Financing Protected Areas: The Social and Environmental Impact Bond's Role in Terrestrial Protected Area Sustainability

Insufficient funding for terrestrial protected areas is a global challenge, and the ability of a protected area management agency to secure sustainable financing is an obstacle in the effective management of these important areas. While the role of public sector agencies in establishing, financing, and managing protected areas, and in providing a supportive legislative and policy environment will remain essential into the future; the International Union for the Conservation of Nature (IUCN) recommends that alternative finance mechanisms be adopted to help achieve financial sustainability. With this recommendation in mind, one approach is to look to other policy areas which traditionally rely on governments as their primary funding source, to understand the alternative finance mechanisms they have adopted and appraise the suitability of these mechanisms for terrestrial protected areas. One alternative finance mechanism is the social and environmental impact bond which is a subset of impact investment and an example of a pay for success or results-based contract. This paper reviews literature on the social and environmental impact bond with a view to assessing its potential applicability to assist in the effective management of terrestrial protected areas that fall within the management categories defined by the IUCN. Three examples of existing and proposed impact bonds with an environment focus are explored, including the world’s first environmental impact bond in Washington D.C., the publicly offered Atlanta environmental impact bond and the proposed wildlife conservation bond in South Africa. The selected impact bonds will help to illustrate the establishment, operation, and evaluation of impact bonds in a real-world context. It will be argued that the social and environmental impact bond can be a useful finance model for a range of uses in a variety of social sectors and conservation settings, including terrestrial protected areas. The paper further considers how the impact bond might result in both improved social and/or environmental outcomes as well as the perceived challenges associated with this alternative finance mechanism. While the focus of this paper is on terrestrial protected areas, the lessons discussed may also be applicable to marine protected areas.