital to invest in and protect critical natural assets is essential, as traditional sources of philanthropic and government funding are plainly inadequate for the challenge. What’s exciting about this report is that it highlights a growing source of capital for conservation investments that has – so far – been under examined: capital from impact investors that targets a blend of meaningful environmental benefit and financial return."
The report went on to describe the major ‘funding gap’ in conservation.
"Two facts are fueling the emergence of conservation impact investing: A growing number of investors want to use their capital to drive positive environmental change, and current financing sources are insufficient for the expanding conservation challenges around the world…The need for more private capital for conservation is clear. Judging by contributions to The Nature Conservancy, philanthropic funding in the sector has been essentially flat, in inflation-adjusted terms, since the late 1990s. Government funding is generally flat as well, and in some cases it is declining. Annual global funding for conservation is estimated at roughly $50 billion, primarily from government, multilateral agency, and philanthropic sources. But these sources fall far short of what multiple researchers have identified as the $300-$400 billion global annual need for conservation investment"
This is a remarkable claim. The gap in funding needed for global conservation efforts is somewhere around $350 billion a year. NatureVest cites multiple researchers who have come up with these figures. The main report they rely on stems from a joint publication by WWF Switzerland, Credit Suisse Bank and Mckinsey & Co consultants, presented in January 2014, which in turn admitted there was no reliable methodology for estimating the financing needs for conservation, but three other reports provided similar estimates for funding sustainable agriculture, climate change adaptation and the cost of conserving bio-diversity outside protected areas. So the $300-400 billion shortfall for financing conservation was hatched. Following the same logic, 50in10 have also come up with a more precise figure of the funding gap in fisheries, presented in their ‘theory of change’ document for how the world needs to transition to sustainable fisheries:
"Economic experts calculate that the total amount that governments need to invest to rebuild world fisheries ranges between US$130 billion and US$292 billion in present value, with a mean of US$203 billion. This total transition cost would be spread over the time required to rebuild fisheries within every country. In contrast, recent studies of the handful of philanthropies that focus on oceans estimate that they invest close to US$300 million annually to support marine conservation, mostly in the United States and Europe. Currently, The World Bank estimates that its multi-year fisheries-related investment is approximately US$800 million. While significant, these investments pale in comparison to the scale of the problem of overfishing. This discrepancy in funding highlights the need to create new partnerships so that we can reduce duplicative efforts, spread workable ideas faster, and increase both the amount and effectiveness of limited funding for fisheries."
The figures cited about the ‘funding gap’ come from a study about the scale of overcapacity in the world’s fishing fleets, and it represents a fairly crude estimate on what would be the costs involved if governments had to fund a reduction in overcapacity and end subsidies. The use of this data to come up with a ballpark figure for how much extra investment NGOs need to raise from private markets to achieve marine conservation is a complete fabrication.
In all of these reports there are imaginative ways of attracting new impact investors. WWF, Credit Suisse and Mckinsey see great potential for conservation work to target “ultra high/high net worth individuals”, i.e. the 1% of the world that owns 50% of the world’s wealth.
"Currently, the bankable assets of the wealthy are estimated to be USD 46 trillion. On a global scale, this asset base is projected to grow at 8% over the next years. If 1% of these new assets and of reinvested existing assets were allocated to conservation finance, around USD 85 billion per year would become available."
50in10 have other ideas of bridging the funding gap. Although they describe traditional sources of development funding to be far too small, they see a sequencing of funding, where public financing paves the way for private investment in a virtuous cycle:
"Initially, this work will be funded primarily through philanthropic and government grants and some low-interest impact loans. As these projects succeed and the economic pay-offs of sustainable fisheries are clear, we expect to inspire development of a more diverse set of business ventures linked to sustainable fisheries that will, in turn, attract a broader group of impact investors. Eventually, this cycle will lead to resilient fisheries that are supported by private capital with limited government funds focused on monitoring and enforcement. Philanthropic and international aid will then be freed up to move to other fisheries and begin this virtuous cycle again."
We can see here why the shift towards private financing is also being encouraged by traditional multi-lateral donors such as the World Bank – here is a way to get serious bang for your buck. We see a vision of the future based on privatization with a minimal role for the state focused only on monitoring and enforcement – ensuring the private property of investors is secure.
But aren’t the rich destroying the earth?
Against this backdrop of the financialisation of green NGOs, is global capitalism that has accelerated the immense destruction of the natural environment. The system of unfettered growth that creates the ultra high net worth individuals lays waste to ecosystems and the communities who depend on them, while also hollowing out state capacity to manage ecosystems. This is a cycle that contrasts to the virtuous one depicted by 50in10. Dan Brockington and Jim Igboe are two of the leading thinkers on how neo-liberalism has engulfed mainstream conservation. They describe the world according to neo-liberal conservation NGOs as:
"…a world in which it is possible to create value ad infinitum meaning that there are no losers (or at least no excuse for people to be losers) and little need for compromise, since there are no longer any fundamental conflicts. In this putative world, every new problem becomes an opportunity for profit and economic growth. Nature is protected through investment and consumption and conservation can be achieved without addressing the difficult and systemic inequities and power relationships that are inextricably linked to so many of our global environmental problems today."
One doesn’t have to be a cynic to note the contradictions in banks such as JPMorgan and Credit Suisse partnering up with green NGOs to save the planet when their banking assets rely on profits from some of the world’s most destructive industries. Indeed, merely months after releasing their report on how to save the world’s oceans through increased private investment, Credit Suisse played a leading role in providing $850 million investment in a government tuna-fishing venture in Mozambique. The deal was so secretive all of the main donors working in Mozambique threatened to end their support to the country if more transparency wasn’t forthcoming. The money raised by Credit Suisse is buying 26 long line vessels and 6 patrol boats that will be under the command of a private firm. Investors will received fantastic returns (8.5% over 6 years), but the impact on the stressed marine ecosystem in Mozambique of yet more commercial boats is highly uncertain.
The attentions of green NGOs should be on the social and environmental impact of 99% of the wealth held by the ultra wealthy, rather than strategizing on how to help them invest 1% of their vast fortunes in green projects.
If one agrees with this negative relationship between modern day capitalism and the environment, then it is alarming that green NGOs have become such staunch bastions of neo-liberalism. This is quite a turn around – it was once the case that green NGOs had a public image of being anti-big business. But increasingly the biggest green NGOs have turned their back on activism, they look and act like big businesses and have a seat at the boardroom. If one looks at the list of individuals leading the Green NGOs today, more and more come with MBAs and CVs from the banking sector. Kenneth Macdonald wrote an essay charting these transitions within the International Union of Nature Conservation, where a business friendly approach emerged in the mid 2000s, alienating many traditional IUCN members. Genevieve LeBaron, co-author of the book “Protest Inc”, describes the upshot for activism:
"A consequence of environmental NGOs opting to co-operate with corporations has been that more effort has gone into market-friendly and consumer-driven activism – eco-certification and eco-labeling, for example, which helps legitimise rather than challenge business as usual…. The great danger of corporatisation is that while environmental NGOs tinker at the edges …overall consumption is rising exponentially. So too is the power and profit of the oil and retail corporations whose unsustainable business models drive climate change. Grassroots environmental movements and groups continue to resist and challenge corporatisation. But this does not mean they are unaffected by it. Our research has found that at as global leaders praise corporate-NGO partnerships, politicians, police forces and court rooms in nations such as the UK, US and Canada treat street-level activists — particularly those involved in direct action — increasingly harshly. When credible alternatives are smeared by association, such actions only enhance the power that corporations have to weaken environmental activism"
The rising power of green NGOs achieved through innovative financial investments must therefore raise serious questions about democratic accountability. Private sector investments in conservation are not as transparent as many traditional development aid projects, and private sector investors don’t tend to demand the same level of ethical scrutiny of their funding than public authorities. More importantly, perhaps, through private investors, organisations such as NatureVest are becoming more influential, able to set the terms of marine policies simply because they can leverage the most capital (or promise to do so in the future). Many smaller groups are getting caught up in the rhetoric of public private investments for this promised “fisheries transition”, based on ideas of a massive increase in investments, some of which may trickle down to smaller NGOs and activists. It is interesting to read an article written in 1991 summarizing the views of debt for nature swaps from a meeting of indigenous people’s organizations in Brazil:
"The conversion mechanism which exchanges foreign debt for environmental benefits, contrary to what it suggests, does not contribute to the development of environmental policies consistent with the democratic management of natural resources, which might in reality lead to environmental conservation and a better quality of life for the local population. It forms part of a more general strategy for converting and administrating the debt, re-affirming the creditors' political and economic domination over the debtors, within a development model, which commercializes life in all its aspects…. The NGOs alternative of acting directly, without becoming entangled in the straitjacket of debt conversion, and with a clearer and further-reaching political focus, is one of the ways of bringing back into the centre of the debate the need to move forward in the construction of a development model which unites ecology, social justice and democracy"
The model that “commercializes life in all its aspects” is far more powerful today than it was twenty years ago.
So is more money – either through development aid or impact investments – always the answer to saving the problems in fisheries? This is precisely what we are being told by so many leading organisations in marine conservation. Yet the logic of needing more money to save the world’s environment needs to be questioned – there is no evidence that billions of dollars invested in development and conservation activities by the world’s leading donors and environmental NGOs has had a resounding positive impact, so why should we believe that massively increasing these types of funding, and trying to make more profits along the way, will automatically solve the complex problems in fisheries and marine conservation? Organisations like NatureVest and 50in10 advance solutions to solving fisheries that rely to a large part on restricting access to fisheries and purchasing marine protected areas. This will have uncertain impacts in many places and there is nothing certain to suggest what is a good outcome for impact investors is good for poorer people. How are these organisations going to balance the ambition of saving marine ecosystems with the needs of both poorer communities and their new investors from the ultra rich? It is surely the case that balancing the needs of people with nature conservation will require fewer profits for the wealthy, not more. We need to challenge the mindset that sees wealth from nature only as “exchange value” (the making of profits). We therefore need to have a more serious debate on the implications of financialisation in marine conservation work, and what are the potential risks to small-scale fishers.
Author: André Standing