ASSESSING AND IMPROVING SUSTAINABLE FINANCE

 

What is a sustainable finance plan?

 

A sustainable finance plan is a plan that will ensure that the full costs of a protected area system are met, both now and into the future.  A sound financial plan should ensure that the growth of income matches or exceeds the growth of expected costs of establishing new protected areas, and managing new and existing protected areas.

 

What are the major steps in assessing sustainable finance?

 

Basic steps in assessing the sustainable finance needs for a protected area system include the following (Weary et al, 2007; TNC, 2004):

• Conduct a financial gap analysis of current income versus expenditures, differentiating between basic and optimal costs, and including the costs of improving protected area management.
• Assess protected area management and capacity needs by identifying key threats and management weaknesses in the existing system, and identifying critical capacity needs.
• Develop cost estimates for the creation and management needs over a ten-year time horizon, including minimum, medium, and ideal growth scenarios.
• Screen and assess existing and new funding mechanisms to address financial gaps, including an assessment of how fiscal and management reforms might reduce overall expenditures.
• Formulate financial plans at system and site levels, with multi-year action plans, including strategic funding mechanisms, resource allocations, fiscal and management reform opportunities, management and capacity building needs, and the implementation plan. 
• Implement the action plans.  This process will entail close collaboration and coordination across multiple government agencies and departments, particularly when developing annual budgets and work plans. 
• Measure progress and adapt the sustainable finance plan regularly, particularly as new funds become available and as priorities shift over time.  

 

What are mechanisms for ensuring sustainable finance of protected area systems?

 

There are a number of mechanisms for sustaining the long-term economic viability of a protected area system (CFA, 2005), including:

 

• Bilateral and multi-lateral funding, where a fund is established to finance environmental projects, remains a significant source of funding for creating and improving protected area systems for many countries.

 

• Biodiversity enterprises that provide capital to small and medium-scale enterprises that contribute to biodiversity conservation in or around protected areas (e.g., shade-grown coffee, ecotourism).

 

• Biodiversity offset projects mitigate or offset land-conversion activities, such as forest clearing, dam creation, and road building.  Biodiversity offsets may be voluntary or regulatory.

 

• Biodiversity prospecting is the search for biochemical and genetic materials from nature that can be applied commercially to pharmaceutical, agricultural, cosmetic and other applications. 

 

• Carbon offset projects are reduce the amount of carbon dioxide in the atmosphere through a range of activities, including emissions trading, which enables countries to purchase emissions units from other countries; joint implementation, which give credits to countries who invest in emissions-reducing activities in another country; and removal units, which provide credits for forestry-related activities. 

 

• Debt-for-nature swaps are a mechanism whereby a creditor (typically an industrial country) renegotiates the terms of a developing country’s debt to fund biodiversity conservation, often resulting in the creation of a privately-controlled conservation trust fund. 

 

• Environmental funds can be permanently endowed grants from governments and donor agencies, as well as by ongoing user fees or taxes, that are earmarked for conservation and protected areas.

 

• Foundation grants are funds provided by private, charitable organizations, but typically are time-bound and do not fund operational, overhead or recurring costs. 

 

• Market and tax incentives provide financial incentives to individuals, communities and corporations for actions that improve biodiversity conservation (e.g., tax incentives for maintaining forest cover, market premiums for certified forestry operations).  

 

• Payments for ecosystem services capture economic value from the services and benefits provided by nature.  These services include watershed services (drinking water storage, flow regulation, flood control), climate control (regulation of temperature and precipitation) and agricultural services (soil protection, genetic resource conservation, crop pollination).

 

• Taxes, fees and fines are recurring sources of revenue that can fund protected area establishment and management costs.  Taxes may come from a range of sources, including sales, property and income taxes, and publicly issued bonds.  Fees may come from direct users, including both visitors and commercial operations, as well as indirect users, such as communities that depend upon drinking water from the protected area.  Fines from illegal activities can also be directed toward protected area creation and management.

References and resources on sustainable finance of protected area systems