Celebrating Student Accomplishment

Today is the morning after a glorious commencement. Exhausted as I might have felt after a long day of greetings, congratulations, and well-wishes, I was that much more energized by having our commencement in person with so many of our engaged and ambitious graduates and their families. Optimism was definitely a theme for the day. As we were all lining up for our processions, I loved hearing what our Nolan, Johnson, and Dyson graduates were off to build, launch, and advance with their new positions. I am sure my leadership colleagues – Suzanne Shu, Mark Nelson, Jinhua Zhao, and Kate Walsh – will agree that commencement is the most rewarding day for us as deans. I know we are all so grateful for the hard work of our faculty colleagues and of our first-class staff, many of whom volunteered to work to make sure commencement processions ran smoothly and without any hitches. Thank you!

A Growing Conservation Finance Movement

I found more inspiration this past month. In May, I was fortunate to be invited as a participant and speaker at the Credit Suisse 9th Conservation Finance Conference in New York. The title of this year’s conference was “Super-Year for Nature – An Inflection Point for Nature and Conservation Finance.” I joined at the invitation of one of the conference co-founders and regular organizers, Dyson School Professor of Practice John Tobin, who leads Dyson’s Grand Challenges program and who worked as Credit Suisse’s Global Head of Sustainability for many years. Given John’s work with the Coalition for Private Investment in Conservation and my own research on climate finance and the ESG investing movement, we have been discussing these biodiversity finance issues for years. He invited me with a clear purpose – to exhort the 250-strong industry participants attending to engage with finance scholars to focus more research attention on the conservation finance sector for biodiversity in general, and to identify key actions needed across the private and public sectors to mobilize institutional investors and corporations to protect nature.

Positive momentum is leading up to the 15th Conference of the Parties to the Convention on Biological Diversity (CBD’s COP15) set for Fall 2022 in Kunming, China. The goal is to adopt a new Global Biodiversity Framework. Where’s the momentum? I see it across municipal, sub-national, national, and even international levels — too many sources to count. Some conference speakers discussed how the Maryland legislature passed HB0653, “The Conservation Finance Act,” designed to leverage public funds by expanding private financing to achieve a goal of conserving 30% of lands and waterways in the Chesapeake Bay by 2030. Others pointed to forward-looking Environment Bill in the UK which passed in November 2021 and which received official Royal Assent. This bill has new legally-binding targets for nature, water, air quality, and waste, and biodiversity net gain requirements for major infrastructure projects. It also established an Office of Environmental Protection. All eyes are on CBD’s COP15 which is bold in scale, focusing on performance targets in wildlife management, marine and coastal biodiversity, invasive alien species reductions, pesticide usage, plastic waste discharge, nutrient loss, and even an annual $200 billion proposed resource mobilization plan. We did learn that the April preparatory talks in Geneva were leaving some market-watchers less hopeful about success, given confusion on specific targets and uncertainty about the costs for implementation and funding. It would seem that these concerns are being met with the specificity that’s required here.

By far, my favorite session was that led by Ramzi Issa, Head of Credit Structuring Americas for Credit Suisse, on their role as sole structurer and arranger of the successful $364 million placement of Belize’s “Blue Bonds” in 2021. Blue Bonds for Conservation was a program launched by The Nature Conservancy in 2019 to help raise investment capital for island and coastal nations to restructure a portion of their national debt and create long-term sustainable finance for marine protection, sustainable economic development, and climate change mitigation. This placement was the largest sovereign bond with marine conservation targets to date. The other members of Issa’s panel included Kevin Bender, Senior Director of Sustainable Debt for TNC, Mark Espat, Lead Negotiator for the Government of Belize, and Marlena Hurley, Managing Director of the US International Development Finance Corporation’s (DPC) Office of Structured Finance & Insurance.

What we learned was how intricate were the negotiations, and how timely was the successful placement, following as it did on the heels of several difficult bond restructuring efforts for Belize during the COVID-19 period. With debt-to-GDP exceeding 130% and current national government bonds trading at 60% discounts, the effort could not have come at a more critical point. The key from Belize’s perspective was to reduce the country’s existing debt service costs while also securing funding for conservation activities. To give you a window into the complexity of the deal, the proceeds of the Blue Bonds are being used by Belize to repurchase a portion of the US dollar-denominated bonds due in 2034, and a portion of the financing – $23.5 million U.S. to be exact – will also be placed in an endowment that will set aside funding for marine conservation accessible from 2041, ultimately aiding in the long-term planning and protection of Belize’s marine ecosystems. Finally, about $4 million annually will be paid over the next 20 years to flow into a new, independent conservation fund for Belize with numerous conservation commitments and milestones. Moody’s AA rating was critical for Credit Suisse as lead and it could not have come without DPC’s assurances on political risk as well as TNC’s affirmation of the conservation goals. Team effort all the way. The quote I noted (without attribution to the individual at the conference who said it) was how this deal was “the right transaction at the right time, with a powerful conservation story.”

The other sessions featured a diagnosis of the world’s first wildlife conservation bond issued with the help of the World Bank. The $150 million so-called “Rhino Bond” includes performance payments from the Global Environmental Facility contributing to protect and increase the black rhino populations in two protected areas in South Africa, the Addo Elephant National Park, and the Great Fish River Nature Reserve. Avril Benchimol of the Global Environment Facility and Michael Bennett, Head of Market Solutions and Structured Finance of the World Bank, led the discussion with Oliver Withers, Biodiversity Lead within Global Sustainability at Credit Suisse. I also found compelling the important remarks of John Morton, Climate Counselor at the US Department of the Treasury, about the new climate-related initiatives for the Financial Stability Oversight Council and their assessment of climate change as an emerging and increasing threat to financial stability.

E. O. Wilson, a Life in Nature
I cannot say enough about Richard Rhodes’ biography Scientist about the influential Harvard biologist and naturalist, EO Wilson (2021, Doubleday Press). Wilson, who happens to be John Tobin’s PhD thesis supervisor, had a seven-decade career that started with fieldwork on ants and that blossomed into an extended understanding of social insects through the animal kingdom to human society. The pinnacle of his career was a book in 1975, Sociobiology, that demonstrated how Darwinian evolution shapes all animal behavior, even that of humans. By far the most provocative chapter is “Human Natures” (Chapter 9), where Wilson admits that he had not yet considered including humans – or human sociobiology – but figured halfway through his 1975 tome that he had no choice. The chapter features much of the fascinating firestorm in the academy that this pivot drew out.

As a finance scholar, this biography stretched me in new ways. It was a perfect way to socialize my own understanding of biodiversity research and underscore the imperative of the biodiversity finance movement. Rhodes’ writing style makes it all approachable with his precise and clear explanations of complicated scientific ideas.

What this all says to me is that our focus on nature and the marketplace must heighten in the next several years. There is much to do, but I am optimistic.