Creating a global investment fund for ecosystem services by Lars Hein

Thursday, May 28 2015


The degradation of ecosystems is one of the key challenges facing humanity. Science increasingly exposes the negative impacts of ecosystem degradation involving the loss of productive soils, depletion of water supplies and alteration of local and global climate processes (e.g. MA, 2005). In the course of the coming decades, the impacts for society are likely to be severe, in particular for the poorest countries and within these countries for the poorest part of society. In the long-term, economic development and poverty alleviation cannot be successful unless the progressive and often irreversible depletion of ecosystem capital is arrested. Sustainable use is required both to safeguard the essential life-support services provided by ecosystems (e.g. water supply, climate regulation at the global and continental scale) and the biodiversity contained in ecosystems, which in turn, contributes to ensuring the functioning of ecosystems and maintaining the services they supply.

Given that benefits from ecosystems accrue at local, national and global scales but that (opportunity) costs occur locally, and that much of the world’s threatened ecosystems and biodiversity is in the tropics where the amount of money to spend on sustainable ecosystem use and conservation is – in many countries – relatively low there is a need to explore options to effectively, and in a fair, transparent and cost-efficient manner provide international support for sustainable biodiversity and ecosystem use in the tropics.

Over the past decades, a range of foreign aid mechanisms have been set up to assist developing countries with safeguarding their ecosystems and the services they supply (e.g. Hein et al., 2013). However the rate of success has been limited, and new approaches need to be tested. A recent essay (Hein, 2015) proposes and describes the main characteristics of a ‘global investment fund for ecosystem services’. Once developed and operational, the proposed foreign aid model would serve as a long-term funding, monitoring and compliance mechanism for conserving ecosystem services and biodiversity. The fund would invest in relatively large areas that provide life-support services essential at the national and global scale, such as carbon sequestration, maintaining river flows, regulating continental rainfall patterns, as well as conserving biodiversity.

Investment entails, in this context, entering a (renewable) legal agreement with the public or private land owner(s) that would commit to sustainably use the ecosystem over a long time period in return for a financial compensation. The financial compensation would be provided annually, subject to strict, remote sensing based monitoring of the condition of the ecosystems in the area, and would compensate for foregone income from the area. Once operational and once the effectiveness of the approach is proven, funds would be provided by funding agencies and other organizations with an interest in preserving biodiversity and national and global ecosystem services.

A tentative design for a pilot-phase of the fund has been prepared based upon recent insights in the functioning of markets for ecosystem services and new developments in remote sensing technologies and would involve an investment of around US$ 35 million. See for details: http://gdn.int/admin/uploads/editor/files/Towards%20a%20Global%20Investment%20Fund%20-%20Lars%20Hein(1).pdf. The fund would be complementary to existing market mechanisms for sustainable ecosystem management, and would differ from them by a rigid application of market principles, a cost-efficient global monitoring program, a focus on legal enforcement, and the global scale at which it operates. The fund would operate with a long-term vision, and would enter legal agreements with landowners based on their willingness to conserve ecosystem services and biodiversity on their properties.

Contrary to existing foreign aid mechanisms, the fund would operate on the basis of a strict application of market principles, among others by selecting the lowest risk, highest return projects generating global and local ecosystem services from a potentially global portfolio. The fund would operate in a fully transparent manner, would pay specific attention to ensure that there would be no alienation of user rights of traditional ecosystem users including indigenous communities, and it would be accompanied by a comprehensive mechanism to monitor the status of ecosystems using the latest remote sensing technology.

Several recent developments have created a basis for successful implementation of the fund: (i) there is increasing experience with market mechanisms to ecosystem conservation including local benefit sharing; (ii) there is a demand for funding for such projects in developing countries as indicated by the willingness of governments in many developing countries to test such market mechanisms; and (iii) there is a potential long-term source of funding from businesses and governments provided that a transparent and credible mechanism can be set up.

The aforementioned essay presents the outline of a proposal for the fund, but further detailed design is needed based on the interests of the funding agency. Exploring if, how and where the fund could be established would require involvement of potential funding agencies as well as a range of experts (ecologists, remote sensing experts, economists, lawyers). A first step now needs to be made, i.e. initiating a process aimed at designing the fund, supported by a funding agency willing to seize the opportunity to deploy economic and remote sensing technologies to create incentives for ecosystem preservation in support of long-term economic development.

 

References:

Hein, L. DC Miller, R de Groot, 2013. Payments for ecosystem services and the financing of global biodiversity conservation. Current Opinion in Environmental Sustainability 5, 87-93.

Hein, L., 2015. Towards an Investment Fund for Global Ecosystem Services - See more at: http://gdn.int/html/page2.php?MID=3&SID=24&SSID=80&SCID=55#sthash.TbkPsqy2.dpuf

MA, 2005. Millennium Ecosystem Assessment, Ecosystems and Human Well-Being: Current State and Trends. Island Press, Washington, DC

 

 

Dr. Lars Hein is a professor and researcher at Wageningen University (The Netherlands). He’s main focus is Ecosystem Services and Environmental Change. Previously, he worked as Environmental Manager at Shell International (dealing with mitigation strategies) and as the environmental expert for FAO Investment Centre, in Rome, Italy. Dr. Hein has master’s in Environmental Sciences (University of Utrecht) and a PhD in Environmental systems analysis/economic ecology (Wageningen University). He is CFA member since 2015. Dr. Lars can be reached at: lars.hein@wur.nl


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Creating a global investment fund for ecosystem services by Lars Hein
Thursday, May 28 2015

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