If you follow news stories about conservation, finance or both, there’s a good chance you may have heard about the Wildlife Conservation Bond (also known as the Rhino Bond) issued by the World Bank in March 2022.

Worth US$150 million, this 5-year sustainable development bond aims to channel private investment directly into protecting and increasing black rhinoceros populations in two nature reserves in South Africa. Under the terms of the bond, investors will forgo their interest payments to fund rhino conservation activities over 5 years, with the aim of raising populations to a pre-defined level (independently verified by the Zoological Society of London (ZSL)). If that target is met after 5 years, they will receive a conservation success payment from the Global Environment Facility (GEF).
The Rhino Bond is an example of a funding model also referred to as pay-for-performance or outcome-based financing (OBF), a financial mechanism in which repayments for investments (with interest) are conditional upon the achievement of pre-defined, measurable and independently verified outcomes or impacts. Mostly used to fund social outcomes like increased affordable housing and reduced unemployment, recently it has emerged as a tool to incentivise investments in environmental projects that might otherwise not receive them.
How does OBF work?
OBF is based on a contractual agreement between private investor(s) and project implementers, which typically goes as follows:
- Defining Outcomes: All parties involved agree on the desired outcomes or impacts, which are typically long-term benefits like enhanced soil resilience or biodiversity improvements such as species count increase.
- Outcome Funder(s) Commitment: If and when outcomes are reached, the Outcome Funder pledges to pay Service Providers and/or Financiers.
- Upfront Investment: Investors – typically impact investors, private sector companies, foundations or development banks – provide the initial capital needed for the project. This funding covers the costs of delivering services aimed at achieving the desired outcomes.
- Service Delivery: Service providers carry out the project, using innovative and flexible methods to reach the agreed-upon outcomes. They have the freedom to adjust their strategies to maximise impact.
- Independent Verification: An independent verification agent – this could be an audit firm, NGO, government agency, or a qualified individual – evaluates whether the outcomes have been achieved. This involves collecting and analysing data to ensure the results meet the pre-agreed standards.
- Outcome Payments: If the outcomes are verified as achieved, the investors are repaid by the outcome funders, which are often governments or philanthropic organisations. Payments are made based on the level of success in achieving the outcomes.
- Risk Transfer: The financial risk is partially shifted from the service providers to the investors, who only get paid if the outcomes are met. This reduces the risk for service providers/implementers and encourages them to focus on achieving meaningful results.
Why OBF?
Unlike bankable conservation projects, which are effectively structured like a business to produce financial returns whilst also benefiting the environment, the goals of most conventional conservation projects (i.e. higher wildlife populations) typically aren’t intrinsically monetisable. As a result, they struggle to attract meaningful investments and instead have to compete for limited, sometimes unreliable, grant money. By making payments conditional on positive conservation outcomes, OBF creates a potential financial return for projects that otherwise wouldn’t generate one, incentivising investors to invest and implementing agencies to deliver results.
The structure of OBF also makes conservation more efficient in many ways. The conditionality of payment on outcomes means that participants will design contracts in ways that deliver the best ones possible. For instance, while the implementers receive upfront capital to fund their operations, they also accept certain risks – like only being fully paid if they achieve the agreed upon outcomes – that motivates them to adopt practices that reduce such risks, while monitoring by an independent third party helps projects to identify and address flaws in design and delivery. This in turn assures investors that outcomes will be delivered as specified in the contract and makes them less apprehensive about investing in projects.
By attracting private investment, OBF reduces the reliance of conservation projects on comparatively limited grant money, increasing their scalability and likelihood of success. A successful project with healthy financial returns can then attract additional investors and act as a model for other projects, thereby diversifying its income, furthering its financial lifespan and amplifying its impact.
What makes Successful OBF?

Despite only recently gaining traction as a conservation financing tool, OBF has nonetheless shown promise in funding positive environmental results. In Mexico, outcome-based payments to landowners have protected Laguna San Ignacio –a globally important gray whale breeding site– from coastal development since 2005, with no incidents of non-compliance. More recently in Canada, the Carolinian Zone Conservation Impact Bond (CIB) has mobilised $1.58 million and restored 269 hectares of degraded land in Southern Ontario as of April 2023, just three years after its launch in 2020.
That said, OBF also comes with considerable challenges. Firstly, conservation outcomes (and any payments attached to them) can take a long time to materialise, meaning that an extensive period of funding for on-the-ground strategies may be required until then. Therefore, it is important to provide investors with comprehensive information about a project –including any waiting periods for payments– early on, and design contracts with timeframes long enough to realistically capture results and mitigation strategies for potential risks. Similarly, implementing agencies will need assurances that investors won’t withdraw their support before results materialise.
Equally important is the need for well-defined goals that can be accurately measured with as little difficulty as possible. For example, ZSL is considering an OBF project similar to the Rhino Bond to boost orangutan numbers, as these can be reliably estimated by the number of orangutan nests in an area, which are easier to find than the animals themselves.
There is also the potential for unintended, undesirable consequences from the incentive-and-reward system of OBF. Between 2018 and 2020, a project to encourage tree planting in degraded forests in Mexico instead lead to farmers deliberately degrading forests to gain more benefits from planting in them. Any loopholes that might allow for such outcomes need to be closed at the contract stage, and projects should be carefully monitored afterwards to identify and address any others that may arise.
Paying for the Planet
OBF is undoubtedly a complex mechanism with no small number of challenges to its implementation. But as the example of Laguna San Ignacio shows, when done right it can finance long lasting benefits for the environment. What’s more, with a worsening climate and ecological crisis, and a US$2.5 trillion deficit in annual funding for the UN Sustainable Development Goals, anything with a proven record of successfully financing and scaling up conservation can and must be put to use.
To ensure the greatest success possible, investors must be fully educated on OBF and its financial and environmental potential, including the sometimes long waiting periods for payments that projects can sometimes entail. Projects selected for OBF also need to be chosen well, based on the tangibility and measurability of the intended conservation goals. Finally, contracts must be well structured to include time frames long enough to achieve results and measures to tackle anything that might impede that.
If the challenges of OBF can be met and addressed, then the results it finances could be truly great, both for the planet and for investors.
Author: Thomas Gomersall, Seneca Impact Advisors
For more information, please contact info@senecaimpact.earth