New Financial Instrument for Species Conservation: Rhino Impact Bond

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Klipspringer
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New Financial Instrument for Species Conservation: Rhino Impact Bond

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https://www.ft.com/content/2f8bf9e6-a79 ... c8325aaa04

‘Rhino bond’ breaks new ground in conservation finance
Investment returns linked to rise in population of the horned herbivore

John Aglionby in London JULY 16, 2019



Conservationists have started marketing a five-year “rhino bond” which bankers say is the world’s first financial instrument dedicated to protecting a species.

Investors in the $50m bond will be paid back their capital and a coupon if African black rhino populations in five sites across Kenya and South Africa increase over five years. The yield will vary depending on changes in the rhino population, which has sharply declined since the 1970s.

The bond is likely to have different categories of investment, with some investors taking a “first loss” position if rhino population targets are missed, according to Conservation Capital, the company arranging the offer.

If rhino numbers drop, those investors will lose their money depending on the scale of the decline and the terms of their investment while investors in other categories will be repaid.

Organisers say the structure — a so-called “outcome payments” model that has been used by other issuers to finance health and education projects — could revolutionise conservation financing as traditional donors such as governments and multilateral organisations will disburse money only on results. It could also bring the private sector into species protection in a new way, because the return on investment will comprise both a financial return and a measurable conservation objective.

“There’s a $1bn-a-day funding shortfall for conservation and the traditional sources of conservation finance — philanthropists and donor agencies — are not going to be able to pick up the difference,” said Giles Davies, chief executive of Conservation Capital.


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Black rhino numbers in Africa dwindled to 2,300 in the early 1990s from more than 63,000 in the 1970s, according to the International Rhino Foundation. The population is currently around 5,000, but poaching remains a significant threat.

Dominic Jermey, director-general of the Zoological Society of London, the charity that runs London Zoo and which is managing the rhino bond initiative, expressed confidence that the bond would reach its target. Organisers are hoping to launch it in the first quarter of next year.

“There are vast pools of capital looking for a home and post-Blue Planet II there’s great interest in sustainable conservation,” he said, referring to the UK TV documentary series presented by David Attenborough.

Conservation is usually financed either by direct donations or funding earmarked for specific “outputs”, such as building fences or training rangers.

Hurdles for the backers of the rhino bond include persuading investors to take the upfront risk and convincing traditional donors to agree to a five-year deferred liability — longer than the usual practice of three to four years.

“Once you get the change of mindset, people should look at it as a standard financial instrument,” Mr Jermey said.

Institutional investors are beginning to express interest in the bond. Marisa Drew, chief executive of the impact advisory and finance department at Credit Suisse, said the bank saw the bond as a “unique concept” that unites a range of stakeholders and that the bank was considering acting as a syndication agent.

“It is this type of innovative financing structure that is needed to tackle some of our most challenging conservation requirements,” she said.


The British government is among potential donors that, through the environment department, has supported preparatory work on the bond. But no decisions have yet been taken on whether to get involved, according to a person briefed on the discussions.

Tom Hall, the head of philanthropy services at UBS Wealth Management, said outcome payments were increasing in popularity, with some $600m being raised in the past year through the model.

“This has never been done before so the risks are around the ability of the organisations involved to deliver outcomes,” he said. “It’s not headline return that’s the challenge but the risk to capital and how you price that.”


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Re: New Financial Instrument for Species Conservation: Rhino Impact Bond

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https://www.fin24.com/Companies/Financi ... w-20190718

Rhinos come to the bond market, and other species may follow
Jul 18 2019 07:58 Antony Sguazzin



The planned sale of a rhino impact bond, aimed at growing the population of the endangered black rhino, is seen by its backers as a test for the creation of a conservation debt market that could be used for everything from protecting species facing extinction to preserving wildlife areas.

The sale next year of the $50m bond, the first financial instrument for species conservation, is being run by the Zoological Society of London and Conservation Capital. The company was founded in Kenya about 15 years ago seeking to create business and investment finance tools for conservation.

Under the program, the five-year bond will cover conservation efforts at five sites in South Africa and Kenya where about 700 black rhinos, or about 12% of the world’s population of the animals, live. Investors will be paid back their capital and a yield if the number of animals increases. The target is to boost the world’s black rhino population by 10%.

“We see this as a shift in the conservation-funding model,” said Oliver Withers, head of conservation finance and enterprise at the Zoological Society of London. “There is huge scope for this to be used for other species. We started out with the framework of ‘can we build an impact bond for conservation’.”

Countable, Charismatic
While the rhino security is a first, so-called “impact bonds” have been used to finance a variety of outcomes from girls education in rural India to sustainable marine and fisheries projects in the Seychelles.

The bond will give investors a chance to “recycle” their capital and buyers are likely to be high net worth individuals with an interest in conservation, as well as impact investment funds, so called ESG - environmental, social and governance - funds and foundations, Glen Jeffries of Conservation Capital said.

Black rhinos were chosen because they are “countable, critically endangered and charismatic,” he said.

There are about 5 500 black rhinos in the wild in Africa, where they are in indigenous species and mostly live in just four countries, down from 65 000 in 1970. That compares with about 20 000 of the larger white rhinos that mostly live in South Africa. They weigh as much as 1.4 metric tons compared with the 2.5 ton white rhino.

Avoiding Poachers
Rhinos in Africa are under threat from poaching, mostly because of demand in Vietnam and China for powder from their horns that is believed to cure cancer and improve virility. In 2018, 769 mainly white rhinos were killed in South Africa. The sites covered by the bond are confidential to avoid attracting poachers.

“Given that we’ve lost so much of our biodiversity already we desperately need to consider new ways of valuing. funding and implementing conservation,” said Dominic Jermey, director general of the Zoological Society of London. “The rhino impact bond model offers a huge opportunity to open up conservation funding and to share the risk of restoring financial diversity.”

The backers of the bond see considerable scope for growth. In just one of the sites there were more than 5 000 black rhinos several decades ago, Withers said. Recipients of the funds will be able to use the money how they choose, provided it’s for conservation.

“What we are really doing is buying into a management team on the ground that can deliver,” Withers said. Those “providing the grants, are not aware of the realities” on the ground, he said.

The project’s funders include the Global Environment Facility and the UK government. It is also receiving assistance from Credit Suisse Group AG and DLA Piper LLP. The plans for the Rhino bond were first reported by the Financial Times.


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Re: New Financial Instrument for Species Conservation: Rhino Impact Bond

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Difficult to understand this... :o0ps:


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..0..


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