TY - JOUR

T1 - The value of flexibility in conservation financing

AU - Lennox, Gareth Daniel

AU - Fargione, Joseph

AU - Spector, Sacha H.

AU - Williams, Gwyn

AU - Armsworth, Paul R.

PY - 2016/6/7

Y1 - 2016/6/7

N2 - Land acquisition strategies employed by conservation organizations vary in their flexibility. Conservation planning theory largely fails to reflect this by presenting models that are either extremely inflexible—parcel acquisitions are irreversible and budgets are fixed—or extremely flexible—previously acquired parcels can readily be sold. This latter approach, the selling of protected areas, is infeasible or problematic in many situations. Here, we consider the value to conservation organizations of increasing the flexibility of their land acquisition strategies through their approach to financing deals. Specifically, we investigated two commonly used financing methods: conservation organizations fund acquisitions greater than currently available budgets through borrowing or increase future budgets by carrying over unspent funds in a financial period to future periods. We first present illustrative models of these financing strategies. We compared results from these models to those from both an extremely inflexible fixed-budget model and an extremely flexible selling model. We found that borrowing and budget carry-over always returned considerably higher rewards than the fixed-budget model. How they performed relative to the selling model depended on how discerning past conservation investments had been. Next, we present case studies illustrating how conservation organizations use borrowing and budget carry-over in practice. Incorporating flexibility through borrowing or budget carry-over gives conservation organizations the ability to purchase parcels of higher conservation value than when budgets are fixed without the problems and risks associated with the selling of protected areas.

AB - Land acquisition strategies employed by conservation organizations vary in their flexibility. Conservation planning theory largely fails to reflect this by presenting models that are either extremely inflexible—parcel acquisitions are irreversible and budgets are fixed—or extremely flexible—previously acquired parcels can readily be sold. This latter approach, the selling of protected areas, is infeasible or problematic in many situations. Here, we consider the value to conservation organizations of increasing the flexibility of their land acquisition strategies through their approach to financing deals. Specifically, we investigated two commonly used financing methods: conservation organizations fund acquisitions greater than currently available budgets through borrowing or increase future budgets by carrying over unspent funds in a financial period to future periods. We first present illustrative models of these financing strategies. We compared results from these models to those from both an extremely inflexible fixed-budget model and an extremely flexible selling model. We found that borrowing and budget carry-over always returned considerably higher rewards than the fixed-budget model. How they performed relative to the selling model depended on how discerning past conservation investments had been. Next, we present case studies illustrating how conservation organizations use borrowing and budget carry-over in practice. Incorporating flexibility through borrowing or budget carry-over gives conservation organizations the ability to purchase parcels of higher conservation value than when budgets are fixed without the problems and risks associated with the selling of protected areas.

KW - conservation planning

KW - conservation finance

KW - land conservation

KW - protected areas

KW - option value

KW - stochastic dynamic programming

U2 - 10.1111/cobi.12771

DO - 10.1111/cobi.12771

M3 - Journal article

JO - Conservation Biology

JF - Conservation Biology

SN - 0888-8892

ER -