Market tools identified to fund biodiversity

Findings of research into mechanisms to fund biodiversity have been published in Israel, suggesting that properly evaluated, such mechanisms can generate investor returns – helping protect national biodiversity in the process.

The research was conducted at the evaluation level, and involved the US based think tank the Milken Institute, the Israel Ministre of Environmental Protection, and various scientists, capital markets experts, foundation executives, architects and land developers.

The evaluation discussions were focused on developing market based solutions to ensure mainenance of the biodiversity in Israel. However, the models discussed were ones that are intended to be applicable to any region and country with a functioning market economy.

A number of proposals resulted, including:
   • Payment for “ecosystem services”: Based on data that place an appropriate value on such services (eg, flood control, improving water quality, preventing erosion, stopping the spread of disease, preventing pollution, and creating amenities such as wetland restoration), payments can incentivise landowners to opt out of ecologically destructive behavior.
   • A biodiversity banking scheme: This approach allows a developer to pay into a compensation program that funds set-asides of bio-similar land parcels – to help offset the effects of developing a particular parcel of land.
   • Biodiversity auctions: a leading mechanism in Australia for biodiversity protection, these involve a bid system which creates competition for conservation services, the capital from which is then used to finance the preservation of other land parcels.

The final report from the evaluation process suggested that protection habitats depens on pricing the assets based on their environmental, social and financial values. This in turn depends on “determining the value of so-called ecosystem services along with data based economic and ecological study. Assigning them a real price forces recognition by markets, government and communities of the significance of biodiversity and its contribution to sustainable economic growth.”

A full report into bodiversity conservation in Israel can be dowloaded from the Milken Institute: http://www.milkeninstitute.org/publications/publications.taf?function=detail&ID=38801348&cat=finlab

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