Banking on Nature

Last week Mark Tercek, the current CEO of The Nature Conservancy and a former partner at Goldman Sachs, spoke on Reuters about the shifting vision of organizations like The Nature Conservancy in the environmental movement.  Most strikingly, he suggested that the Conservancy is not a philanthropic, or environmental advocacy organization, but rather, a “merchant bank” for nature.  Coming from a former investment banker this is perhaps an unsurprising sentiment.  It is, at the same time, an idea that should be given real attention by non-bankers.  As Tercek points out, the scale of the environmental challenges the world faces are not likely to be solved solely by philanthropic gestures.  Rather, solving these problems requires an approach that realizes, and capitalizes, the value of nature into modern economic systems.

Being a merchant bank for nature means, primarily, that the Conservancy is working to expand the scope of their work beyond the scale permitted by philanthropic donations.  As an example, the purchase and conservation of a $500 million dollar ranch in Montana to conserve land in the Northern Rockies ecoregion is something that philanthropy alone would struggle to finance.  Even more important, however, by maintaining ranching operations on their property and working to reduce its environmental impact –rather than banning it outright – the Conservancy can maintain relationships in communities that have historically be hostile to environmental motives.  Integrating, rather than siloing, environmental protection and economic activity is an approach that stands to strengthen both.  It strengthens environmental work by increasing financing and improves economic activity by making it more sustainable.

Opportunities for integration are not limited only to the American west.  Global insurance and reinsurance companies are very engaged in the process of integrating incentives to preserve natural buffer zones around properties into those properties’ policies.  Things like limiting the impacts of hurricanes by not building directly on dunes or reducing storm surges through the re-introduction of native oyster beds are projects that promote – and finance – environmental conservation for traditional economic reasons.

As more and more companies recognize that global supply chains are vulnerable to environmental factors – climate change threatening avocados or droughts pressuring soda manufacturers for instance – there will be even greater demand for work in the style of the Conservancy’s.  And while solving a water supply issue for Coca-Cola may not directly contribute to the more traditional types of species conservation that environmental groups are known for, perhaps the merchant bank analogy has some relevance here.

If big banks can subsidize their less profitable groups with particularly successful groups, why not expect environmental organizations to do the same?  If helping private companies develop their green infrastructure – in Tercek’s words – leads to increased financing for the Conservancy as a whole, then it has expanded its capacity to achieve not only economically beneficial conservation but also those projects which may never help the bottom line.

If Tercek’s interview highlights one thing it is that natural capital will play an increasingly important role in economic growth in the future.  Whether you want to call it ecosystem services, green infrastructure, or natural capital, the services provided by the environment are economically valuable.  This presents an unprecedented opportunity for conservationists.

Building programs to measure, integrate and ultimately capture this value will fall to those organizations which have been investigating them for decades; in other words, the environmentalists.  As a result, there will be new opportunities to finance conservation projects.  Treating their role as natural capital advisors, a la the role of a mergers & acquisitions team, will lead to new opportunities for these groups to help shape the development of the global economy.  Handled well it will also expand their ability to achieve more traditional conservation goals.  The door to a golden age of conservation is open; it is up to leaders who recognize the opportunity to step through it.


Image Credit: U.S. Fish and Wildlife Service via Wikimedia Commons


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