The Great Biodiversity Bake Off
Biodiversity markets promise to generate finance to protect vital ecosystems. In doing so, they entrench the very austerity conditions that make them vulnerable in the first place.
The last 30 years of biodiversity policy would have made for good(ish) TV. Each season, new project developers come on the scene, building excitement about their idea for how to turn biodiversity into an investible asset. The pilot episode could have been bioprospecting Costa Rica's genetic resources. Then biodiversity credits in the Amazon, followed by a bond linked to Rhino numbers or a satellite that tracks whales as carbon credits.
Some of these ideas have helped fund important conservation projects: the Yurok Tribe, for example, has leveraged forest-based carbon markets to buy back pieces of their territory in California and conduct ecological restoration. Other ideas have been speculative, unscientific or ludicrously ignorant of their social and ecological impacts. All have jostled for attention among NGOs, governments and the private sector, making the case for how they will create a market that can “unlock trillions” in capital for biodiversity conservation and restoration.
But the promised flood of capital has never arrived. Instead, viewers have tuned in to see the proliferation of pilot projects, boutique funds and voluntary efforts repeatedly demonstrate that profit-motivated biodiversity conservation remains a tough sell. Each time, the money mobilized has been small, inconsistent and dependent on public subsidies and philanthropic guarantees. The result is an outlook for biodiversity that resembles not a burgeoning capital market but something more like a bake sale.
“Bake sales”, for those who don’t live in the Anglosphere, became popular in the 19th and early 20th centuries when churches, schools and charitable groups would sell homemade cakes, pies and breads to raise money for various causes. Over time, bake sales became a staple of school fundraising—today, they are often used to support extracurricular activities like sports, music and field trips. Bake sales are voluntary, piecemeal and subsidized by concessional capital and labour (parents buying ingredients and making the cakes and cookies themselves), while the proceeds are unpredictable. They are not designed to support ongoing investment in essential infrastructure; they are stopgaps in weakened public systems.
As with bake sales, most biodiversity finance projects depend on subsidies: public money or philanthropic funds that absorb potential losses so private investors are motivated to participate. A whole range of public and NGO actors work behind the scenes to perform this market under the impression that such efforts are more efficient and scalable than funding conservation directly. And so, despite nature-related private finance consistently falling short of the lofty projections for market growth, the show is always renewed for another season.
Ecosystems, of course, are not the only public goods exposed to marketization efforts—health care, education, utilities and transportation systems in many parts of the world are under pressure to turn core infrastructure into profitable business models. But even in this context, biodiversity faces a unique set of constraints to privatization and profitability: put simply, there is no market for the type of global protection and restoration needed to stay within planetary boundaries. Lack of revenue, high transaction costs, low liquidity and the need to satisfy investors’ risk-return profiles all limit the scale and distributional reach of projects.
So, despite frequent projections that the market will scale, the lack of a true business case for investment in biodiversity has relegated “market-based conservation” to a never-ending bake sale.
Perverse Incentives
Why, then, spend so much energy trying to appeal to private finance when you don’t have the one thing it needs—profit?
Public funding remains, by a long shot, the largest force in biodiversity conservation. But with private capital increasingly concentrated and public finance increasingly scarce, those seeking funds for conservation work are frequently told they must develop return-generating ideas to tap into this abundant capital.
While raising money for protection and restoration is critical, a lack of conservation funding is not the primary driver of the ecological crisis. Most ecosystems are lost not because of insuficcient funds but because the pressures to convert them to other uses are so strong. Up to 90 per cent of all biodiversity loss on land is estimated to be driven by extractive land use change, including mining, forestry and industrial agriculture. Much of this happens with the full-throated approval of the state, although it also happens through informal or illegal practices too.