Opinion: Combating environmental crises requires investment from the private sector
By Grace Edinger
Philanthropic and government dollars are perceived as ‘doing good’ for the environment, where private funding, with the same outcome, has a more sinister connotation. Many traditional conservationists think that it is immoral to profit from ecological restoration and conservation. I argue that that is not the case, that private involvement is necessary to combat the climate, clean water, and endangered species crises we find ourselves in. Development will continue to advance; we should embrace the range of solutions available to deliver environmental benefit along with it.
It is estimated that the United States has an annual environmental funding gap as high as US$824 billion. Globally, our gap is estimated to be US$3.5 trillion. As recently as 2020, less than 2% of philanthropic dollars went to environmental efforts, totaling only US$8 billion. In the same year, the American government contributed US$321 billion. If other sources, like conservation banks [1], private investments, etc. are not embraced without stigma, it is highly unlikely that we will be able to combat climate change.
Conservation banks and compensatory mitigation have gotten the private sector involved in conservation efforts for almost 30 years. In that time, we have seen corporations de-risking investments for the public, taking on project management roles, freeing up time for underfunded agencies, and creating positive economic pressure. All that being said, government policies and procurement practices create unnecessary red tape for these initiatives, often making restoration efforts just as challenging as development. With an economic interest and expertise in restoration efforts (rather than pristine ecological conservation), these privately-funded programs have the ability to restore areas hit hardest by environmental injustice.
Not only do these private investments create direct positive environmental outcomes, a suite of ‘co-benefits’ is produced as well. This work creates jobs in low-income and minority communities, provides green space and access to safe outdoor recreation, and builds healthier communities by increasing natural disaster resiliency and water quality.
An emerging partnership model known as public private partnerships (P3s) has demonstrated its effectiveness in achieving these environmental and public health co-benefits while driving economies of scale and cost efficiencies and streamlining implementation. P3s exist in many forms, but most involve a negotiated mix of financial and project management roles between a government agency and a private company, creating stronger incentives to achieve outcomes.
For example, in 2015 Corvias entered a partnership with Prince George’s County, Maryland “to improve the stormwater infrastructure and make a commitment to impact the local economy through ‘local’ targeted disadvantaged subcontractor development and utilization.” This partnership, aptly named the Clean Water Partnership, contracts with local businesses to bolster economic development and produce significant improvement to stormwater infrastructure. To date, this partnership has exceeded its goals in terms of socioeconomic class participation, county resident participation, and local business participation.
In short, private investment needs to be central to the environmental movement. Incentivizing and untangling the red tape needed to meet the scale of the problem at hand will help close the funding gap.
[1] Conservation Banks are parcels of land that have value in terms of natural resources (acres of habitat, presence of species, etc.) that is managed in perpetuity. The value is converted into credits, which can be sold to compensate for environmental impacts.
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The Restoration Economy Center, housed within the Environmental Policy Innovation Center works to detangle this red tape and change the perception of private finance in ecological restoration. To learn more, please email grace@policyinnovation.org.