Rhino bond a milestone in ethical investing
First published 22 July 2019 • Updated 17 July 2019
A revolutionary new form of investment promises to turn conservationists and capitalists into unlikely allies. The ‘Rhino bond’ is the world’s first financial instrument created to protect a species – and investors are interested. Article by Nick Green.
Protecting endangered species has long been a costly uphill struggle, particularly in the case of animals like the rhinoceros which are often worth – to poachers, anyway – more dead than alive. The sad truth is that there are millions to be made from killing rare animals and selling their remains on the black market, which means that conservation efforts (expensive in themselves) are often fighting against the economic tide.
But a company named Conservation Capital hopes to change that. It has started marketing a new ‘rhino bond’ which, if successful, will pit the big money makers directly against the big game hunters. The rhino bond will a powerful financial incentive to protect African black rhinos, while simultaneously generating funding towards those conservation efforts. In short, it puts capitalists and conservationists on the same side.
How will the rhino bond work?
Bonds are loans (made by investors to governments or large corporations) that pay back a return over a set time period, in exchange for having the money up front. The rhino bond works on a similar principle, but with an interesting twist.
The rhino bond (or Rhino Impact Investment) is a five-year, £50m bond linked to the populations of African black rhinos in five sites across Kenya and South Africa. Investors in the bond will make a return on their money if the rhino population increases over those five years, and the yield will vary depending on the level of growth. Black rhino numbers have been in steep decline for the past 50 years.
The money raised from investors in the rhino bond will be used for conservation efforts on the five sites. It is expected that there will be different terms of investment, some of which will be higher risk (meaning the possible loss of capital if rhino numbers decline) but with potentially higher return. Lower-risk investments may have their capital preserved, but may fail to make a profit if rhino population targets are not met.
Is this the future of ethical investment?
The structure of the rhino bond is known as an ‘outcome payments’ model, similar to those already used to fund health and education. According to Conservation Capital, this is the first time that such a model has been applied to a conservation project, and it could revolutionise the way such work is financed.
Giles Davies, chief executive of Conservation Capital, explained the need for this initiative. ‘There’s a $1 billion 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.’
The rhino bond is planned to launch in the first quarter of 2020, and will be managed by the Zoological Society of London. The Society’s director-general, Dominic Jermey, is confident that the bond will prove popular. He said, ‘There are vast pools of capital looking for a home, and post-Blue Planet II there’s great interest in sustainable conservation. People should look at it as a standard financial instrument.’
The bond has also received a warm welcome in more traditional quarters, with Credit Suisse considering a role as syndication agent. Marisa Drew, chief executive of its impact advisory and finance department, said, ‘It is this type of innovative financing structure that is needed to tackle some of our most challenging conservation requirements.’
If the rhino bond proves popular with investors and also succeeds in delivering the desired protection for rhinos, then this kind of ‘outcome payments’ model could represent the future of conservation funding – and a mainstay of ethical investing.
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