The £1 Billion Challenge

A blog by our founder who was part of the Leadership Group that have taken on this challenge.

Bridging the gap between conservation and finance.

Have you ever thought about your pension? I certainly hope you have considered making provision for future years. In thinking about your pension, have you stopped to consider where, or who it is invested in?

For many of us the answer is “no”. Our money is entrusted to a team (an institutional investor) to drive a return; part of that return keeps the provider in business – and makes them a profit – and part of it helps to build your capital. But your money does much more than that; it could be propping up a tyrant or it could be making the world a better place. Do you have any idea what yours is doing?

Sadly, only a tiny fraction of the institutional investment monies are working as hard as they could to make the world a better place and even less of it is actively supporting conservation outcomes.

It is important to get a sense of the scale of this discussion. McKinsey estimates that at the end of 2018 there were over 79 trillion Euros of Financial assets in Europe alone, with 22 trillion of that managed by European institutions (McKinsey and Company, State of European asset management industry 2019).

At the same time a report by Credit Suisse AG and the McKinsey Centre for Business and Environment – Conservation Finance, From Niche to Mainstream: The Building of an Institutional Asset Class – in 2016 estimated that between $300 – $400 billion US was needed each year to preserve healthy ecosystems across the planet and yet only around $52 billion is available, mostly in the form of public and philanthropic funds.

Or put another way, it would only take 2% of the European assets under management to preserve healthy ecosystems on land and in the oceans across the whole world.

What is going wrong?

The early stages of the £1Bn Challenge explored this question and the answer was heartening. There is an appetite for investment from the institutions – indeed they are under ever increasing pressure from their stakeholders to do much more – and there is an appetite from those running conservation projects to attract investment. The issues stem from a lack of engagement between the two sides; in effect a chasm of incomprehension and scale exists between the two sides.

The £1Bn Challenge set out to address this and to find ways to cross the chasm and to get the first £1bn into conservation finance in Scotland.

This may seem simple, but it isn’t and there are some deep seated issues that will need to be addressed. We will need to think of conservation projects as businesses, to identify where the returns come from and to be able to quantify them.

We will also have to think a lot bigger.

Institutional investors talk in the tens if not hundreds of millions and can only assess a modest number of potential investments in any one year – anything too small simply won’t get looked at. Conservation projects are in the thousands or hundreds of thousands and are ruled out before even starting as being sub-scale.

What can be done?

These gaps can be bridged and the £1Bn route map lays out 9 strands of activity that look like good places to start. What is certain is that we need parties on each side of the chasm to develop a shared language, we need to see new products including models that can aggregate conservation projects and help make them investor ready and this can all be accelerated by changes to the investment environment by government.

This may seem remote to you, but to finish where we started… check what your pension is invested in and see if you can help to make your institution invest more of the monies they have under management into things that will make the world a better place.

James’s sketch of the chasm that characterised the problem.

The final document references the idea of a chasm of incomprehension and scale. This doodle is where that started. It is also an insight into how I make sense of complexity and make it digestible.

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