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New report highlights successes in conservation finance projects

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In 2015, the U.S. Department of Agriculture’s Natural Resources Conservation Service (NRCS) launched a new initiative to fund promising conservation finance projects through its Conservation Innovation Grants (CIG) program. This innovative effort was spurred by the belief that attracting additional private sector funding to private and working lands conservation could increase the pace and scale of conservation adoption by farmers, ranchers, and private forest landowners.

NRCS funded a diverse cohort of conservation finance projects, ranging from consumer-driven certification and labeling programs to urban green infrastructure to pay-for-success approaches for water quality improvements. A new report published by the Conservation Finance Network and Gordian Knot Strategies highlights the value of these initiatives. The report finds that overall, of the 25 CIG-funded conservation finance projects funded by NRCS between 2015-2017:

  • 16 (64%) achieved on-the-ground conservation outcomes;
  • 8 (32%) successfully sourced and deployed private investment capital; and,
  • 17 (68%) led to follow-on projects, post-CIG award.

The Enduring Arches: Building Conservation Finance Projects for Impact report, funded by the Walton Family Foundation, lays out a framework that can guide how and where future conservation dollars are spent.

“We hope that this report and the Arch Framework serve as something akin to a credit rating score for conservation projects,” says Sean Penrith, CEO of Gordian Knot Strategies and lead author of the new report. “Conservation finance dollars are too rare to waste, so finding a way to optimize their use is critical.”

Conservation Finance in Practice

At first glance, it can be difficult to find common ground between all the conservation finance projects that were funded by CIG since they cover the entire range of natural resource concerns, from water and air quality to wildlife habitat and carbon sequestration to consumer product labeling. Yet all the projects share the common goal of attempting to pinpoint both the value of a natural resource or ecosystem service and finding willing payers for that service. The resulting increased flow of money to conservation projects creates wins for America’s farmers and ranchers, investors and the environment.

For example, several CIG-funded projects are attempting to help farmers transition to organic agriculture. Organic production systems can lead to higher margins for farm operators and increased environmental benefits, including cleaner water for downstream users and increased carbon sequestered in the soil. But the cost of transitioning can be costly and risky, with producers having to go through a three-year transition period during which many incur additional costs. Consequently, several CIG-funded conservation finance projects are aiming to address this challenge. Two projects, a 2016 CIG lead by Iroquois Valley and a 2019 CIG lead by Mad Agriculture, have successfully piloted loan structures that help farmers transition to organic while securing returns for impact investors. 

Similarly, a CIG-funded project lead by the Xerces Society established a new labeling program for farm products, certifying the product as pollinator friendly. The idea behind the Bee Better standard is that consumers will be willing to pay a premium for products they know to be environmentally friendly. This encourages participating farmers, like the 10,000-acre Villicus Farms in northern Montana, to adopt practices that benefit pollinators, including habitat creation and pesticide mitigation. The Bee Better standard has been adopted on almost 20,000 farm acres and is being used by major retailers including Häagen-Dazs. The Xerces Society is still expanding the program, with plans to enter new countries (such as Canada and South America) and crop verticals (such as blueberries and wine grapes).

Other CIG-funded conservation finance projects focused on water quality and quantity issues. For example, a project lead by The Nature Conservancy and the Fox Canyon Groundwater Management Agency used advanced metering infrastructure to facilitate water trading in order to meet new groundwater regulations. The project lead to a successful year-long groundwater market pilot in 2020, with more than 100 agricultural wells opting to participate and the first trades completed in March 2020. Still, other CIG-funded projects analyzed by the report used market incentives to address issues ranging from wildfire risk to land access for young farmers to storm water management.

“The findings from the Enduring Arches: Building Conservation Finance Projects for Impact reinforce what we had hoped when we embarked on this new effort — that conservation finance can lead to on-the-ground conservation outcomes,” says Kari Cohen, Projects Branch Chief at the NRCS. “The framework highlighted by the report can help NRCS deploy our funding for innovative conservation more effectively in the future.”

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