Environmental Funds

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Updated at 21/04/2022

Environmental funds (often called Conservation Trust Funds or CTFs) are private and independent institutions established to provide stable, sustainable and long term sources of financing for the sustainable management of natural resources in areas of high biodiversity.

Without replacing the responsibilities of states, they help ensure, in a regular way, the inflow of complementary resources needed for the good attainment of management plans for the Conservation Areas.

The first environmental funds were set up in the early 1990s, and they have been growing in number and importance since then. Currently there exist, in various countries, more than 107 CTFs (of which 40% were set up in the last 10 years), mobilizing about two billion US dollars for conservation.

The operational standards of these environmental funds are established and revised by the CFA (Conservation Finance Alliance), an international voluntary organization which brings together NGOs, foundations, agencies, academics, governments and individuals. Some of the main activists of the CFA have been collaborating with and supporting BIOFUND since its creation.

In Latin America and the Caribbean, the environmental funds in 1999 set up a regional federation, RedLac, which became the main international reference of the sector. With the support of RedLac, bilateral agencies and private foundations, the African environmental funds in 2010 set up their continental organisation CAFE (in French Consortium Africain des Fonds pour l’Environnement) which, 11 years after its creation, consists of 18 member funds, including BIOFUND, as a founder member. In October 2021, BIOFUND hosted the 11th General Assembly, at which it was for the first time elected a member of the Executive Committee of this Consortium.

What is its function?

In developing countries, the financing of conservation, from allocations by the State and from tourism revenue is, in general, far below the financial requirements. This is expressed in a high degree of dependence on external sources. In Mozambique, it is estimated that the contribution of the international community covers about 75% of the running costs of the national system of conservation areas.

Although it is a useful injection of funds, this support is not distributed equally among the ACs. In the case of the most favoured ACs, although this support is significant, it also presents challenges, since the sums may vary drastically from year to year, sometimes presenting gaps between the end of one project and the start of another, making it difficult to plan and to implement programmes.

Bearing in mind that different donors generally support different aspects, and that they are not always aligned with each other, the dependence on foreign aid represents a high risk for the effectiveness of the ACs, and a heavy bureaucratic and administrative burden.

In this context, the CTFs are an important alternative that can provide a stable level of long term financing for the conservation areas.

How do they work?

The CTFs develop structures of donation and collaboration with the conservation areas and with the national management network, including impact monitoring systems, and are thus very attractive for external support programmes for donors, especially those who do not have specialist teams in the country.

The CTFs normally includes a capital fund known as an Endowment, set up through one or more relatively large grants (provided by the State itself, by international organisations, by bilateral agencies and/or by private donors). This fund is then invested on the international financial market, according to established prudential rules, so as to multiply the resources made available, conserving thus the value of the capital and using only the yields from the investments to provide a reliable source of long term support for the management of protected areas.

What is their added value?

One of the main arguments is that the environmental funds are excellent instruments for financing the running costs of the conservation areas – that is, the costs of monitoring biodiversity, inspection, maintenance of infrastructures, opening and maintenance of access paths, and any other regular costs which can be budgeted well in advance, and which the donors typically do not finance, could be financed by the CTFs. Another aspect is that the funds may be regarded as the ideal tool to balance “the capacity for financial absorption”, which is in a very limited state in many developing countries.