Greening the economy: financing conservation through innovation

Earlier this month, the Wildlife Conservation Bond was priced in support of South Africa’s efforts to conserve endangered species. Also known as the “rhino bond,” the five-year USD$150m Sustainable Development Bond includes a potential performance payment from the Global Environment Facility.

Approximately USD$10m will be paid to two protected areas in South Africa: the Addo Elephant National Park and the Great Fish River Nature Reserve. The aim will be to contribute to protecting and increasing black rhino populations in these areas.

The rhino bond is a first-of-its-kind, outcome-based, financial instrument that channels investments to achieve conservation outcomes.

Rhino growth rate will be independently calculated by South Africa’s Conservation Alpha group and verified by the Zoological Society of London. If the bond performs successfully, investors will receive a success payment at maturity. This represents a new approach in conservation financing that passes project risks to investors and allows donors to pay for conservation outcomes.

Innovative financing and the ESG agenda

The rhino bond opens a new avenue for financing biodiversity. The bond issue comes at a time when more investment funds are under pressure to invest in environmentally friendly or socially conscious ventures, a category known as ESG (Environmental, Social and Governance).

Corporates are increasingly being asked to exercise a high degree of moral and ethical leadership. These factors have forced companies and institutional investors to look more closely at their ESG practices to ensure legal compliance that also delivers on moral and ethical expectations.

Your ESG agenda

It is more important than ever for companies to have comprehensive ESG policies in place. Businesses must build a culture of compliance and implement comprehensive policies and corporate governance structures. Available resources include ISO standards for risk and compliance management.

Corporates should have due regard to their environmental and sustainability obligations -including making and managing investments.

Developing a coherent strategy will depend on the sector, size and risks relevant to any organisation, but will most likely involve the following steps:

• Assembly of a high level ESG team
• Due diligence/audit on current ESG risks
• Development of a firm-wide policy, prioritising key areas and goals
• Establishing a method for measuring achievement of these goals
• ‘Selling’ the policy from the top-down, supported with training and development initiatives
• Reporting and providing feedback, both internally and externally
• Reviewing and amending policy/objectives as required.