August 2016

Deborah Froeb Director, NatureVest

Investing for Conservation Impact

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C (Tim

Calver)

Impact investing refers to investments "made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return.”

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What is impact investing?

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Nature Needs Capital … and Capital Needs Investment-Ready Projects

$1B $1B

$6B

$0$1$2$3$4$5$6$7$8$9

2009-2013 2014-2018 projected

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Past & projected private investment in conservation

Deployed Allocated Projected

Challenge: Investment-ready deals

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NatureVest Strategic Summary

NatureVest generates measurable conservation outcomes along with a financial return.

Put to work at least $1 billion of impact investment capital for conservation

TNC’s unit working to deliver conservation outcomes while also generating financial returns

Structure transactions that can be replicated and scaled Source impact capital from current and new supporters Share our knowledge and experience to strengthen awareness and support for impact investment in conservation

PURPOSE

STRATEGY

GOAL

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1.Support TNC global strategies with viable Theory of Change

2.The ability to generate dependable cash flows that create a critical role for impact capital

3.Size of the conservation impact and investment opportunity

4.Replicability of the individual deals

5.Readiness to deploy capital

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SCIENCE

LANDS WATER OCEANS

CITIES CLIMATE

Investment Priorities

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Global Conservation Strategy NatureVest Business Lines Deal Criteria

WORKING LANDSCAPES

WATER

MARKETS

DEBT CONVERSIONS

GREEN

INFRASTRUCTURE

SUSTAINABLE AGRICULTURE

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• $134M

• 165,000 acres

• Wildlife migration

Great Western Checkerboards

• $7M

• Sustainable cattle grazing

• Local conservancies

Livestock-to-Markets

• $20.2M

• Marine protection areas

• Permanent funding for conservation

Seychelles Debt Conversions

• $19.56M

• Restored wetlands

• Jobs for indigenous peoples

Murray Darling Balanced Water Fund

• $1.7M

• Reduced storm water runoff

• Green jobs & green space

Washington, D.C. Green Infrastructure

CLOSED DEALS

• $200M, 6 deals

• 3 continents, 4 countries

LANDS

CLIMATE

OCEANS

WATERS

CITIES

PIPELINE

• $850M, 8 deals

• 4 continents, 7 countries

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NatureVest Closed Deals

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The Nature Conservancy will build off of its Great Western Checkerboards deal ($134M and to protect additional high value conservation projects.

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ark Schapper)

Conservation Objectives: Conserve approximately 400K acres of critical biodiversity hotspots Investment outcomes: • Carbon sequestration from forests • Stable or increased wildlife populations using critical corridors

and restored habitat • Recreational opportunities • More diverse local economies • Market return for investors

Deal summary • Investment into a fund that will acquire a portfolio of high

conservation value properties with an initial focus on four regions: Central Appalachians, Longleaf Pine, Emerald Edge (Washington) and the Working Woodlands program in the Northern Appalachians and Upper Peninsula of Michigan

Financial Information Deal Size: $400M

Forests for our Future Fund

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Equity 15 year term

Debt Senior, secure debt

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Partner with USFWS to protect 50,000 acres of critical wetland habitat for migratory birds in South Dakota

Environmental & Social Returns

• Compensation helps ranchers to continue family enterprise on native grasslands

• Protection avoids emissions of 770,000 tons of carbon dioxide

• Protection provides critical habitat to support migrating birds

Financial Returns

• 3% yield on impact investment • Generate estimated $4.2 million in

funding for additional easements • Reduce commodity crop related

job and revenue risks

Public Private Partnership using Carbon Finance

Population growth and associated real estate development in the Chesapeake Bay Region have made stormwater pollution the Bay’s fastest growing source of water pollution.

Washington, D.C. is the epicenter as it is the

fastest growing metropolitan area in the U.S. with a 40% population increase expected in the next 15 years and 22.5 million square feet of development underway.

The District’s three primary watersheds feed stormwater pollution into the Chesapeake Bay, an ecological and economic treasure with a shoreline longer that the entire U.S. West Coast.

A Nature Based Solution in Washington, D.C.

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DC DEVCO

REGULATOR (DOEE)

INVESTOR

GREEN INFRASTRUCTURE DEVELOPMENT PROCESS

GREEN INFRASTRUCTURE

ASSET

PROPERTY OWNER

DEVELOPER

CASH FLOW

REGULATORY COMPLIANCE

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The DC Green Infrastructure Fund will seek to mitigate roughly 43 million gallons of storm water runoff annually in Washington, DC by building green infrastructure projects in underserved areas.

© K

halil Kettering

Conservation Objective: Reduce water pollution in Chesapeake Bay, most productive estuary in US. Investment Outcomes • Cleaner water to support marine life, recreation and livelihoods • Cleaner air and healthier outdoor spaces for low income neighborhoods • New jobs generated (build/manage infrastructure investments) • Continued economic growth in DC benefits all citizens • Market financial return to investors • Proof of concept for replicable business model

Deal summary • Equity investment into a joint venture fund that will develop,

manage and sell storm water retention credits (SRCs) to developers under Washington, DC regulations

Financial Information Deal Size: $10-15 million .

Washington DC Green Infrastructure Fund

Equity 12 years

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Contact Marc Diaz Email mdiaz@tnc.org

NatureVestTNC.org

• Clarity about all objectives and how the investment will really achieve them

• Enabling conditions: Demand pull…. Existing or new regulation or market conditions or industry risk management

• Externalities: Costs and Benefits Link parties • Is the business model or investment hypothesis

economically feasible? Does it have a plausible exit?

• Ecosystem service investments can be expensive and risky to develop. Agency approvals, shifting standards, competition…..

Considerations

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