A Quick Analysis of MPA financing and A Financial Management Framework for MPA Networks

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1 A Quick Analysis of MPA financing and A Financial Management Framework for MPA Networks Mr. John D. Claussen and Mr. Stuart J. Green

2 Overview 1. Protected Areas (PAs) present solution for biodiversity conservation, habitat preservation, and community security 2. Functioning PAs and networks require adequate planning and resources (human and financial). Significantly more than is available today. 3. Effective PAs must be well designed and considered. To respond to lack of resources PAs and networks must also be optimally designed. 4. CCIF proposes an operational and financial (management) framework considering detailed analysis on options and providing decision-makers, practitioners and funders the information necessary to succeed. 5. Conclusions

3 Globally the number of PAs has been increasing significantly, and now cover about 12% of the Earth s land surface Growth of PAs worldwide PA coverage goals - Consensus The Convention on Biological Diversity calls for most signatory countries to set PA coverage targets by % terrestrial coverage in Protected Areas (current: 12% globally) 10% marine coverage in Protected Areas (current: >0.5% globally) In order to keep up with the rapid growth of PAs, a lot more funding and capacity will be necessary, along with better tools and methods of setting priorities in funding Source: CCIF Analysis, Sustainable Financing of Protected Areas, IUCN, 2006 PA Guidelines report; Convention on Biological Diversity Notes: (1) Excluding PA s with no known date (approx. 38K PA s covering 4 million km 2 )

4 Despite aggressive growth demands, PAs have limited funding options, especially in developing areas (PAs are expensive..) PA global costs overview Global PA expenditure est. at $6.5B /yr (2003) Global MPA coverage of 20 30% would cost $5 19 billion / year, but would increase sustainability of a global marine fish catch, currently worth $70 80 billion annually, and may help sustain unseen ecosystem services worth $ trillion each year 1 Domestic government budgets and donor assistance important. Private sector emerging Indonesia s $5.5/Ha PA funding gap 2007 Indonesian PAs Funding Levels $56m $38m Countries such as Indonesia require 2-3 times their current PA funding to meet ideal needs. Source: CCIF Analysis, Center for Applied Biodiversity Science 2003 PA Costs report, IFCA 2007 PA report Notes: (1) Balmford, Gravestock, Hockley, McClean & Roberts 2004.

5 Initial Notes on Sustainability financial sustainability the ability to secure sufficient, stable, long-term financial resources, and to allocate them to cover the full costs of PAs and to ensure that they are managed effectively and efficiently with respect to conservation and other objectives. (Sustainable Financing of Protected Areas: A global review of challenges and options. - L. Emerton, J. Bishop and L. Thomas. 2006) Effective management and financing is about more than money; it involves managing funds to achieve conservation outcomes (or objectives). Sustainability requires funds be managed and administered in a way that promotes cost efficiency and management effectiveness, longterm planning and security, and provides incentives and opportunities for managers to generate and retain funds at the PA level.

6 MPA Learning Partnership Visited 6 MPA Networks at various stages of planning and implementation in the Coral triangle and conducted in depth subjective interviews with key stakeholders in 6 sites

7 Two themes emerged relevant to our discussion: Success depends on key functions and availability of resources Indicator of Management Success Increased fish catch Improved critical habitats in no-take zones Improved marine diversity in no-take zones Enforcement by community enforcers Highly Significant Factors Sustainable Financing for Management** Clarity of MPA network rules** Enforcement by community enforcers** Local skills development** Involvement in management by local elected politicians** Sustainable Financing for Management** Management capacity for MPA network / board* Local skills development** Participatory biophysical assessments** Increased fish catch** Increased household income Skills Development ** Capacity Development of Management Group / Board* Opened Tourism Business Opportunities** Opened Nontourism Business Opportunities* Supplemental / Alternative Livelihood Programs Provided* Sustainable Financing for Management* Outreach Programs Conducted* Increased community pride Skills Development** Opened Tourism Business Opportunities** Supplemental / Alternative Livelihood Programs Provided* Sustainable Financing for Management* Extent of Support of Local Politicians** Extent of Support of National Politicians** Best perceived predictors of management success as determined by regression analysis for key indicators MPA Network Learning Partnership ** Correlation is significant at the.01 level (two- tailed). * Correlation is significant at the.05 level (two-tailed).

8 Current operational frameworks often have too narrow of a focus on scientific objectives and not enough on sustainable operations Common PA operational model Observed limitations Functional Management Plans actually are Approach Objectives Stakeholders NOT the norm leading to lack of PA Management Biodiversity conservation Support ecosystem services Maximize social and cultural benefits Conservationists Scientists Policy makers management in practical terms and misallocation of funds in many cases Focus is currently heavy on science and conservation objectives with little understanding or appreciation for the operational and financial requirements need more integration here essential to achieve these objectives Management effectiveness is on the whole Create and Accountants poor, particularly for marine sector (behind 1- Costs & Financing maintain budgets Fulfill donor requirements Donors Investors 2 decades of learning to terrestrial parks) Integrated planning is lacking Classic fundraising does not produce needed results. It alone can not. Source: CCIF Analysis Notes: Observations largely derived from CCIF projects

9 Limits of current model present the following barriers Capability barriers Limited capacity to make management and operational decisions rooted in sound financial analysis, let alone conduct analysis Financing/costs are not fully considered at inception/objective setting stage. Short-term thinking leads to programs that are financially unsustainable in scale and scope Policy & regulatory constraints limit effective government budgeting and allocations as well as collaboration in management Lack of revenue development skills Willingness barriers Low prioritization of financing activities Over reliance on scientists to manage Over reliance on expectation for donor funding Funders continue to under-emphasize long term sustainability Funder fatigue and lack of willingness to invest over much longer time frames Lack of focus on making a business case for PAs Continued expectation that government and/or community will necessarily prioritize conservation for conservation sake Not enough funding is a problem BUT.. not having a clear understanding of how much you need in the first place and the costs associated with management over the long term is just as much a problem (no household budget).. Source: CCIF Analysis

10 Setting a Framework Integrated management and financial plans are built on a clear and rational view of the requisite framework components Framework Foundation: Objectives Functions Effective conservation Habitat protection Resource management Community security & livelihoods Governance & Planning Science & Research Zoning & Enforcement Information, Education & Comm. Sustainable Livelihoods Tourism Management Finance & Administration Cost Categories Scenarios Status Quo Minimal Optimal Personnel Contractual Services Travel Supplies & Materials Fuel Occupancy The CCIF Approach provides a clear and consistent framework to create, revise, and monitor integrated management and financial plans Capital Assets Asset Maintenance Miscellaneous

11 A Framework: conduct a series of comprehensive analyses on PA management and financial planning with varying levels of participation.. CCIF Integrated PA Management Approach 1 Initial Assessment Fund Sources PA Profile Database Cost & Revenue Modeling Management & Financing Strategy 2 4 Implementation Financial Plan Donor Report & proposals Com muniti es Ecological (General) Mgmt Review & Plan Endowment Business Plan Assessment of current status through internal and external data Agreement on objectives and functions Builds integrated network model, comparative scenarios based on PA assessment and reviewed data Summarize tactics and pursue implementation plans 3 3 Management Approach Financing Approach Staffing allocation models and ranking Comparative management scenarios Assess and rank staffing models Develop management scenarios and their respective cost of personnel and operations Financial objectives & priorities Funding, revenue & gaps chart Identify and analyze financial objectives and priorities necessary to meet optimal PA scenarios Forecast financial conditions and assess funding required to meet objectives Recommend implementation plans

12 PAs can benefit from a multi-dimensional approach integrating more fully their planning to hit the sweet spot for success Financial planning sophistication High Low Conceptual framework for PA operational focus IV: Scientific Savvy I: Scientific Passive III: Comprehensive Savvy (optimal) II: Comprehensive Passive Scenario I: Scientific Passive Management and administration solely focus on the science of conservation Passive model of fundraising and little financial investment or business development ideas Scenario II: Comprehensive Passive Professional management systems are implemented Passive model of fundraising and little financial investment or business development ideas Scenario III: Comprehensive Savvy (optimal) Professional management systems are implemented Innovative business models (i.e. tourism) and strategic investments of funds Low Management system intensity High Scenario IV: Scientific Savvy Management and administration solely focus on the science of conservation Innovative business models (i.e. tourism) and strategic investments of funds The most sustainable PA scenario is one that implements both strategic management and active financial planning in its operational model Source: CCIF Analysis

13 PAs and networks should be viewed in terms of operational benefits: economies of scale should be explored in more detail, Operational PA network concept PA 1 US$50,000 /yr PA 2 US$75,000 /yr ILLUSTRATION PA benefits are escalated by networks Ecological benefits: Ecosystem maintenance through area scaling Risk sharing that strengthens system resilience Slowing the loss of endangered species Ecological PA Network Planning Considerations Institutional and governance Economic and social Spatial and temporal Scientific and information management Total Cost US$125,000/yr Economical Maximum Benefit Social PA 1 US$30,000/yr Network US$15,000/yr PA 2 US$50,000/yr Total Cost US$95,000/yr Economical benefits: Efficient use of critical resources when inputs & outputs are coordinated Sharing of best practices in financial management Social benefits: Coordination of learning and administration Conflict prevention through common goal sharing Source: CCIF Analysis; Establishing Resilient PA Networks, IUCN, WCPA & WWF report, 2008 Notes: Data on PA network establishment trends are rarely recorded formally and savings are based on projections

14 Conclusions Consensus exists around value and necessity of MPAs and networks as tools for achieving habitat and species conservation and community security. But Objectives must be clear. MPAs and networks are relatively expensive requiring complex set up and operations, which requires meaningful human capacity and financial resources. To date most effort and expenditure has been on scientific and policy actions. MPA financing is about more than money however; it involves mobilizing and managing funds to address a range of challenges associated with objectives. MPA financial sustainability can be defined as the ability to secure sufficient, stable and long term financial resources, and developing proper capacities and policies, and to allocate all of these in a timely manner and in an appropriate form. A systematic operational and financing framework is required to design efficient, effective and equitable MPAs, and to continuously improve management of these MPAs so that resources are optimized (even before discussing MPA networks).

15 Conclusions (cont) Building MPA capacity for financial and business planning is essential. The increasing difficulty of raising funds for MPAs from conventional sources, together with the increasing complexity of PA funding needs and opportunities, accentuate the importance of financial planning and marketing skills. When MPAs and MPA networks are planned and objectives set, we need to be very clear on how much it will cost to manage and where this money will come from (most ecological management plans 25 years, most budgets and financing 1 2 years!) Financing options / strategies ((including innovative PES, etc) can be developed based on a sound understanding and appreciation the possible scenarios for a achieving MPA and related objectives, but should be initiated at the planning stage. We need to get the individual MPAs functioning well, before upgrading to MPA networks, but scales of economy should kick in with networks. With proper planning, and analyses these will be found. We need more business trained managers involved in MPA design, management and planning (sorry scientists..). And we need to find more ways to secure and retain resources for MPAs (and we need scientists to get MBAs!)

16 Conservation Finance Community Development Markets & Ventures Downloaded at: For additional information on CCIF: and the MPA Learning Network see the Appendix which follows.

17 Appendix

18 CCIF focuses on three core areas to address urgent conservation and sustainable community development issues globally We conduct sound analyses to design innovative financing strategies for critical conservation challenges around the globe, combining expertise in onthe-ground conservation work with experience in finance and natural resources economics. Conservation Finance Community Development Conservation and natural resource management efforts are invariably linked to communities and their livelihoods and security. We work at the intersection of these issues to find ways to enhance community development and improve conservation efforts for the long-term. Markets & Ventures We assess and design opportunities and solutions to transform destructive practices and industries and develop strategic investments in improved business models, markets, and enterprises.

19 CCIF How We Work Overview CCIF Setup CCIF applies the tools, strategies, and resources of the private sector to address urgent conservation and community development issues worldwide. A project of the Trust for Conservation Innovation (TCI), a San Francisco-based fiscal sponsor 1. TCI provides administrative and grant management services. Investors Packard, TOF, Duke, IFC, AusAid, Oak, World Bank, GEF Clients CCIF (TCI - US 501c3 non-profit) Implementers CI, TNC, WWF, WCS, MAC, Reef Check, local NGOs CCIF is led by a Managing Director and is governed by TCI s Board of Directors. In addition we are guided by an advisory group. CCIF utilizes 14 Practitioners globally. ~7 projects in last two years across Asia Pacific Starling Resources SE Asian Consultancy Staff & Advisors Independent Experts and Contractors California Environmental Associates US Consultancy Clients are Foundations, NGOs and private sector organizations. Notes: (1) TCI maintains CCIF s 501 (c)(3) registration with the US government.

20 CCIF Where We Do It Duke University (2008) Marine Ecosystem-base Management Tool Innovation Fund MPA Financial Management Tool United Nations Development Program ( ) Mongolia and Thailand PA National PA system finance assessments and design Conservation International (2007) Berau Marine Conservation Area, Kalimantan, Indonesia PA Management and Financial Analysis MAR Fund (2005) Central America Mesoamerican Reef Fund Business Plan El Nido Foundation (2006) El Nido Taytay Managed Resource Protected Area PA Financial and Operational Management Evaluation David & Lucile Packard Foundation ( ) Fiji Locally Managed Marine Areas (FLMMA) PA Trust Fund Design and Financial Planning David & Lucile Packard Foundation ( ) Republic of Palau PA Management and Financial Planning Methodology GCF and ADM Capital Foundation (2008) Cardamom Mountain Protected Area Network PA Network Conservation Trust Fund Business Plan Conservation International (2008) Raja Ampat Protected Areas, Indonesia MPA Network Management and Cost Analysis CCIF project partners led these assignments using CCIF materials/ approach Wildlife Conservation Society (2005) Karimunjawa National Park, Java, Indonesia PA Financial Needs Assessment TNC, PNK, and Packard Foundation ( ) Komodo National Park, Indonesia PA analysis and management report, community development Our protected are experience encompasses both management and financial plan designs. ADM Capital Foundation (2009) Nantu Forest, Sulawesi, Indonesia PA network costing and finance strategy (include CTF and REDD)

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