Guest Blog: A new tool for scaling investment in nature-based solutions - the “made in Canada” conservation impact bond

February 9, 2022

Guest post by Diane-Laure Arjaliès and Matthew Lynch

Investing in nature-based solutions is emerging as a key opportunity for real progress on tackling the interconnected biodiversity and climate crises.

For example, the federal government recently launched the Nature Smart Climate Solutions Fund, a $600 million program to reduce 2-4 megatons of greenhouse gas emissions annually. The fund will support projects that conserve, restore, and enhance wetlands, peatlands, and grasslands to store and capture carbon, especially habitats that are important for biodiversity and species-at-risk.

The win-win appeal is obvious. However, delivering these solutions in practice, and at the scale required will be challenging, especially considering the need to bridge the estimated $20 billion annual funding gap in Canada to protect biodiversity. How do we design and implement financial mechanisms that can deliver robust ecosystem and climate outcomes, while generating returns to attract private capital to fill this funding gap?

And in Canada, we are invariably talking about investing in lands that are the traditional territories of Indigenous Peoples. How can we imagine new partnerships with Indigenous leadership to co-develop and implement solutions in a true spirit of reconciliation, mobilizing the deep ecological knowledge of traditional owners?

And of course, what is the best role for policy-makers and other key public agencies – such as municipalities and conservation authorities – in accelerating this opportunity?

An innovative new “made in Canada” financial mechanism – the conservation impact bond (CIB) – is making real progress in shaping how we can possibly navigate these challenges in practice.

The Deshkan Ziibi Conservation Impact Bond (DZCIB) is being implemented by a unique group of partners in south-west Ontario. The initiative is being facilitated by the Carolinian Canada Coalition, and steered by a leadership group also involving Deshkan Ziibiing (Chippewas of the Thames First Nation), VERGE Capital, Thames Talbot Land Trust, and the Ivey Business School.

Here’s how it works: the CIB starts by identifying organizations that are willing to pay for enhancing conservation or ecosystem outcomes (“outcome payers”) – potentially a government agency or a local business that relies on these services. These payments can attract investors willing to invest upfront in these conservation outcomes (“impact investors”), which provides a pool of funds that can be used by conservation organizations (“habitat growers”) to do the “on-the-ground” work to improve these ecosystems (e.g., through planting trees, restoring waterways, removing invasive species).

The model requires a program facilitator to coordinate the parties and set up the rules of the bond, especially the definition of successful outcomes in improving the ecosystem. The investors are only paid if the prescribed outcomes are achieved – a “pay-for-success” model.

So far, the DZCIB has supported 53 healthy landscape projects resulting in numerous ecological, sociocultural, and economic benefits. Sixty-nine hectares (171 acres) of natural assets/climate-smart habitat in southern Ontario have been improved, 39,000+ native plants have been planted, and approximately 450 people have been engaged in high-quality learning and activities on the land.

In announcing federal support for phase 2 of the initiative, the Honourable Steven Guilbeault, Minister of Environment and Climate Change observed that: “…by supporting conservation, green innovation, green jobs, and reconciliation, the DZCIB initiative represents the kind of innovative thinking we need to meet Canada’s conservation goals and address the climate crisis.”

What is particularly exciting about the CIB is the different pathways that it opens for public agencies to advance nature-based solutions.

A new brief for policy-makers explores these new opportunities for public involvement in more detail. The CIB has the attraction of scaling up private investment and opening innovative new opportunities to engage and mobilize the resources and expertise of other stakeholders to achieve multiple policy objectives.

The brief spells out the specific roles that public agencies can play in the delivery of the bond model (hint: public agencies can be involved in all the CIB roles described above and more) and highlights the linkages to the major policy priorities of all levels of government in Canada: reconciliation; biodiversity conservation; climate mitigation and adaptation; community resilience, and progress towards the Sustainable Development Goals (SDGs).

You can find the policy brief here. For further detail on the DZCIB initiative please also see the detailed research report and the dynamic “story map”.

This work was funded in part by the Economics and Environmental Policy Research Network (EEPRN) and the Greening Growth Partnership. To learn more about some of the researchers involved in this project, check out this recent Researcher Spotlight.