 So it looks like we're gonna get going Hi and welcome. My name is Ricardo Bayon. I work with a group called echo asset management partners I'm gonna turn it to my co-panelists to have them introduce themselves But before I do that, I wanted to just set a series of ground rules, but I don't want it to sound very formal They're not really rules because what I actually want this to be is a no rules. No holds bar discussion There's enough of you that we can actually have this kind of discussion So knowing that it's after lunch. It's the evening. Many of you have been staring out at the Golden Gate and wishing you were out there Rather than in a room. I figured that I wasn't gonna let any of my panelists put up PowerPoint presentations And and Peter begged and begged and begged, but I told them no way no PowerPoint presentations for you So he may have a little PowerPoint withdrawal, but the idea is that we have a conversation and and I was selected for this job Lee tells me because I'm Annoying enough to to be up here and bug people So my job is to not let people ramble on to interrupt them To ask them hard questions and to just generally be my own annoying self So I guess I won't date myself by saying Phil Donahue But Essentially what we're trying to be here is kind of like I don't know what would be the equivalent nowadays Geraldo Rivera is still too old. I don't know you're young Eric What's the what's the YouTube equivalent of a talk show host these days? Who knows but the point is this is more of a talk show than a series of presentations So you don't have to wait for any Q&A session to raise your hands and ask questions If you have a burning question raise your hand I will try and call on you But please wait and hold your fire until you get a mic because this is being recorded So we want to get it on the microphone And our subject is the evolution of conservation finance And so what we're going to talk about is sort of the past present and future Of conservation finance and we have a great panel up here to talk about that and I'll pass the mic to Have them introduce themselves and I'll try not to be annoying when they do John My name is John Tobin. I work at Credit Suisse based in Zurich Where I have global responsibilities for sustainability at the at the financial institution Much of that has to do with risk management, but increasingly We're getting involved on the opportunity side of sustainability and Conservation finance is a topic we are getting actively involved in So can everybody see my PowerPoint? No So my name is Peter Stein. I'm one of the managing directors of something called the Lyme Timber Company We're a private equity fund structure that invests in high conservation value forests I'm the old person here Not just on the panel in the room at the conference in Sanford. No And I've been doing land conservation for exactly 41 years Hi, I'm Susan Finney silver I'm at the David and Lucille Packard Foundation And I manage our PRI program program related investments and about half Of actually both our grant making and our investing are in the conservation and climate arena Happy to be here Yeah, it's it's great to be here as well. My name is Eric Holstein I work with the nature conservancy and I work with an initiative that we have called nature vest Which is an initiative to take the 3500 employees roughly that we have The projects around the world and the six billion dollar balance sheet And look at how we can leverage private capital to achieve conservation objectives And so we're interested in impact investing and investing and conservation investing from the perspective of What can we achieve in terms of the fisheries improved? The miles of riparian habitat improved and the conservation outcomes and look at investing as a mechanism as a tool for doing that Great, so we'll start We'll start off with with a question for for john John Along with peter and a bunch of other folks around the room susan even eric Were involved in a a report that came out recently that credit suice did with wwf on Conservation finance. I was going to ask john to tell us a little bit about his involvement in that What the findings of the report are and and then to follow up with a bit of a question on Why is a big bank like credit suice getting involved in this? What's the interest there? Thanks. Well a couple thoughts on that in terms of The Principal findings. I have to say that what struck us that struck us the most about the work that we did is was that in the process of interviewing especially high net worth individuals for Our data collection process. We were struck by how much interest there was in environmental impact investing Social impact investing is probably a decade ahead of Environmental impact investing there is a much greater diversity and number of Financial products available for investors on the social side of then on the environmental side And to our surprise there was a you know huge interest on the part of people Again, particularly private high net worth individuals in being able to put some of their wealth into these In into this area The reality is that the available availability of products is limited and that's something that we need to work on Maybe the other finding that I would like to highlight is the fact that Ultimately the story of conservation may be a happy one Relatively happy one at least if we're able to bring private capital to bear And why do I say that as part of this study? We took a look at what the conservation needs are globally And we came up with an estimate based on you know a consensus number of three to four hundred billion dollars per year that are required in that would be required in order to you know really Detect biodiversity and protect Habitats to an extent that is consistent in the long term with You know a healthy and sustainable coexistence of our species with the other 20 million species on the planet Those numbers can be you can quibble about you know a few million more a few milling less But but but that seems to be the consensus out there So three to four hundred million and how do much how does that compare to what is being put into conservation today? Uh, we came up with a number of roughly 50 billion dollars yearly going to go into conservation Uh, roughly 80 percent of that is from Public sources and from philanthropic sources. Maybe 20 percent of that is coming from private investors Okay, so 50 billion that is going into conservation Three to four hundred million which is the need if we're really going to maintain a healthy and sustainable environment in the long term How do you feel hold on a second a happy story? How is this a happy story? Uh, that's the punch line is coming Um, come on come on There is a that gap Could be filled with if that gap put it this way if that gap is filled with private capital It could be a happy story Why? because we looked at the total amount of new and invested capital every year that becomes available and The gap between what goes into conservation and what conservation needs are is roughly one percent of all New and reinvested capital globally on the part of retail high net worth and institutional investors So if we could actually direct a just one percent of all of This new capital and reinvested capital to double bottom line activities that would have A good a positive environmental impact and would Provide some returns for investors. We could tackle the problem So give us an example of what is uh in your view a double bottom line investment that that fits that bill because By those numbers a whole lot less than one percent is being invested In this because it's 20 of that 50 billion number, right? Yeah, so I'm not very good at math. So I'm not even going to attempt that but it's a whole lot less than one percent It's probably a tenth of that. Right. Um, yes, definitely A lot less than that but a few examples. I mean, uh, some of them We have heard about today. Some of them we will hear about shortly, but anything from sustainable commodities sustainable forestry Offset markets payments for biodiversity Services Any of a number of different fields where As the markets develop we may come closer to filling that gap But admittedly it's a huge gap and it's a huge and it's a gap that will only be filled if Private capital is deployed through intelligently designed financial structures and good business models that allow Private capital to really be so I mean, I think we would all love it to see one percent of that money end up in conservation or something like that What do you think is give us one thing that's missing? What what what would change it? Did the report highlight? Activities that could be done that would help that one percent come in any number of Of points things that you could point to but if I had to point to one thing I would say the deployment of good structuring muscle People and Who have the willingness and the ability to structure good financial transactions that will have this double bottom line it Getting to where we are on the impact investing side on the on the Social side of things has taken a very long time and of in a huge amount of thinking There have been all sorts of obstacles regulatory financial etc And it's through the deployment of good Structuring muscle that we can get there Necessary but not sufficient right and and I guess that answers a little bit my question of why is a big bank like credit So he's interested in this is it because you want to help move that? 1% to conservation or are you being are you being asked by your clients to to move in this direction? Absolutely, I would say the number one motivation is an ever increasing expression of desire on the part of Clients particularly high net worth individuals for product that will allow them to invest Not necessarily all but at least a certain part of their wealth into products that will have Uh, you get positive impacts that go beyond the financial part. So this panel is about evolution So have you seen a change in that respect? I have I have, uh, I should Emphasize that Credit Suisse is relatively new to the to the impact space But but even during that time. Yes, we have seen what do you think has changed what why is why is Why are your clients asking for this? Is there some something you can point to any ideas? I nothing in particular that comes to mind immediately that is Causing this but the fact is it's happening there used to be a mentality And and still the prevailing mentality is you make your money this way and then at the end of the year You take part of your returns and you donate them to good causes. There's a clear trend towards Moving away from that Schizophrenic approach to investing and trying to align your values with your own investments more than there used to be It's no longer about making money any way you can and then You know paying for your sins at the end of the year by making some small donation more and more It's about investing in things that are good interesting, I I mean, I think if we take a look susan, I wanted to turn to you because Packard as well as more foundation are working with tnc with echo asset management partners and with jp morgan On producing a kind of a report that goes into the numbers How much is actually going into conservation impact investing? Um It's kind of a follow-up to the report that credit suiz and others did which looked at the problem This is saying okay. Well, what's happening out there? What are people doing? Um And I think john's painted a sort of good news bad news story right good news There's a lot of potential bad news There's not a whole lot of money going in and when he says 50 billion dollars Even if you take all of the social impact investing Money that that jp morgan and another report on social impact investing, which I should add didn't include conservation impact investing at all That number was 10.6 billion Last year so well short of the 50 well well well short of the 400 billion Um Can you give us some some highlights on the report and and also talk a little bit about The role that you see for Packard institutions like Packard in this process Yes, definitely, and I think you know building on john's point I think certainly it is true that conservation investing is Both in terms of scale of dollars in terms of being as john said a decade behind You know, I would agree with those things. I think you know this You know at the collective that came together around commissioning this report I think um really saw though that there is a glass Half empty and a glass half full, you know side to that story and so Um, I think we felt it was important to document. There's been a lot of um studies There's been a lot written. There's been a lot of attention a lot of forums around how the social investing has grown And I think you know, we felt it was important to document the conservation investing side And you know whether I think when we look at the numbers that are coming out The number we did a survey of sample of conservation investors The number that's come out is 24 billion. Am I allowed to say that we haven't come out with a report yet, but You know 24 billion over five years But of which a lot of it is development banks. So it's really about 2 billion. That's private investor capital So you could look at that number and we wonder how you know, how are we all going to look at that number? Is that that is a limited number? You know, so you could you know, look at that number and get depressed or say impact investing You know is is irrelevant for conservation. I personally don't feel that way I feel that that number is you know, it's an early in the evolution The other striking finding is just the the rate of growth and it's looks like it's doubled You know over a five year period likely to Double or more than that over the next five years. Um, I do think um, it is an opportunity of of You know, it's early and so my hope is that it's early and also that Um, when you look at the 22 billion the other side of development banks I think there's really a lot of opportunity there to partner with either that 22 billion That's development banks and also the private sector capital that john alluded to some of the structured products that you know Remain to be created. Um, and so there's really a lot of uh partnership opportunities across Asset classes and sort of turning to the other question you asked rickardo about how packard looks at this I think that's really a lot of where we're uh spending our time within our shop Which so we have a 180 million dollar program for peer eyes or MRIs And I think what we're doing a lot of in the last few years is looking for those opportunities Um to scale new innovations So to really use our capital to come in after it's been proved after some of these innovations have been proven out And and and are ready to really scale and grow and to find those opportunities and you know Provide growth capital and I think you know, there's more and more of that I guess again that also is a little bit of half empty half full I think that what we're seeing is versus five years ago when we were doing a lot of very sort of just bread and butter Land transactions or you know very straightforward. We're seeing a lot more of creativity From folks like you You know everyone who's here at soak up. I mean, there's just so much more Creativity going on that's the half full. I think the half empty is in my view There's a lot more capital right now than there is a what I like to call absorptive capacity I feel like being able to find Investable, you know places for it At least from the investor side and I know that certainly that could be a source of debate and discussion And maybe Ricardo is about to do that. Can you give us an example of the types of new creative mechanisms that Packard is Investing in sure. I mean, I think To give sort of thumbnails and then I can flesh out any of them You know, for example, we Invested in the the spin out of the Certification system for biofuels called the round table on sustainable biofuels To create a market standard for biofuels Another example is our investment in the freshwater trust where Basically, they are designing an innovative System for creating water quality credits using an environmentally sound scientifically based system that Is innovative in the market? So we've provided them with growth capital to really scale that up in the pacific northwest and hopefully Nationally over time And then I guess another example I would use is is we're doing a lot with trying to Find ways to layer our capital with other sources to bring other sources I mean conservation has been driven by government funding by donor funding And really trying to find ways where there's other layered sources of capital. So like carbon credit funds. We were invested in the echo Green carbon fund. We're actually just now. It's not approved But we are taking to our board a recommendation for a five million dollar investment in the alphalia climate fund Which has been successful in europe but has not yet gained traction in the u.s. And we're hoping to help them Um boost that um If I have time for one more example or not sure go for the other one I was just going to say was ecotrust forest that was one where we tried to Use our capital as a debt layer to bring in private equity capital So it's kind of creating a capital stack where foundation is more willing to take risk perhaps than a than a private investor or Different type of risk or a different return Yeah, so and I guess it what's interesting is I think that um, what we find is there's different tools for different Transactions and a lot of times so so the taking more risk is actually not always the role And so for example in ecotrust forest, we actually um do need to preserve our capital So we have 180 million dollar fund. So and we need to preserve that over time. So so We sometimes for some things that are very bullseye will come in with a first loss But for example in ecotrust forest, that's not really actually what was needed. In fact the private equity investors That's what they do Is take risk and so actually coming in with the 1% Actually fairly more risk averse capital But that just had a the thing we do have is we have no profit motivation lower return So a lower return. So we're able to sort of Juice up the returns as always the you know Not so elegant way to say it probably not Yeah, the way the lawyer would like but but it's sort of to to be that part of the capital stack that will enhance The returns for those private equity investors who actually can are set up to take risks But do need the return hurdles to be met Peter you you've been at this longer than a lot of people looking at conservation finance from a variety of different hats private hat public hat NGO hat I mean talk to us a little bit about how you see things changing and where you would like things to go in the future But perhaps start by telling us a little bit about your experience with lime timber and how that's evolved over the years well I'm kind of short-sighted so I can only talk in the millions not the billions but I I made the transition from the NGO world to the private capital You know money grubbing world 24 years ago And a lot of my friends Thought I was crazy But it it worked out quite well And what it really is is harnessing a lot more capital than will ever be available through philanthropy so i'm a giant fan of Susan's program related investment function at the Packard foundation in fact i'm a fan of all pri's anywhere but They really are there as leverage to grow the comfort for private investors to invest in this space and so lime timber lime timber became an impact oriented manager Without any impact investors. It's kind of the opposite about How much of this happened so in in 1990 or 1991 when I joined lime timber forest land Continues to be available to invest in it was a little easier 24 years ago but One of the challenges was to kind of Change the behavior behavior of private investors And you probably could do that through counseling But you can also do that. I know some that would be pretty resistant to counseling So well, we didn't take that tech anyway, so the way we changed behavior We started with our own behavior, but it's been Mimicked or copied throughout the timberland investment industry now Is to bifurcate the ownership of timberland? So if you actually want to make a timberland investment versus A path of development investment You either have to find a remarkably stupid seller Who just wants to sell their timberland at its timber value? Or you have to find a way to monetize the non timber values in the investment And the monetization mechanism in the united states of america and about 73 other countries Is to buy some of the property right interests in in america We call it a conservation easement or a conservation restriction if you're in massachusetts In furan kebac you call it a conservation servitude, but basically some of those rights Were acquired by land trusts or by public agencies and they bend or Influence the behavior of the party that holds the balance of those rights So the best way to understand this is lime timber just wants to be a timberland investor We never meet any stupid sellers anymore We're paying the same price that every other timber investor wants to pay Most of them are also real estate developers We don't want to do that. I could not go home to my wife I wouldn't be able to explain it to my children. I would lose all my friends at the nature conservancy and the trust for public land So the ones you haven't lost already, right? So anyway, uh, but coming off if I go too long So, uh, but it what what really changed over the last 24 years is we now no longer just go to conferences And give presentations or listen to presentations. We actually get commitments from institutions and families so First five years there was there was not a nickel of impact investor money at the lime timber company By 1995 we had a single impact investor the jessie smith noise foundation in new york city Our last fund, uh, which is vintage 2010 41 of the capital in that fund came from impact investors that totaled 61 million dollars So out of 160 million dollar fund two fifths of the fund came from impact investors Obviously, we're not doing anything about solving the gap between 50 billion dollars and 300 billion dollars But we're i'm actually seeing real dollars being committed by real people real families real institutions foundation endowments small college endowments secondary school endowments Our very first public pension fund, uh in our newest fund But uh, they are actually getting the rationale Of why it makes sense to become impact investors and they're not doing it because there's a charity motivation whatsoever We're making market rate returns But they're finally getting the fact that they think it's changed. I mean, what do you? I think the fact that it's no longer just lime timber that there's actually a cohort of private equity structured investment managers I think they're, um, it may be over. I may be overselling this But the fact that we actually now have some common reporting schemes About impact like the iris metrics from the global impact initiative Uh, I think the fact that we have a track record. So we're raising our fifth capital pool now Uh, I think it's challenging if you're a startup. It's challenging if you're in the you know 10 to 50 million dollar space But at the couple a hundred million dollar space, I think people are ready for that And how many how many assets do you have under management now? Uh, it's what it's thursday, right? Yeah, okay, so How's timber doing today? Timber did a timber did really well today. No, um, we own uh, Exactly 1.2 road islands worth of land about 700 000 acres Uh, and in terms of money, can you share any details of how much assets? Uh, yeah We have about 350 million dollars of assets under management. Did you want to get in here? Well, I was just gonna um Say one other dimension to the question you just asked about what's changed and I think one thing Certain we've observed Is what's changed also is the way people define themselves and peter was kind of alluding to that I do think even in the last three years Um, we've gone from a world that was more what john said to sort of bipolar world of are you Profit seeking or are you impact seeking and I think as we co-invest in funds now We actually are just going through an analysis right now As we look at whether that you know to classify our affiliate investment as a peer eye and we try to go through analysis Okay, is this a profit seeking investor our other co-investors or are they impact and they were all You know pretty really every single one were really along this very fuzzy spectrum They had some, you know, they were either a finance first fund within a strategic fund Or they were strategic within a finance first or they were and it I just think even in the last three years There's been real and I and I'm blurring in a very good way of sort of more holistic investing That's that's happening. So then in addition to the you know, the ground up from the investment side I do think there's a real Psychological shift on the investor side as well So it seems like we're coming to an interesting curve Or an inflection in the curve where the capital is becoming more aware. There are more products like lime timber, etc Where does the the nature conservancy stand in all this and how are you seeing the evolution of conservation finance? And I know you just helped create with a major bank jp morgan this entity called nature vest Which echo is also involved in Tell us a little bit about that and about how you see the shift and where you would like to see it go into the future Great. Thanks. Ricardo nature vest There's a lot of information in the creation of nature vest as a as a data point and it was created through a partnership with jp morgan chase To take what is a really strong transactional history at the nature conservancy in all 50 states in the us 30 plus countries around the world and In a sense roll that up and try to get much more disciplined and proactive about creating a pipeline of products that could go out to market The conservancy brings to the evolution of conservation finance I think some very unique attributes because of our history and our dna is a transactional organization But as a conservation first organization and we have a one thing we have is a very large staff of scientists About a half of the nature conservancy are phd scientists. They are passionate about making sure that the impacts are well understood but also Uh Tracked and followed and and the investments are built around kind of that conservation outcome. I'm thinking transactional phds. It's kind of We have we it's it's it's a it's a really it's a day to day It's a very fun tension for for us in the organization because I sit there and I sit and I work with my team to try to structure Transactions and then I have to take those to the phds and say does this pass the sniff test? What else do we need to know about these and and what I would say is that nature vests And this relationship with jp morgan chase and leveraging kind of tnc's platform Is that in a number of these areas like investing in natural infrastructure? Or green bonds or fisheries. There's a really interesting and compelling science component about understanding What happens for example if you follow a fishery? That's maybe been overfished how long before it recovers and could potentially return money to investors And does that happen on a five-year time frame which is to sort of a nice time frame for investors or does that happen over 30 years? Similarly in natural infrastructure sort of what are the issues and I know echo is very involved in this work But what are the issues around? The trade-offs that get made around different types of infrastructure Is there a sort of deep green versus a light green and we're in a position to both kind of help understand what those trade-offs are And and structure products around them that are ultimately investable So the idea behind nature vest is to Structure these products come up with these products that they can can then be taken to the market and then People like jp morgan or credit suisse or others could could come in and invest in part of the vision around nature vest Is to get involved in that early deal structuring investment creation Leverage that platform And then hopefully in some ways bring those almost as pilots to market But that that success for nature vest is actually that other other folks at scale are doing this So we we may have de risk for example natural infrastructure. Hopefully with some help from echo And funding from Packard De risk de risk them to the point where the where they are well understood as investment vehicles You know what kind of the science outcomes are or the conservation outcomes? You know what the risk return profile is around the investing and that they become investable for commercial investors so To interrupt Eric, but with an example lime timber also invests in wetland mitigation and stream banks and We got into this because we watched NGOs make wetland mitigation bank investments and stream bank investments and Our first one was a partnership with the virginia chapter of the nature conservancy when they had essentially tapped out internal resources To do this But we had watched them do it three other times and we then became their private investment partner for the fourth Investment so it's really already happening Mm-hmm Yeah, and I mean talk a little bit about the experience guys I know the california chapter of the nature conservancy and nature conservancy generally has a tremendous wealth of experience of investing Capital in both land real estate timber even fisheries in ways that that that generate the conservation results I mean, can you talk about some specific examples where you've seen that? Achieve conservation results as well as investable returns from the private sector Yeah, it's a it's a really a fair and good point on the west coast the nature conservancy Is the second largest owner of ground fish fishing quota? Uh, so that includes all commercial investors. We have bought and sold 1.5 million acres of property. We actively manage 500 000 acres of property So in terms of transactional experience, we have lots of it. Um, often it was Not done in sort of this structured way so, um As an example though of of I think Where an organization like the nature conservancy and our partners and we have some very generous and wonderful partners who help us Do this work our effective is with this ground fish story, which was 10 or 15 years ago With funding from foundations We went in and we bought permits boats and quota pounds and retired them from the a big piece of the ground fish fishery in the west coast we then Relicensed them out with a bunch of conservation restrictions about when and where you could fish What kinds of fish we created with the community's help some restrictions on Well some mechanisms like a risk pool that basically just kind of allowed the fishery to be much better managed And we worked and I think we should talk a little about this But we worked on a policy angle to restructure the governance around that fishery So that it wasn't a completely open access fishery And then this last year we completed the first divestiture of that quota share Back into one of the communities that had sold us the quota in the first place and they bought it They paid real money for that It was funded by a commercial lender And it's a great example of kind of early engagement involvement by a nonprofit Changing kind of the the rules of the game putting some structure around it from a regulatory standpoint And our expectation now is that that model of reforming a fishery this way becomes something that is investable Are you worried that if if we get to the kinds of numbers that john's talking about You know 400 billion dollars going into conservation and you know the the wolves of wall street like Some of the people on this panel and others come in and they start you know doing their usual rape and pillage of Of a fishery is that gonna affect the conservation results or do you think we can we can find ways to you know Harness the gordon geckos of the world and the greed is good philosophy and and still achieve conservation Yeah, I think this is a great question and I and I live it daily because I walk into the office And I wear a bunch of hats. I have this this phd in economics I guess it doesn't make me a good guy, but it makes me one of the scientists sort of Uh, but then I'm also the one economics Bringing these deals to the to the organization and working with people there's some folks in the audience with nature vest But sort of bringing these deals to the organization And so I get a lot of pushback from the scientists and I would say yes This is a big concern for us Which is sort of the watering down of the conservation outcomes around these investments and so We think about this sort of I think green bonds are a great example of it Which is I see a real role for the nature conservancy and for kind of rigorous science That determining what is an appropriate conservation outcome around green bonds And let's at least make sure that investors know what the trade-off is that's being made between the financial return and the conservation outcome And getting really kind of precise and clear about that so that you know not every green bond is equal Yeah, it's interesting You should mention green bonds because I think it's it is indicative of this transition, right? There are all these bonds billions of dollars being transacted now where people are putting money into largely renewable energy It's most of the green bonds. We've seen 95 probably more than 95 percent have been about renewable energy And some you could say are You know so light green they're approaching some other color And some are truly green But there is also a signal that's out there that billions of dollars of demand For these bonds is happening So, you know, can we harness that to achieve some of the conservation results that the tnc pushes for Susan, are you worried that this If if there is this influx of money that it will change the The landscape out there Well, I definitely think that you know the the sort of what's been branded the impact imposters I think is a real Phenomenon and I do think or the light, you know, the Barely light green Investments, I think that what we strive and this gets back to you know the role of Foundations of NGOs. I think to be able to be that I think that's in government, right? We haven't talked about it that you mentioned it Yeah, no, that's a very good point and I think you know as we think about the roles in the capital stack part of it is In you know, what's the return? What's the risk but then part of it also is to help to be the arbitrar Of being able to do that deep scientific analysis that eric is talking about I know that when we come to investments For example, the investment that we're recommending again it hasn't approved yet But in althelia part of what we're trying to do is to say we've diligence this from a programmatic perspective We've delved into all of their ESG. We can kind of help You know be that arbitrar and be a lead investor so that other investors can look to us and our Diligence around what is really the impact and programmatic impact of these investments in terms of your question rica, although I think we have to worry about Having good regulation in place and good compliance as long as we have that I'm very pragmatic about these things as long as the outcomes are the right ones from a social point of view I worry a little bit less about the motivation of the investor than many people do I think if the ultimate social outcome is a positive one if what is primarily motivating the investor is The greater good of society or of the planet or it is His or her bottom line But I don't get too worked about too worked up about it. We want the right outcomes and that's the key thing And I mean it's interesting that the the study you were involved in john said 80 percent of the money that's going into conservation now is some mix of governments multilaterals and and philanthropy right Our study that we are involved in on conservation. Vesta said 90 percent of the money that is actually going into impact investments and granted, you know, this was a very limited Survey it was a very limited pool of of people we asked because we didn't have You know the time or the resources to really go everywhere We probably didn't touch a lot of impact investors in in europe But this is a first step to quantify what the size of it was but it found too that 90 percent of that money Was coming from bilaterals and multilaterals organizations like usa id organizations like, you know, the development aid agencies of sweden norway u k u s Etc etc etc Can you talk john a little bit about the role of government? In this space what you what do you see is the right role? For government in encouraging us moving towards that 400 billion that you talked about as a banker and a biologist I may not be the person best qualified on this panel to talk about government But I personally I think government is absolutely crucial government and regulations passed by government are what create Markets if we did not have governments and we did not have regulations We would not have markets because the market is nothing but the natural working out of the game that is played in the Regulatory framework that is in place So the rule of so they're the referees of the game and they they write the rules and they referee the game And many in the private sector There's a tendency in the private sector to kind of you know downplay the importance of government and to You know react negatively to almost any kind of regulation and I think personally and I'm not speaking for my institution I'm speaking as an individual I think that's terribly unfortunate because if we don't have good government And we don't have good strong predictable Intelligently developed regulation. It's very difficult to play the game of the market Just to give two examples from from our own experience at echo We have a a carbon fund that that Packard is an investor in and you know There would not be a carbon fund if there wasn't a carbon market And there would not be a carbon market if the limits on emissions had not been set by government So what the carbon market is essentially doing is Taking a public good that hasn't hadn't been priced and turning it into You know something different where you can set limits on it another example We're looking at fisheries investments learn trying to learn from the tnc experience and other experience And we're trying to figure out where we can put private capital and create investable solutions that will lead to sustainable fisheries We're finding it very difficult to do that in places where there aren't things like quota fisheries where the government hasn't set up limits On the sustainability. So we believe that the government plays a fundamental role But but but maybe you can chime in here peter and talk a little bit about your experience Well, you know it it it certainly Levels the playing field a bit, you know, we work predominantly in In the u.s. We've made a total of one investment outside the u.s. In canada, but The reality is Don't get too crazy now, peter Okay, that counts that counts But think about the fact that we're monetizing the real estate development potential through the sale of a conservation easement over a working forest If you have no zoning and a landowner can do whatever he or she can possibly imagine That easement is going to be more expensive So more public resources and a little bit of philanthropic resources will go into Compensating the landowner for the purchase of that easement if you're in the adirondacks One of maybe seven or eight places in the united states of america That has what I would call robust regional annual regulations easements are far less expensive Because the development potential has already been modified through a public regulatory scheme So that's how we're seeing it Frankly, I would challenge anybody to to find really good investments in the u.s. Only that don't have a good strong governance or regulatory structure When I think the laws in the u.s. Around property rights or what enables the lime timber model I think the existence of the pacific fisheries councils what enables the transaction I described around fisheries And I would say the lack of that in some cases like around cap and trade and carbon is somewhat hindering that market the uncertainty For example of what what is happening post 2020 in the california carbon market. I think is holding a lot of people back What I would also though say is there are nongovernmental ways to achieve the same ends. So I really like the Round table for sustainable biofuels that sort of transparency allowing the market to Make decisions based on disclosure of information I think and in many cases be an appropriate substitute for that kind of regulatory oversight Or at least it's a good complement to the existence of a strong regulatory oversight or governance rules So I feel I've failed at my job because none of you have raised your hand and nobody has stood up and And and and wielded a chair and thrown it at us or something like that. I mean come on guys. All right, I mean Mike Wait, can you wait till you get the mic because it's being recorded? Mike van Patten mission markets. Um, ricardo, we've known each other for years Quick questions. So it seems that some markets lend themselves very well to structure Structuring asset-backed securities like tradeable quota and so forth And some do not like payments for ecosystem services because they're so localized and they're so esoteric What is your opinion on Is the hope of a market for payments for ecosystem services ever going to really evolve where it's actually investable Or is it too local and too, you know, customized versus let's say transferable quota I mean, I'll take a stab at it and then pass it on to peter But I think that that that we are seeing it evolve just maybe not in the way Some of us had had initially thought or hoped right So we are seeing to some degree the creation of explicit markets for ecosystem services in carbon and and and people say the carbon market is dead But if you take a look outside the us and even in california here The carbon market is alive and well and then carbon markets are just not happening at the global scale They're happening in california in kebek in korea in japan in brazil in mexico in europe So it's going down to to what i call the the highest effective level of sovereignty that we have because Globally, we have no real sovereignty to decree and set these standards But at the same time there's another way this is happening right so the other issue we're working on beyond carbon or forestry is Green infrastructure. So how do you use green technologies natural systems to deliver Clean water storm water management services to cities Cities are desperate for these services Just their only solution until now has been the traditional gray infrastructure They're spending not millions but billions of dollars in this infrastructure if we can channel some of that Into the provision of ecosystem services from natural infrastructure That's that's in my view a payment for ecosystem services Developing in a very different way than some of us had hoped peter. Well, I was going to say the same thing about sort of urban green investments, but Look at wetland mitigation banking investments. That follows a national rule It's the part of the clean water act and it's the 404 permitting under the clean water act that drives Public parties private parties under a no net loss of wetland scheme to invest In making up for the wetlands that were harmed We are actually lime timber does this ecosystem investment partners does this new forest does this there's There's probably 350 million dollars of investable capital in the us focused on that payment for ecosystem services right now And it's a three to four billion dollar market annually So are they do any more questions? I don't know how much time do we have like Five minutes not a lot of time So we'll take two more questions and then I'll ask one final question of the panelists over here back in there Hi, wendy richards, and I'll ask my question as a private investor So I have a pretty clear idea from this morning's panel what I could do with my next investable dollar If I go to lime timber this panel is about the future So instead of going to lime timber and committing today if I hold back on that dollar Or perhaps you can argue I should come to you Why should I save that dollar and wait for jp morgan or credit suice? What exactly are you going to provide in these products? Like very specific What would the investor be getting in your vision if you're successful in the partnership That you're looking to do and in the work you're doing. What will we be investing in? Yeah, I'm happy to take a crack at this one as examples though of products that we are developing at the nature conservancy One is that last year we launched a conservation note That was A 25 million dollar offering That was then used and invested by the nature conservancy in a variety of projects We're structuring investments in fisheries globally outside of the united states For as riccardo mentioned the recovery of those fisheries We're structuring a fund in latin america that would provide loans to farmers in post conflict areas to convert from Kind of monoculture beef ranching to civil pastoral systems that are much more complex systems that are also better for the environment and way better economically We're looking at investments and funds in natural infrastructure in carbon In water rights in australia. So each of these things would be an investable fund That we would be structuring that would be in a portfolio of things another type of real asset With a different kind of risk return profile than the other ones That if you were looking at it as a retail investor, you might think that you you want you want to have a portfolio built around that particular profile And I think what's interesting here is that you you mentioned a lot of different types of investments I think to answer your question. What would you be getting? I think there's a dual return, right? There's whatever the rate of return is for that particular investment and you know The ones we've seen go anywhere from on the low end 2% irr all the way on to the higher end, you know 20 something or 30 something irr in the best of cases But at the same time you have if the if it works and it leads to more sustainable fishery You have a sustainable fishery outcome or a sustainable water use outcome or or whatever the outcome is you want it to jump in John But if I understood the question correctly, it's Do you wait for jp morgan or credit swee's or do you go with lime timber? And why would absolutely wait for credit swee's Well, I would actually that it's a lot less about the institutions because after all a lot of the large financial institutions have open platforms open architecture platforms products like lime timber may end up being put on the Investment platform of jp morgan What financial institution large financial institutions can provide is some additional structuring muscle Can provide some scale and what I think is key is because of the The depth and extent of relationships that these institutions have with high net worth individuals it can Intermediate between interested investors and between the lime timbers of the world And yes, some of these institutions will develop their own products as well But I view the role is not Antigonic to but rather complementary to The lime timbers So we had one more question up here Up here we had she had her hand up before Go back to you afterwards. Thank you. My name is Lana Raymond I love the idea of being able to invest in a nature conservancy note like a treasury bill Could you speak to the earlier you were talking a little bit about How green the investment is light green dark green, etc Where can the investor look in the future for information about The level of greenness who's going to be the authority to rate the greenness of an investment so You know like you know a theme of our panel is sort of we're still nascent on that But I think there are some answers coming forward There is the the gin you may be familiar with has created something called the iris the impact reporting investment standards, I think I've got that right and So several of us on this panel We actually Sponsored and funded an effort to build out the conservation Impact metrics within iris so iris as with many things impact investing the social investment metrics were very well built out I think several of us saw a need to really make sure that the conservation metrics were beyond just number of hectares So so we had a working group. There's a rigorous process And so those are now on the iris platform to be used so that it's a start And I I mean, I don't think everybody is using them yet But but if more customers say We want to see how you're meeting these standards. I think that's a big step I do think there is a role, you know, for instance in this whole green bond discussion Of a third party like tnc or somebody else going out there and saying yeah, this is green and this You know less so In order to put some some sort of standards. I mean, we got this in organic We've got this in fair trade, you know rainforest alliance I I can see it coming in the investment world and now with the standards that iris has I think that's a That's a good a good first step in that direction So one last question back there And your last answer may be helpful on this In the in the transactions you've discussed I'm thinking how does imposition of conservancy goals actually Improve the value of your asset So I think it's a little counterintuitive to me that imposing these restrictions actually makes the fishery more valuable So when you have these pressures to produce returns Maybe this measurement is the answer but but help me out. Am I Am I evaluating that correctly? Yeah, let me let me speak to this and then I'm happy to have other folks on the panel talk about it too In the case of fisheries one of the biggest challenges is open access And that as fishermen are competing with each other for a very scarce remaining Asset base that they over fish. So they're fishing the the fishery well beyond what is sustainable To a level that is harmful to that fishery and also to the ecosystem around it So the imposition or the layering of something like in this case the pacific Council fisheries council was to impose a set of rules around access to that fishery and allow The nature conservancy and partners to put these restrictions on how you would fish onto that fishery and actually and actually Assign the property right which was previously not assigned To the fishermen and to the communities who could then own it as quarter share And by owning it as quarter share then they could manage it much more sustainably because it was incentive To do so and I think that story holds true across a whole number of different assets about assigning the property rights And then having the ownership of those property rights established Now there is a sort of flip side to this which is that ownership does also come with some unintended consequences that We were very concerned about in that particular example, which is that we didn't want An industrial scale fishermen Acquiring all of that property right and over well and fishing that fishery to its maximum because there would be significant kind of social impacts Along the fisheries and the coastline and those communities And so part of the regulatory structure was about designing Some rules that that set maximum amounts of that that quota that any one organization could own So I think it's that kind of thoughtful It is sort of it's not exactly market making But it is sort of expressing society's preferences through regulation That I think is important as you put together these structures And having an organization like the nature conservancy that has a strong kind of policy skill set and connections and can can exert that influence And working with our partners like Packard and others to have that dialogue at a in some cases a national or a global level We view as very important to make sure that those unintended unintended consequences are well considered and thought out Yeah, I mean I think that the way the way I look at it. I think there is a fundamental problem, right? We do not in our economic system value some of these ecosystem services We've had this huge blind spot for hundreds and hundreds of years and you know because it's not valued Uh planting soy or planting palm is more quote unquote valuable than maintaining a forest So I do think at the heart of it We will over time need to fundamentally change our economic system to add this value Uh, I guess to use a tech metaphor. I think we're operating on you know windows 1892 uh As opposed to to where we need to be in a world where you know, you have twitter and facebook and all these other things Right imagine if you were working in windows 95 in today's world You know, you'd see that blue screen of death way too often And I think the problem is the rules were written at a time when what was important what was scarce was capital and labor Not natural resources, but we're transitioning into a world where natural resources are scarce And at being scarce they will become valuable and that transition is in a potential for Increased profit and you see it in the in the fisheries as they become scarcer You know, there is that potential if we don't get into this tragedy of the common situation Where everybody's chasing the last fish if we can give it some breathing room to recover That is potential value. I mean you just look at the recovery of fisheries if they are if they are left untouched That's a classic financial j-curve That you could invest in and make profits off if if you did it right The question is how can you do it right? So I know that I'm I'm being like Told to get off here or else we're going to be pulled off with a hook but Before we do that I wanted to ask one last question of each of our panelists and that's a very simple question If there was one thing you could do to achieve that 400 500 billion dollars for conservation of which a huge chunk of it would come from private capital What would you do and and how would you achieve it quickly? The single most important thing we could do is to try to get individual investors To recognize that their own investment choices Where they put their wealth where they put their pension money has an impact on the world And to align Where they put their money and their pension funds with their values And in some cases that may mean some people putting Their their pension money into coal companies. I think in a large majority of Of cases it will it will have positive effects We need to be less schizophrenic about how we invest and we have to bring our values and our investments closer together Well, I just say here here to what john said the only Only way I think I might attempt to phrase it slightly differently and it's actually been Licensed or trademarked by a wealth management firm here in san francisco Is the is the concept of full consequences? I think you alerted to the fact that we don't have an economic system that values natural resources completely So if you're an investor you really need either on your own or with great wealth Advisors from jp morgan chase morgan stanley goldman sacks and credit swiss To have advisors who can really talk to you about the full consequences of your investment And that would go a long way to getting that money there susan I guess I would then turn to I mean we've talked about the investor side and certainly I do think there are You know is capacity that's needed, but I actually think you know as I alluded to earlier the absorptive capacity I do think there's a lot of interested capital that wants to have an impact and so I think you know I I'm very heartened seeing what's happened here with socap Over the last few years and a lot more You know, uh, hopefully just as much hope and aspiration, but I think a lot more actual deals Being represented and so I think that's where my hope would be That there's just a lot more investable activities that have been structured And ready to be invested in To to get to that scale Yeah, I think I would echo this I think we need more product and to get there in part We're going to need clear regulatory rules and oversight that reduce the uncertainty in these markets And I think just to leave it on a glass half full note One interesting thing that we are seeing happening is that they tell us there is about to be a 40 something trillion dollar transition of wealth From the the baby boomers to their heirs Now this is and also other research tells us that when people inherit money, they change their management styles and they change their managers Interesting to note the children do it at about 80 something percent And and spouses women do it at 90 something percent. I don't know what that says But but the point is there is an incredible opportunity here In that transition of wealth to do it in a way that john was talking about of of aligning values with investments Because I think you know this whole this old world that By having an impact you are giving up on returns that is not always the case It can be the case, but it is not always the case There are cases where you can get both returns financial returns and impact returns and those are the ones we need to find Those are the ones we need to structure. That's the kind of product I think we need to put out there to capture a portion Whatever percentage is it one percent two percent of that 40 trillion dollar change of wealth so, uh, whatever we can do to to capture some of that I think is really the The challenge for the next 10 or so years, but a big round of applause for our panelists and thank you very much