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How Bond Investors Are Being Used To Save Rhinos

Sep 5, 2019
Originally published on September 5, 2019 11:43 am
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NOEL KING, HOST:

The very last male northern white rhinoceros died in Kenya last year, so now conservationists are trying to use the financial markets to save other species of rhinoceros. Stacey Vanek Smith and Cardiff Garcia of the Indicator podcast from Planet Money have the story.

STACEY VANEK SMITH, BYLINE: The problem with current efforts to save and protect the rhinos is that all this takes a lot of coordination - constant vigilance, day and night. Oliver is the head of conservation finance and enterprise at the Zoological Society of London.

OLIVER WITHERS: Poaching - that is actually quite a difficult thing to budget for.

CARDIFF GARCIA, BYLINE: The other problem, says Oliver, is that the current system does not tend to focus on long-term goals. Everyone is just kind of scrambling to make it from day to day, so it makes it hard to plan and to get ahead.

VANEK SMITH: The result - fewer and fewer rhinos in the world. And Oliver is a finance and economics guy, and he says the plight of the rhinos just really strikes him as a very classic economic problem.

WITHERS: The way to look at it is, imagine you're in the mythical Economics 101 widget factory. You make widgets. You know, in this case, we're making rhinos.

VANEK SMITH: And this is where the rhino bond comes in.

GARCIA: The conservationists put together a plan laying out what they would need to guarantee that fewer rhinos got poached and more baby rhinos got born. Altogether, it's about $50 million. That's what they would need.

VANEK SMITH: Here's how it works. Investors will buy a five-year bond - $50 million worth altogether. At the end of five years, these investors will get their money back with a little extra.

GARCIA: And the bond succeeds if the number of rhinos in the five parks reaches a certain threshold.

VANEK SMITH: Now, if the number of rhinos does not meet the bond's promise, investors lose money. But if the number of black rhinos does meet the bond's promise, investors can feel like they really made a difference. And they'll get their money back, plus a bit extra - a profit for the risk they took.

GARCIA: Oliver and his team are looking to governments and foundations for the money to back this bond.

VANEK SMITH: It does seem a little strange that, like, the public sector would be potentially paying investors.

WITHERS: The reality is is that we've seen that money be invested into biodiversity. We haven't achieved the results we expected. If we use some of that to pay investors for taking on that risk, the public's actually better off.

GARCIA: Oliver says that to this point, governments and foundations have been donating money with no guarantee of results. And the results, frankly, have not been great. Under this new model, the bond model, wealthy investors take all the risk. They buy the bonds and hope that the rhinos proliferate. They put up the $50 million.

VANEK SMITH: If the rhino numbers do meet expectations, then and only then will the governments and taxpayers pay out. They will pay back the investors who bought the bonds. Still, Oliver says, governments have been skeptical of this and slow to sign on.

GARCIA: Investors, though, they've been jumping at the idea. Glen Jeffries is with Conservation Capital. He's the finance manager for the rhino impact bond. He says that interest from private investors has been overwhelming. And that's good news, he says, because investors will want to see where their money has gone. They're going to want to track how it's used, and that is going to bring rigor and accountability to conservation spending.

VANEK SMITH: Still, ecosystems are incredibly complicated. Focusing on one animal could end up being problematic, create unexpected issues, put pressure on other species.

Stacey Vanek Smith.

GARCIA: Cardiff Garcia, NPR News.

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