Background
The World Economic Forum ranks biodiversity loss, climate change and extreme weather as the most significant threats to the planet over the next decade.
This is significant because these threaten ecosystem services that provide the global economy with benefits of USD $125 to USD $145 trillion per year – more than one-and-a-half times the size of today’s global domestic product (GDP).
The global economy, however, has yet to fully value these services. Estimates show the financing needed to protect the most important biodiversity and the services it provides is between USD $598 billion to USD $824 billion per year by 2030. This global biodiversity funding gap reflects the challenges governments face in securing and deploying adequate financing to protect nature.
While investments are flowing into biodiversity and nature-based solutions in industries including agriculture and tourism, investors often lack the necessary social, environmental and governance (ESG) expertise to make the business case for protecting biodiversity. Furthermore, while there is increasing appetite from impact and mainstream investors for significant investments in biodiversity, there is still a lack of sufficient catalytic capital to help scale early-stage, nature-positive businesses.
Innovative partnership
Conservation International (CI) is a US-based environmental non-profit committed to protecting nature for people. Conservation International Ventures (CI Ventures) is an impact-first investment fund created by CI in 2018. The fund combines CI’s 36 years of climate and conservation science to tackle the biodiversity investment gap and climate-related challenges facing Africa, Asia and Latin America. The fund partners with public and philanthropic investors and invests in early-stage, nature-positive businesses, providing catalytic capital for opportunities that are too early or in special situations where traditional investors can’t, while prioritizing impact, offering flexible structures, connecting investees to CI’s science and programs where possible, recycling capital into new investments and proving bankability to invite follow-on financing for its investees.
CI Ventures provides loans to small and medium- sized enterprises (SMEs) that operate in the forests, oceans and grasslands where CI works. The strategy ensures the provision of catalytic capital to develop a project pipeline that can achieve sizeable social and environmental impact, while reinvesting financial returns from loan repayments to support more SMEs serving nature, climate and people.
In 2022, CI Ventures, in collaboration with the U.S. International Development Finance Corporation (DFC) and the U.S. Agency for International Development (USAID), set up a loan portfolio guarantee to support critical ecosystems in Mexico, Peru and Colombia where there is a great need for conservation, restoration and sustainable management approaches. The guarantee will provide USD $5 million in financing for a USD $10 million loan portfolio.
CI Ventures is committed to promoting sustainability and biodiversity while also improving local livelihoods. As such, investments under the guarantee may include solutions that address mangrove restoration, sustainable livestock, regenerative agriculture, sustainable forest harvesting and ecotourism. USAID will also support the guarantee in the form of technical assistance.
CI Ventures is optimistic that this support will help CI increase social and environmental outcomes and pave the way for additional financing for conservation impact in these countries.
Solution
CI Ventures uses a venture philanthropy model that combines public and philanthropic funding with venture capital. Through its impact investing approach, CI Ventures can invest in companies that other investors might consider too high-risk. One such example is Coast 4C, a social enterprise helping to restore coastal infrastructure for smallholder seaweed farmers following Super Typhoon Rai in the Philippines. Its approach makes CI Ventures uniquely positioned to prioritize impact, strategically time its investments, lead with science and ultimately maximize the impact of every dollar invested.
To be eligible for financing from CI Ventures, enterprises must meet its investment criteria
by demonstrating a viable business model, the potential to unlock future follow-on investment at scale and strong management capacity, in addition to alignment with CI’s mission to protect nature for the benefit of people and the potential for significant, measurable environmental and social impacts. CI Ventures has also built a strong impact-reporting framework that remains central to its investment process and ensures the continuous monitoring of positive impacts. The program developed its own Impact Pathways approach that draws on its deep expertise
in conservation and climate science to track investment outcomes – whether in natural capital, sustainable production or human well-being. By applying a common framework for theories of change, CI Ventures can identify causal links between investments and outcomes. Equipped with a two-tiered monitoring and evaluation structure, CI Ventures can measure both headline indicators and project-level metrics.
In 2022, Environmental Finance named CI Ventures “Small Asset Manager of the Year” for the second year in a row. The fund attributes its success to a unique impact investment approach and strong collaborations with global partners on innovative initiatives.
Expected impact
In its first five years, CI Ventures achieved impressive results from investments in landscapes and seascapes in Peru, Colombia, Ecuador, Kenya, South Africa, Indonesia and the Philippines. The fund executed 34 deals supporting 30 enterprises. In addition to a USD $12.5 million investment made by CI, CI Ventures mobilized another USD $86 million in co-financing and follow-on investments. At the close of 2022, the fund had raised USD $19 million in capital and identified USD $30 million in eligible near-term pipeline projects.
As its portfolio continues to grow, CI Ventures aims to develop the market for nature-positive investments while working to close the investment gap. Based on results achieved to date, CI Ventures has set its sights on scaling up a USD $50 million fund. The larger fund would enable it to:
- Execute 200 deals for people and nature;
- Secure co-financing and prompt USD $700 million in follow-on investments;
- Create 3,000 jobs in nature-based businesses;
- Support 150,000 livelihoods;
- Protect, conserve or sustainably manage 500,000 hectares of natural habitat.
Sources
- Conservation International (n.d.). CI Ventures, LLC.
- Conservation International Ventures, LLC (2022). CI Ventures Impact Report 2022.
- Costanza, R. et al. (2014). Changes in the global value of ecosystem services. Global Environmental Change, vol. 26, 2014, pp. 152-158.
- Environmental Finance (n.d.). IMPACT Awards 2022: Asset manager of the year – small: Conservation International Ventures.
- Paulson Institute (n.d.). Financing Nature: Closing the Global Biodiversity Financing Gap.
- World Economic Forum (2023). Global Risks Report 2023.