Over the last few years, socially and environmentally conscious impact investing by the corporate sector has witnessed encouraging growth. One of the key components of this field is “conservation investing,” which has assumed increasing importance in view of the global commitment to achieve the UN’s Sustainable Development Goals (SDGs).
Tracking the corporate investments made by businesses in the area of environmental conservation, Forest Trends has now released a new report called the “State of Private Investment in Conservation 2016.” According to the report, the private sector channeled $8.2 billion into investments that seek measurable environmental benefits, apart from financial returns, between 2014 and 2015.
Conservation investments defined in the report include any private capital committed for sustainable food and fiber production, habitat protection, or clean water. Investments in this area have seen exceptional growth after 2013, with a jump of 62 percent in just two years from $5.1 billion to $8.2 billion.
Investors have placed their confidence in financial returns they can earn from these conservation investments, with 31 percent of all investors anticipating rates of return between 5 and 9.9 percent. Conservation investments appear to be performing well in comparison to traditional strategies, with half of all for-profit investors expecting returns of 10 percent or higher.
More than $3 billion in additional private capital was on the table in 2015 as investors continued to seek out deals that met criteria for both environmental and financial returns. Almost all of these investors said they planned to raise or reallocate more capital for these investments in the next three years.
The report signals a newfound awareness on the part of banks, fund managers, and others that these conservation-oriented asset classes now represent a viable addition to portfolios. According to Michael Jenkins, Founding President and CEO of Forest Trends, the findings of the report reveal growing recognition of conservation investments as smart investments.
The report drew on survey responses from 128 banks, companies, fund managers, family offices, and non-governmental organizations, most of which were headquartered in North America and Europe. However, the report found that a significantamount of investment is moving into emerging economies, particularly sustainable forestry in Latin America – where annual investments quadrupled to over $500 million between 2009 and 2015 – and Africa.
Source: Forest Trends