Crises of the magnitude of climate change and global biodiversity loss require equally high impact and wide-reaching solutions. One such solution recommended by scientists is to designate at least 30% of the earth’s lands and waters as protected areas by 2030 (a target known as 30×30) to preserve biodiversity and ecosystems on a meaningful scale. Encouragingly, this target is enshrined in the Kunming-Montreal Biodiversity Framework, which almost every country in the world formally joined at the UN Biodiversity Conference of the Parties (COP15) in 2022.
The question now is, how to finance this?
Achieving the 30×30 target will require adequate, reliable, long-term funding for expanding and effectively managing protected areas on a landscape level. However, conservation currently often relies on short or medium-term donor capital, and many protected areas receive minimal national funding. Such piecemeal income leaves them vulnerable to cuts in donations or budgets, and constrains their ability to achieve and maintain long-term gains.
With the climate and biodiversity crises continuing to worsen, and time running out to meet the 30×30 target, it is imperative that we shift to more stable sources of conservation funding that produce maximum benefits. Fortunately, a model for achieving this already exists and is showing considerable promise in countries where it is being implemented: Project for Finance Permanence.
What is Project Finance for Permanence?
Project Finance for Permanence (PFP) is a model that allows for long-term funding of conservation areas in full, not only by securing all of the necessary funding to meet specific goals over a defined timeframe, but also the policy changes needed to enable these in perpetuity.
A PFP initiative typically happens as follows:
- The party/parties interested in establishing a PFP initiative convenes potential partners –including governments, communities, NGOs and donors– to agree on specific, large scale, long-term conservation goals. A formal assessment is conducted to determine if enabling conditions for a PFP (e.g. political will, capacity for implementation) are present in-country or could be with a reasonable amount of effort, and if/how a PFP could further national conservation priorities. As developing a PFP is a multi-year, often multimillion-dollar process, a complete assessment report should be transparent about its current strengths and weaknesses, and which areas may need further investment before proceeding further to prevent time and resource wastage.
- If PFP is feasible and the enabling conditions are sufficient, the involved partners establish a coalition to develop the components of the PFP agreement, including a conservation plan and fundraising goal. This is also the phase to address gaps in enabling conditions identified in the assessment. The financial gap between existing sources of sustainable funding and the amount needed to meet conservation goals is quantified, and additional sustainable finance strategies to fill that gap are explored and secured, such as carbon taxes that direct revenues to conservation.
- Donors pledge funds to cover the initial costs of implementing the agreement, but these are withheld until the fundraising goal and all agreed-upon key legal and financial conditions (known as closing conditions) are met, including sufficient funding being committed to the PFP. Closing conditions ensure donors that the PFP will be fully funded, under conditions creating minimal risk of failure.
- A closing agreement is signed by all coalition members, with governments and partner organisations committing to ensure effective management of areas covered by the PFP.
- Donor capital is placed into a fund with an independent fund administrator to provide oversight and transparency and distributed over a set period of time. The release of funds is conditional on a set of rigorous disbursement conditions (or performance-based milestones) being met. This incentivises other partners to achieve said milestones, which can include creating a certain number of hectares of new conservation area or zero net loss of habitat under protection.
- While donors fund the initial implementation of the PFP, governments gradually increase their share of the spending (sourced from more recurrent in-country sources of capital) until they fully or mostly assume the costs of conservation.
In addition, a PFP initiative also requires a robust financial model that estimates the full costs of achieving and maintaining long term goals, and must incorporate the following five elements of sustainability:
- Areas covered by the PFP must be sufficiently large and well protected to maintain biodiversity, especially if they include corridors for migratory or long-ranging species.
- Protected areas must have the support of communities that live in or near them. For this, the project should provide tangible societal benefits and economic opportunities.
- Strong, sustained government commitment and good governance to support program design and implementation.
- Institutions that can design, implement and monitor activities meant to contribute to the PFP conservation goals.
- Sufficient funds and fund management.
Keys to a Successful PFP
One of the most important keys to a successful PFP is ensuring that a sufficient number of enabling conditions either already exist or can be made to do so with a reasonable amount of time and effort. PFPs are best suited to conservation areas that have already experienced prior investment in their creation and management structures, rather than ones where basic governance and management structures still need considerable improvement. In this context, a PFP acts as a way to secure the long term financial sustainability of a conservation area(s) that already have means of support, rather than a main source of income.
Another critical enabling condition is political support. To obtain this, those proposing a PFP should pitch it to the leader of a country early in their term to maximise the time that the PFP could have high-level support for. To increase the chance of getting support, the goal of a PFP should align with the country’s national and international environmental commitments, and address major threats to its environment and society. Gaining political support from an accountable government lends immense legitimacy to a project, and indeed is one of the conditions donors look for before committing to supporting a PFP.
PFP coalitions should be diverse, including partners from the social and economic development sectors as well as the environmental. Such diversity can also make a PFP more attractive to donors, particularly if it includes partners with similar values to their own.
Within the team overseeing the PFP, diverse skillsets and interests are likewise desirable, and roles should be allocated based on whose skills and interests are best suited for them. The most important team member is the deal broker, who serves as the main point of contact for the PFP between governments and potential donors, and also ensures that the project is properly managed. Therefore, the person/people acting as deal broker should have at least some political influence, as well as be a good organiser and team motivator.
Finally, a PFP must be flexible enough to adapt to changing circumstances, including delays, changes in government, and lapses in government involvement that might impact fundraising. On the latter note, PFPs must also explore and utilise diverse sources of domestic sustainable funding to whether changes and cuts in funding streams. Such sources are best explored before the agreement is finalised, as there is less incentive to make the policy changes needed to secure funding afterwards.
Case Study: ARPA for Life
To date, PFP has been implemented in Brazil, Colombia, Peru, Costa Rica, Canada, Bhutan and most recently, Mongolia, protecting over 120 million hectares globally. In Brazil, ARPA for Life –the largest of these PFPs both financially and geographically– offers some of the most compelling proof of the value of PFP for nature conservation.
Considered the largest tropical forest conservation project in history, ARPA for Life was formally implemented in 2014 to fund the pre-existing Amazon Region Protected Areas (ARPA) program, which aims to consolidate at least 60 million hectares of protected areas –including 6 million hectares of new ones– and had experienced over a decade of investment beforehand. The MoU for this PFP commits $215 million to a 25-year transition fund that will eventually allow the Brazilian public sector to gradually assume the costs of conserving areas supported by ARPA for Life. Funding came from a diverse pool of sources supplementing those that had previously supported the ARPA program, including private companies, the Inter-American Development Bank, and private foundations and individuals in the US.
ARPA for Life has had a drastic impact on Amazon conservation. With its support, over half of the ARPA program’s ‘6-million-hectares-of-new-protected-areas’ target had been met as of 2020. As of 2023, the targets for protected area consolidation had been exceeded, supporting 120 protected areas covering 62.5 million hectares (over 20% of the remaining Amazon forest). Along with funding, ARPA for Life has also resulted in new guidelines to ensure proper managing of finances, effective decision making, and improved staffing, operations and management capacities within protected areas.
The statistics on ARPA for Life’s impacts on deforestation likewise speak for themselves. According to a 2023 study, deforestation was 9-39% lower within areas with ARPA support, avoiding the emission of 104 million tonnes of CO₂. Even when deforestation levels increased inside ARPA-supported areas during the Bolsonaro administration, it was still only 39% of the levels that would have occurred without ARPA for Life’s support, showing the power of PFPs to withstand changes in political regimes.
Pitfalls for PFPs
As one would expect for a mechanism this complex, there are many risks that can befall a PFP and undermine its effectiveness.
One of these risks is unrealistic expectations on the part of donors and other stakeholders, who may grow impatient at the amount of time and effort required for a PFP initiative (just designing one can take 5 years or more). As a result, crucial conditions and decisions may end up being pushed until after the PFP agreement is closed –when there is less incentive for governments especially to deliver on them– in order to rush closing the deal. It is therefore important to be transparent with potential partners on the long waiting periods for PFP from the start, as well as to ensure enough support from governments to keep the initiative going so continual progress can be demonstrated. Early consultation will also dispel misconceptions that the purpose of a PFP is to raise funds for short term operational costs (another thing that can deter impact investors).
It is also advisable to have obtained initial commitments to fund at least one third of the PFP before pitching it. Doing so will make the prospect more palatable to governments by lessening the burden on them to provide initial funding, while also motivating other donors to close the funding gap.
When dealing with governments, there is a risk that too many of the conditions they are obligated to meet will be pushed until after the PFP agreement is closed. This can result in crucial things like fund distribution and hiring of staff for protected areas being delayed or not delivered on. PFP agreements should therefore require governments to meet as many of their conditions as possible before the closing.
As in any financial mechanism, there is always the risk of funds being poorly distributed or ineffectively used. This can be mitigated in a number of ways, including assembling a strong team with the right skillsets to manage and distribute funds, and investing in adequate monitoring systems for protected areas to ensure that funds are properly spent in the ways and places they are most needed.
While undoubtedly a complicated system requiring no small amount of time and resources, PFP is nonetheless a promising tool for financing landscape level conservation. Moreover, as the example for ARPA for Life shows, in an era of widespread environmental degradation and flaky political commitments to combatting it, it may even be the best sustainable financing tool of our times.
Author: Seneca Impact Advisors
For more information, please contact info@senecaimpact.earth
