There is a lot of economics and finance in this one (Envisioning profit in environmental good works):
While the state government has developed a detailed master plan for wetlands restoration in the region, and money has been promised from the federal government and the BP settlement of the 2010 oil spill, this project is getting its funding from a private equity firm. The company, Ecosystem Investment Partners, intends to profit from its good works by selling environmental restoration credits to private developers and government agencies like the Army Corps of Engineers, which need them to offset environmental damage done by their projects.
Such mitigation banks have been allowed for two decades under provisions of the Clean Water Act, but private-sector work tends to be done on a small scale to offset the effect of a single project — say, by placing a frog pond next to the new Walmart — and it tends to be unconnected to any larger environmental purpose. This project is remarkable for its ambition and scope: The company has raised $181 million from investors for this and other projects, and has bought 16,500 acres of this swamp. It could spend, by some estimates, $30 million here. ...
The process of making money out of restoring wetlands is complex, but it comes down to straightforward market principles. A policy developed under the first President George Bush calls for “no net loss” of wetlands, so when developers and government agencies tackle projects that drain or fill wetlands, they need to offset the damage either by restoring an equivalent amount of wetlands or by buying the credits from the restoration work done by others. ...
The current phase of the Chef Menteur project, a 508-acre chunk, will ultimately be worth 508 credits under the federal system. Ecosystem Investment Partners can negotiate the value of each credit with the buyers, with the price depending on factors that include the availability of other projects in the same area, the ability of the potential buyer to do its own mitigation projects and how badly the buyer needs the credits.
A federal rule issued in 2008 established a preference for any entity that damages wetlands, including the government, to use mitigation banking over doing the work itself — in part because specialists are more likely to do a better job and to tie the work to broader environmental goals. The preference could encourage private-sector involvement. That is where Ecosystem Investment Partners and similar groups come in, taking on the work and allowing the builders to focus on their projects.
But the field has yet to really take off because, as a recent paper from two Yale-trained researchers put it, the work can be expensive and financially risky, while the size of projects has tended to be too small to attract institutional investors like pension funds and university endowments. ...
Who puts money into the risky proposition of restoring swamps for profit? One of the investors is the Lincoln Institute of Land Policy, a nonprofit based in Cambridge, Mass. Katie Lincoln, the chief investment officer for the group’s half-billion-dollar endowment, said she put $10 million into Mr. Dilks’s company not as an environmental do-good project but as an investment that she expected would generate returns. “This is not a charity for us,” she said.
Some of the credits become available when the restorer commits to the project, but the full measure of credits will not be accessible until the project has been completed and has proved successful for five years. Mr. Dilks acknowledged that his company was taking on risk that extended over several years — but said calculating risk was part of what investment fund managers like himself were paid to do. Still, he said, “if you don’t have patient, long-term capital behind you, it’s really hard.”
Too much for me to have anything to say.
