10th RedLAC General Assembly. Building business opportunities for Biodiversity

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1 10th RedLAC General Assembly Building business opportunities for Biodiversity Mario Monzoni FGV Centre for Sustainability Studies (GVces) Belize City, Belize November 10th to 13th, 2008

Centre for Sustainability Studies (GVces) mario.

2 Agenda Dillemas & Trends Command & control X economic instruments Valuation Buyers Non-profit projects X pro-profit sustainable businesses Management Challenges My feelings

3 Dilemma #1: Command & Control x Economic Instruments Command & Control Uniform standards not cost-effective Do not incentive cleaner technologies Few incentive for exceeding the targets Heavy bourocracy Economic Instruments or Incentive Based Regulation Cost-effective: assume marginal cost of emission reduction are different by sources; or MARGINAL PRODUCTIVITY OF LAND USE IS DIFFERENT BY REGIONS Offer long run incentives for clean technologies; or LAND USE BEST PRACTICES Etc

Incentive Based Regulation Cost-effective: assume marginal cost of emission reduction are different by sources; or

4 Trend # 1: Evolving (crescent) interest for ECONOMIC INSTRUMENTS as a toll for conservation, and sustainable use of natural resources In large scale, so interest is due to the realization that the use of command & control type of instruments, solely, has been revealed insufficient to guarantee expected results from public policies, particularly with respect to the use of forest (natural) resources. Fonte: Seminário: Instrumentos econômicos para o Desenvolvimento Sustentável na Amazônia Brasileira. Promovido pelo Programa Piloto para a proteção das Florestas Tropicais do Brasil (PPG-7) Secretaria de Coordenação da Amazônia, Ministério do Meio Ambiente. Brasília, DF, 24 e 25 de julho de 2002.

with respect to the use of forest (natural) resources. Fonte: Seminário: Instrumentos econômicos para o Desenvolvimento Sustentável na Amazônia Brasileira.

5 Trend # 2: Funding De-concentrated not only gov t and multilaterals Private Sector Mandatory VOLUNTARY markets Trend #3: Competition on the environmental funds market Trend #4: Use of resource Payment for environmental services: protector receives Working with the Entorno ( surroundings ), diminishing economic pressure on protected areas In line of the fundamentals of the economic instrument = changing the behavior of the economic agent at the micro-level

services: protector receives Working with the Entorno ( surroundings ), diminishing economic pressure on protected

6 Dilemma # 2: Valuation: water and biodiversity Trend # 1: Bundling selling the services together Pegging Biodiversity to Carbon Trend # 2: payment for the COMMITMENT of land use and/or conservation BEST PRACTICES High correlation between land use good practices and supply of environmental services

for the COMMITMENT of land use and/or conservation BEST PRACTICES High

7 Dilemma # 3: Buyers Status Quo: State & Multilateral Money Tax & fees (transferring resources): public policies & programs federal and states budgets Sectorial Funds; Matching money (ex.: GEF)

8 Dilemma # 3: Buyers Trend # 1: Civil Society, NGOs Pilot Projects; seed money ; matching money i.e.: Fundação O Boticário; TNC, CI, why not WWF, etc. Trend # 2: Watershed Committees (use of water charges) PES as a modality of the use of the resource (i.e.: Piracicaba watershed, SP) Great opportunity for atlantic forest (BRAZIL); forest recovering; particularly gallery forest (permanent protection area)

(i.e.: Piracicaba watershed, SP) Great opportunity for atlantic forest (BRAZIL); forest recovering;

9 Dilemma # 3: Buyers Trend # 3: Private Sector benefit is tangible (i.e.: water for utilities companies; traditional knowledge for cosmetic & pharmaceutical companies, etc ): great possibilities for market schemes (private buyer and private sellers) Benefit is diffuse: resources can come from CSR, carbon neutralization, marketing... Where there is a verification, certification, and/or secondary markets institutional framework I.e.: carbon (bundling!!!)

(private buyer and private sellers) Benefit is diffuse: resources can come from CSR, carbon neutralization,

10 Dilemma # 4: Non-profit or pro-profit projects Trend # 1: Market for sustainable businesses venture capital fund Grants x Investing money = two way flow Might have some statutory constraints

11 Management Challenges Challenge #1: Competition Scale: diminishing transaction cost = < Administration Costs/Desimbursements (or assets under administration) Challenge #2: Governance Best Practices: Strong, Independent & Active Board Challenge #3: Transparency/Accountability Investment in Information Technology (IT); and Annual Report Challenge #4: Dealing with more sophisticated financial mechanisms Human resources environmental (conservation) finance

Independent & Active Board Challenge #3: Transparency/Accountability Investment in Information Technology (IT);

12 My feelings... There is money for conservation in the market That money knows nothing about conservation That money wants to be effective There is a market for environmental funds Thank you! Mario Monzoni FGV Centre for Sustainability Studies (GVces) mario.monzoni@fgv.br

Markets for Conservation & Sustainable Use of Biodiversity. Maritta Koch-Weser

Markets for Conservation & Sustainable Use of Biodiversity Maritta Koch-Weser 10th RedLAC General Assembly Belize November 10-13, 2008 The Global Exchange for Social Investment GEXSI GEXSI London 1A Birkenhead