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Can wildlife conservation banking generate investment returns? Rhett A. Butler, mongabay.com November 27, 2007
Using money from its asset management business, New Forests will to fund rehabilitation and protection of Malua Forest Reserve, a tract of rainforest that supports orangutans and other endangered species. To generate financial returns for investors, New Forests will sell the value of the "forest conservation outcomes" as biodiversity protection credits to palm oil developers, energy firms, and other businesses seeking to provide consumers with environmentally sustainable products including eco-friendly biodiesel. New Forests says the program -- modeled after the U.S. endangered species banking market -- is the first-of-its-kind in Borneo.
Environmentalists say Malaysia's rapid expansion of oil palm plantations over the past decade have come at the expense of biodiverse rainforests that are store large amount of carbon and are home to endangered orangutans, rhinos, and forest elephants. Facing criticism from green groups and potential sanctions in consumer markets, some palm oil producers are working to clean up their operations. Last week the industry-led Round Table on Sustainable Palm Oil (RSPO) announced new criteria for "greener" palm oil production. The new initiative will give palm oil producers another option in protecting regional biodiversity and forests. It may also provide attractive returns for investors. Mr. Brand says that from a financial standpoint, conservation could be competitive with other types of land use. "The conservation banking business in the USA is a private equity style business and seeks returns in the 15-25% real IRR range," Mr. Brand told mongabay.com. "We expect if we are successful here we can generate similar or better returns, which should be competitive with the alternative land uses such as palm oil plantations. In fact that is central to what we have argued to the government--that conservation may ultimately become as if not more commercially attractive than conversion of the forest.
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