When Costa Rican President Óscar Arias declared “peace with nature”
in 2007, he laid out an ambitious plan for his country to take the lead
among developing nations in supporting ecosystem conservation.
The goal was admirable—to expand and secure all of Costa Rica’s
national parks, wildlife reserves, and protected seascapes and become
the first developing country in the world to meet the protected
area targets and management standards of the UN convention of Biological
Diversity. At the time, however, it seemed like yet
another environmental proposal filled with promise
but with little chance of success.
Nonetheless, over the next three years a group of international
conservationists, funders, and the Costa Rican government put together
a deal to permanently protect 1.3 million hectares of sensitive
terrestrial habitat and 1 million hectares of critical marine habitat.
The deal included a $57 million funding package from outside funders,
new government commitments to conservation, and a framework
to conserve Costa Rican habitat. The result of this collaborative effort
was the groundbreaking Forever Costa Rica project, which Time
credits as making “conservation work on a much bigger scale than it
ever has before.”1 Although execution of the plan remains demanding,
the project proved that given the right approach and favorable
circumstances, permanent protection of some of the world’s most
important ecosystems could be accomplished.
Our organizations (the Linden Trust for Conservation, the
Gordon and Betty Moore Foundation, and Redstone Strategy Group)
were fortunate to be a part of Forever Costa Rica, which showed us
the power of bringing together, in one large and complex deal, all the
stakeholders, resources, and commitments needed to permanently
conserve a large and well-defined area. We also saw successful results
when similar processes were used in the Great Bear Rainforest in
British Columbia and the Amazon Rainforest in Brazil to conserve
millions of hectares of critical ecosystems.
These achievements have led us to believe that this approach to
deal making—which we call Project Finance for Permanence (PFP)—
can be applied more broadly in the conservation field and perhaps
in other fields as well. What sets the PFP approach apart from the
practices of the past is the integration of a powerful vision with an
equally powerful process.
The vision is permanence, the permanent conservation of the
basic structure and biodiversity of an ecosystem, something often
considered out of reach. The goal is not to try to prevent any changes
to the ecosystem, but rather to make sure it is resilient enough to
thrive for at least several generations to come. A PFP project cannot
anticipate every conceivable challenge, but it can create a strong
foundation for conservation that is adaptive, resilient, and able to
weather unforeseen events.
The process is project finance, which draws on Wall Street practices
for organizing and financing complex, expensive, and well-defined
projects such as electric power plants. With project financing,
investors fund all of the necessary components of a complex project
(for example, the boiler as well as the fuel delivery system). The financing
is contingent on all of the other important elements of the
project being in place (for example, a contract for sales of the electricity
generated by the power plant). And all of the funding from all
of the investors is made simultaneously at a single closing, as none
of the project’s components has much value without the others.
The practices that distinguish the PFP approach—mobilizing in
a single burst of effort all of the elements needed for long-term success—
are commonplace in the for-profit sector but have not been
widely used in the nonprofit sector. That is beginning to change as
more organizations begin working together to concentrate scarce
resources in well-defined arenas to create transformational change.
This new approach can be seen in a wide variety of fields, including
economic development, health, and education. The Harlem
Children’s Zone, for example, concentrates resources within
a 97-block area of New York City and considers all of the major
problems facing children in that area, including health care, housing,
and education. Although this article focuses on the application
of the PFP approach to the conservation field, we believe it may be
used in other fields as well.
A New Approach Emerges
The PFP approach grows out of a long history of efforts by
conservationists to permanently protect habitat in ecologically
valuable areas. Place-based conservation projects are
typically limited by a lack of funding and an incomplete
view of the necessary conditions for habitat to be protected. This
leads to piecemeal efforts that create protected areas (such as national
parks and wildlife reserves) but may not sustain biodiversity
over the long run. As one conservation leader said of the piecemeal
approach, “Our goal this year is to hold off disaster, and to raise the
money for the next year so that we can live to fight another day.”
As the understanding of the scale and effort necessary to preserve
complex ecosystems has grown, it has become more important to
consider new funding and organizational models.
In the last 15 years, conservationists have made great strides in
moving beyond piecemeal approaches to sustainably conserve major
habitats. In particular, several of The Nature Conservancy’s US efforts,
such as its vast projects in Montana and the Adirondack Mountains
in New York, demonstrate how permanence can be achieved on a
large scale through multiparty deals. Likewise, Conservation International’s
Global Conservation Fund, launched in 2001, focuses on
establishing the financial sustainability of specific protected areas.
And the World Wildlife Fund’s Ecoregional Conservation approach,
launched in the late 1990s, considers the species, habitats, and ecological
processes of specific natural communities to maintain ecological
sustainability.
The PFP approach as we visualize it emerged from all of these
efforts and others, but three major conservation projects in the
Amazon, British Columbia, and Costa Rica are salient examples that
demonstrate the development of the technique at very large scale.
Though these projects are still ongoing and thus too early for a rigorous
evaluation of their results, each has mobilized unprecedented
resources and commitments and launched large-scale protection.
Although none of the three projects exhibits all elements of the PFP
approach, between them they encompass all the elements.
The first of these efforts is the Amazon Region Protected Areas
project. In 1998, President Fernando Henrique Cardoso of Brazil
pledged to protect 10 percent of Brazil’s Amazon biome. The government
then worked with the World Wildlife Fund (which helped
launch and organize the project), the German Development Bank,
the World Bank acting with funds allocated by the Global Environment
Facility, the Brazilian Biodiversity Fund, and others to
develop this public-private program, “one of the largest and most
ambitious conservation projects ever undertaken.”2 It has been
actively pursued through the administrations of Presidents Lula
and Rousseff.
The goal of the Amazon Region Protected Areas project is to
create, consolidate, and establish long-term ongoing management
of 60 million hectares of the Amazon Rainforest—an area almost
twice the size of the entire US National Park System. At the completion
of its first phase, launched in 2002, the program permanently
staffed and funded management of 32.5 million hectares across 62
protected areas, and it was responsible for the designation of 44
new protected areas including 24 million hectares. This required
raising $80 million in one-time funding and $37 million in endowment
funding. The program is currently in its second phase, which
has a goal of consolidating 32 million hectares of extant protected
areas and designating 13.5 million hectares of new protected areas.
The Amazon Region Protected Areas project was an early leader
in the development of a critical component of the PFP approach: integrating
thorough long-term financial planning into the program
design process and committing to fund the full cost of the resulting
effort. Although it has not yet secured all the funding needed for
long-term conservation, it has already accomplished much for global
conservation. Efforts are now under way to design and execute a
process to bring this ambitious project to completion.
The second effort that formed the basis for the PFP approach is
the Great Bear Rainforest project. The leaders of the project forged a
consensus to protect 8.5 million hectares of coastal British Columbia
temperate rainforest while supporting local economic development
and ending decades of intense conflict between the forest products
industry, environmental groups, and the indigenous First Nations
communities. Two developments in the mid-1990s brought an end
to the stalemate over logging in Great Bear: a successful campaign
by environmental advocacy organizations that urged forest products
customers to avoid products sourced in British Columbia’s
rainforests, and a series of legal rulings that strengthened First
Nations’ rights and title claims on provincial land. Negotiations
among the parties began in earnest in 1999, resulting, in 2006, in
a single multiparty deal that mobilized simultaneous funding and
commitments.
The Nature Conservancy led the private fundraising effort for
Great Bear in conjunction with leading conservation funders such
as the David and Lucile Packard Foundation
and the William and Flora Hewlett
Foundation. In 2006, the announcement
of a joint land conservation and economic
development plan for the coastal rainforest
led British Columbia Premier Gordon
Campbell to declare, “There’s a new era
dawning in British Columbia.”3 The plan
included a conservation and development fund totaling C $120 million
(approximately US $100 million at the time). Although Tides
Canada led the final stages of the PFP project, The Nature Conservancy
continues to play an important conservation role.
The third effort that helped us formulate the PFP approach is
the Forever Costa Rica project. The project implemented President
Arias’s 2007 “peace with nature” initiative by funding the nation’s
protected area system in perpetuity, launching at least a doubling
of the marine reserve system and setting the stage for Costa Rica to
become the first developing country in the world to meet the U.N.
standards for protected areas. The leaders of Forever Costa Rica
brought together $57 million of new funding from sources outside
of Costa Rica to gain agreements from the Costa Rican government
to increase its own funding for protected areas, restructure its management
agency, and greatly expand its marine network. The project
succeeded because of decades of collaborative conservation planning
and implementation among local NGOs, international NGOs (led by
The Nature Conservancy), and the government; a partnership of The
Nature Conservancy and philanthropic foundations to spearhead the
fundraising; and The Nature Conservancy’s leadership on negotiations
for a debt swap with the US government. Execution of these
efforts continues under Costa Rican President Chinchilla.
The Amazon Region Protected Areas, Great Bear Rainforest, and
Forever Costa Rica projects are examples of major conservation victories.
On the basis of their successes, as well as their limitations, we
synthesized the PFP approach, which incorporates the best practices
of all three projects.4 The approach is built upon two tenets, permanence
and project finance, each of which will be explored in detail.
Designing for Permanence
The vision of permanent protection is at the heart of the
PFP approach. The outcome sought is permanent conservation
through long-term holistic resilience, not absolute
immutability. Because planning cannot anticipate every
conceivable challenge a project may face, the PFP approach aims
to create a strong foundation for implementation and subsequent
management that is adaptive and resilient, and thus able to weather
unforeseen storms.
There are five elements of sustainability that, if all are achieved,
will meet the goal of permanent protection. It is the goal of the PFP
approach that all five elements are solidly in place when the project
is completed.
1. Ecologically, the project must ensure the long-term health
of an ecosystem if successfully implemented. This means that the
geographic areas must be sufficiently large and well protected to
maintain biodiversity. The system as a whole must also provide
migration corridors for long-ranging species, counter external
threats such as poaching and invasive species, and accommodate
climate change adaptation.
2. Financially, there must be sufficient funds, and funds management
and control processes, to obviate the need for significant future
external fundraising. The funding should rely on a strong internal
and external funding base, and preferably have the potential to develop
new ongoing funding sources for conservation. Funding from
the host government is typically the single largest source of funds,
but additional private funds will be needed, as will, in most cases,
an endowment to supplement long-term governmental funding and
to maintain an incentive structure for adherence to the agreements
reached in the closing process. Funds for the design and execution
of the PFP effort itself must also be secured.
3. Organizationally, stakeholders need the capacity for designing
and executing the project and carrying on the conservation strategy
in the future. The PFP approach depends on partnerships with and
among highly capable and enthusiastic NGOs that have a credible
track record of working closely with the government, managing and
raising large amounts of money, and having technical expertise and
in-country knowledge. The national park service and oversight and
policy structures must also be effective and trustworthy.
4. Politically, strong high-level commitment and good national
governance are necessary to support a deal though closing and implementation.
One thing we have learned from the three projects
we looked at is that large-scale conservation efforts require—in fact
often follow—political leadership at the very highest levels, which
must be sustained for years and across administrations.
5. Socially, the protected areas created or funded by PFP projects
must be supported by those who live in or near them to secure
a “license to operate.” This typically comes from a project’s inherent
societal benefit (such as improved ecosystem services), and the
ability to provide continued economic opportunities in the region.
Although the greatest advantage of the PFP approach to deal making
is its ability to bring together the resources needed for permanent
conservation of globally important intact habitat, the PFP deal
structure offers many other benefits. Most important is that the PFP
approach focuses attention on ecological, economic, and social concerns
simultaneously by bringing a wide array of interested parties
into the process. Because of this, a PFP project can reduce the tension
that sometimes arises between ecological and human economic
goals in conservation projects. Great Bear—which brought together
the logging industry, environmentalists, and First Nations people—is
an example of how to incorporate social and economic concerns into
project design, though this remains an ongoing challenge.
The PFP process also delivers a complete set of ecological and
organizational conditions to guide implementation of the conservation
plan after the deal closes. This allows the team on the ground
to adapt program implementation and deal with unanticipated
restoration needs and biodiversity threats within the program area.
Because of the demanding nature of the outcomes that a PFP
project seeks, and the limits on what a short-term intervention can
accomplish, there are important preconditions to creating a successful
PFP project. Sufficiently large intact ecosystems must of course
be in place that can be supplemented or reinforced by the project to
ensure ecological sustainability. A PFP project must be potentially
attractive to possible donors. There must be a sufficiently strong
institutional base upon which to build a sound organization. Most
significantly, and the most difficult for a PFP project to influence,
there needs to be strong political support and good governance so
that local leadership can overcome the inevitable obstacles that occur
during the project and so that funders can trust that long-term
agreements will be adhered to. Taken together, these necessary
preconditions significantly limit the domains in which the PFP
approach may be successfully applied.
Project Finance
To raise funds for a large, multifaceted project with numerous
stakeholders, the for-profit sector uses what it calls
project finance. Project sponsors gain commitments for
the necessary funds but delay calling for and receiving
committed funds until a final closing secures the complete set of
resources and conditions needed for project success. These conditions
include an agreed-upon financial plan that encompasses the
entire operational structure for the project, the establishment of
all necessary conditions for success, institutional commitments to
all of those conditions, and the commitment of all needed funds.
The PFP approach uses this for-profit sector model to structure
the intricate deals required to achieve permanent conservation. The
10 steps of project financing are listed below in rough chronological
order. Although a PFP project can succeed without all 10, each plays
an important role in achieving permanent conservation.
1. A single, measurable goal unifies the parties | The setting
of a single measurable and charismatic conservation goal is one of
the most important elements of the PFP process. For example, Forever
Costa Rica’s goal of meeting the UN protected area targets and
standards helped unify efforts by forcing clarifications of what was
needed and what was not. Although a project’s stakeholders may
have divergent interests and different parts of the project may hold
more salience to some than to others, a single overarching goal allows
everyone to maintain a cooperative outcome-driven focus. A
measurable goal also helps prevent mission creep that could leave
major objectives unfulfilled as stakeholders’ agendas diverge and
effort is diverted to tangential efforts.
2. A holistic deal structure ensures that all necessary conditions
for permanence are agreed to, and that all stakeholders meet their
own objectives | The deal should be structured so that all parties both
contribute to and receive something from the project, so that each
is better off accepting the deal than rejecting it. This was a defining
characteristic of Great Bear, where First Nations gained access to a
$50 million economic development fund and secured the protection
of their ancestral lands, the forest products industry gained certainty
that it could sustainably log and sell timber, and conservationists
protected more than 8 million hectares of rainforest. At the same
time, it is impossible to fully engage every stakeholder, especially
those that lack clear leadership and organizational capacity. It is
thus vital that the project team clarify which stakeholders are essential,
and which form a wider circle to be consulted periodically.
3. A high-capacity NGO helps secure the partnership | The
lead NGO can, depending on the circumstances, provide scientific
expertise, mediate partner relationships, support post-closing implementation
with technical assistance and ongoing advocacy, and lead
fundraising. In Great Bear and Forever Costa Rica, it was The Nature
Conservancy that played this role, and in the Amazon it was the World
Wildlife Fund. It is highly unlikely that a successful PFP project could
be executed without the leadership of one of the large, global NGOs
that have these sophisticated skills and important relationships, as
well as sufficiently strong social standing to coordinate efforts locally.
4. A set of core partners shares fundraising responsibilities | The
costs of permanently protecting large areas of land or water are quite
substantial, and responsibility for covering these expenses must be
shared among a set of core partners. For example, Costa Rica’s national
conservation area agency, The Nature Conservancy, the Gordon and
Betty Moore Foundation, the Linden Trust for Conservation, and
the Walton Family Foundation shared the major responsibility for
financing Forever Costa Rica. The Costa Rican experience is typical.
The core partners included a lead governmental participant to help
secure public bilateral and multilateral support, a lead NGO to tap
its individual and foundation funder base, and lead foundations to
contribute money themselves and gain support from other foundations
and private philanthropy sources.
5. A financial plan estimates the full costs to perpetuity | The
project team needs to develop a comprehensive financial plan that
estimates all of the financial resources necessary to achieve the
program goals. For protected areas, this includes the initial creation,
consolidation, and implementation costs as well as ongoing funding—including an endowment managed by an independent trust fund
agency—to secure them permanently. Although revenues generated
by businesses operating within a protected area can assist (such as
logging in British Columbia), experience suggests that governmental
and philanthropic financial support will usually dominate. The
transaction costs of the PFP project itself must be included, too—among them the execution costs for NGO partners, fundraisers, and
lawyers during the deal process, and for the technical support and
advocacy needed in the years immediately after the closing.
6. A full-cost fundraising effort ensures permanent funding |
To close the deal, the project team needs commitments to cover
the financial plan’s estimates for program costs in perpetuity. This
might be compared to funding an airport. One would generally not
start construction if there were only money for half a runway. In
conservation, however, the common practice is to do just that, and
assume or hope the rest of the funding will come along later. The
PFP approach aims to bridge that gap by uniting vision and financing.
A board resolution by the lead NGO or the lead foundation specifying
the conditions for the release of their funds can be relied on by
other funders and thus serve this purpose.
7. A “deal broker” leads stakeholder engagement and drives
the process | In a PFP project, it can be difficult to ensure that all
necessary stakeholders come to the table, that each stakeholder’s
interests are taken into account, and that the project stays focused
on its goals. A deal broker can help solve these problems by maintaining
the group’s focus and moving the process forward. Although
it is not necessary that one type of individual or organization plays
this role, and indeed the role was played by a range of institutions
and individuals in the three PFP projects, it is useful if there is one
clear manager or a single institution that holds the confidence of
all parties. In complex for-profit deals, this role is usually played
by a project team from an investment bank.
8. A set of formal closing conditions ensures completeness | At
the closing, the negotiated terms become formally binding. This step
is based on the project meeting certain stipulations, such as that all
prescribed initial government actions have taken place. The project
needs a structured way to determine formally whether these closing
conditions have been met.
9. A set of formal disbursement milestones ensures ongoing
compliance | Disbursement milestones written into the deal ensure
post-closing compliance by conditioning the distribution of
funds for implementation on the post-closing activities necessary
for success. The milestones can include the measures required of
the government by the program design, such as regulatory changes.
Disbursement conditions apply most importantly to cash flows
from the endowment established to provide ongoing funding for
the project, but also to sinking funds that spend down their assets
for designated purposes. The independent trust fund agency
controlling the endowment is therefore a critical part of ensuring
discipline in implementation efforts over time.
10. A single closing lends urgency, creates leverage for every
entity involved, and thereby draws out new resources and commitments
| The actual delivery of the pledged funds does not occur
until the closing conditions are met. Each participant thus gains a
high degree of leverage for the funding or other commitments that
it contributes. The all-or-nothing deal structure also lends urgency
to the process. In bigger projects, it may appear more expedient to
fundraise in phases with partial closings for each phase, as has been
the case with the Amazon Region Protected Areas project. This approach
can also allow for midcourse adjustments and innovations
for very large projects. Such an approach can dilute the power of the
PFP approach, however, and should be avoided if possible.
Because the entire project depends on every donor, the financial
leverage of the single closing magnifies the impact of each funder’s
contribution, which is particularly powerful for private funders. For
example, from a single foundation’s standpoint, a $5 million commitment
to Forever Costa Rica provided an effective leverage of more
than 10 to 1. At the same time, the promise of large-scale philanthropic
investments encourages governments, NGOs, and others to
put essential legal, regulatory, and organizational structures in place.
For example, in Great Bear, the 2006 Parks Act amendments introduced
co-management of the protected rainforest with First Nations.
A PFP project can build on decades of prior conservation efforts
by governments, NGOs, local communities, and others to create
the potential for permanent conservation. It may have taken years
or even decades for the conservation program to develop the conditions
necessary for a PFP project to succeed. The PFP deal can, then,
be a timely, short-term, transformational intervention in this much
larger process, setting the stage for successful permanent conservation.
By bringing in a large amount of funding from outside of the
conservation region and well beyond that available to local parties,
a PFP deal can organize the necessary entities and draw out new
financial resources and commitments (frequently including policy
and organizational changes).
Applying the PFP Approach to Other Fields
Many of the principles that work in conservation may
be similarly beneficial for other large-scale social
sector initiatives. The PFP approach could help these
initiatives attract new funding, provide leverage to
overcome policy and regulatory barriers, and make more effective
use of scarce resources to reach desired outcomes.
Although we are not aware of examples outside of conservation
where all PFP dimensions have been applied, there are numerous
examples where some key features have been used. The Harlem
Children’s Zone—which concentrates financial and organizational
resources in a defined geographic area to achieve a single, measurable
goal, to “equip the greatest possible number of children in the
HCZ project to make a successful transition to an independent,
healthy adulthood”—is an example of a project that shares many
similarities with the PFP approach.5
Elements of the PFP approach also are being applied in what has
traditionally been purely public sector finance. Agencies such as
the United Nations Population Fund have been experimenting with
sector-wide approaches where external funding supports a government’s
holistic approach to a social challenge, rather than a specific
program.6 For example, the aid agencies of Ireland, the United Kingdom,
Norway, and Sweden worked together in the early 2000s to
provide more than $80 million annually to Uganda for health care.
Instead of developing parallel delivery structures, the donors provided
the Ugandan Ministry of Health with the funding directly based on
the ministry’s targets for health outcomes and financial management.
The project resulted in a greater emphasis on primary health care, a
higher-capacity Ministry of Health, and a more productive NGO role.7
Features of the PFP approach can be seen as well in what John
Kania and Mark Kramer describe as “collective impact initiatives,”
where multiple stakeholders make long-term commitments to solve
a social problem with a shared management system.8 Examples of
collective impact include Strive, which focuses on education in the
Cincinnati area, and the Elizabeth River Project, which is restoring
a river in southeastern Virginia. These initiatives use the power of
a single, measurable goal to align actors across sectors. The goal is
intentionally narrow to ensure that the problem is addressed holistically,
with all possible tools and donor resources brought to bear.9
Although there is no “single closing,” funders commit to long-term
engagements and draw on each other for high leverage.
The social challenges these initiatives seek to overcome are immense,
and it will take many years of dedicated work to bring about
permanent positive changes. Yet the same could have been said of
the ambitious proposal to secure protection for Costa Rica’s most
sensitive terrestrial and marine resources in 2007. The pressures on
the environment and the scope of the challenge seemed to far outmatch
the available resources. Despite those barriers, the Forever
Costa Rica program built the foundation for success, and elements
of the PFP approach were a key to that achievement.
We believe the PFP approach merits consideration for other
large-scale projects to address critical conservation, and perhaps
other social challenges as well. Project finance, combined with a
vision of permanent conservation, offers a holistic and practical
path toward solving some of the world’s most pressing problems.
The authors wish to thank the many conservation professionals they have had the good fortune to work with as Project Finance for Permanence has developed. In particular, we would like to thank the superb leadership and project teams at The Nature Conservancy and the World Wildlife Fund, which have been leaders of the projects we describe. We would also like to thank Kent Redford of the Wildlife Conservation Society and Nick Salafsky of Foundations of Success, who provided helpful guidance on early drafts of this article. Nevertheless, any errors of fact or judgment are strictly the authors’.