The monetary benefits of a new conservation bond are considered secondary to the relationship connecting investors to the land, said a financial conservation expert in an interview with Carbon Pulse.

The Sustainable Finance Lab at Western University is trying to create a new type of asset class that is relationship-based, by working with financial actors that are connected to the land and the people, like credit unions, said Diane-Laure Arjalies, lead of the sustainable finance lab at the university’s Ivey Business School.

For financial instruments like the Conservation Impact Bond (CIB) that Arjalies’ team has been researching, “the monetary transaction is almost secondary to the relationship building and education”, she added.

The CIB’s policy brief describes the model as an outcome-based financial instrument that brings together stakeholders who place a tangible, monetary value on a service provided by nature and are willing to commit to pay upfront to ensure this service continues in those ecosystems.

Investors receive their principal plus a return on the investment if the outcomes are achieved, but they receive nothing if the initiative is not successful.

The model prioritises relationships and works differently because the economic argument will not convince investors to fund the project as “it makes no sense economically”, said Arjalies.

The facilitator combats this by physically bringing potential investors to the land to engage with the place and experience the biodiversity benefits, she added.

The facilitator is a third-party organisation that has the expertise to coordinate the design and implementation of the CIB. Facilitators hold the bond, define the success outcomes, manage cash flows, coordinate relationships among partners, and establish legal agreements that make up the bond.

The Carolinian CIB project was established to provide financing for natural restoration in the Carolinian Zone in Ontario, one of the most biodiversity rich areas in the country.

Phase one of the Carolinian CIB, the Deshkan Ziibi Conservation Impact Bond (DZCIB), deployed the CIB model for the first time in Canada in 2020, and was followed by phase two of the project, the Long Point Walsingham Forest CIB.

“The overall objective for these two project phases is to solidify a scalable CIB model to build relationships for reversing the trend of habitat loss and eventually doubling habitat levels in the Carolinian Zone,” stated the CIB policy brief.

The Carolinian CIB has raised over C$1.58 million ($1.4 mln), including C$300,000 from multinational industrial company 3M and C$130,000 from impact investor VERGE capital, and resulted in the improvement and resiliency of 269 hectares of land as of Apr. 2023.

CIB project impacts are measured according to the predetermined evaluation framework, which assesses social, ecological, and economic impacts, before being assessed by evaluators.

Investors are eager to fund nature finance in Canada, a recent report by the Nature Investment Hub showed, with survey responses suggesting that the investment share in biodiversity could grow by more than a quarter.

The government of Canada has been supportive of increasing biodiversity by funding over C$4.8 mln through Canada’s Enhanced Nature Legacy in 2023 to support biodiversity conservation in southwestern Ontario.

In line with Canada’s 2030 Nature Strategy, launched in June 2024, the CIB policy brief outlines how it is a place-based model that is guided by Indigenous partners and a cross-sector leadership team, as it is essential that Indigenous Peoples have a leading voice in the future of Canada’s natural resources.

“The model is designed to help reconcile peoples and ecosystems, Indigenous partners may choose to connect or lead in multiple ways, depending on their interests and goals,” the brief said.

Including First Nations communities is crucial to making the model work because they don’t need to be convinced about the importance of restoring the land, said Arjalies.

Partnering with First Nations also made it easier to raise funding, because investors are looking for opportunities to establish relationships with First Nations communities, she added.

By Chris Ward – [email protected]

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