For last three days I have been refreshing my brain cells at the Skoll World Forum for Social Entrepreneurship (www.skollworldforum.org ), held at Oxford University’s Business School (www.sbs.ox.ac.uk). The theme this year has been Flux; how entrepreneurs  need to seize and maintain momentum within the ambiguity that is inherent to every start-up, especially during times of economic uncertainty.

From an ecosystems services perspective Jason Clay, Head of Markets at WWF (www.guardian.co.uk/profile/jason-clay), laid a foundation for the Forum. Although Hans Rosling (www.gapminder.org) explained with humour and sound logic that the world population should stabilize somewhere between 9 and 10 billion (an increase of around 40% compared to today), Jason highlighted that consumption per capita is expected to double by 2050. So over the next few decades, we will shift from a planet with 7 ‘units’ of consumption pressure to a planet with 20 ‘units’ of consumption pressure. For someone like me, who has had the privilege to grow up and work in some of the world’s magnificent wild places, this is an extremely worrying situation. As an ecosystem services entrepreneur, however, this should fill me with optimism. As scarcity drives value, the services of nature will start to bleep redder and redder on global economic platforms, and it is simply a matter of time for more market makers and serious investors to seek the services of Nature Services Peru.

But time (staff time, office time, lawyer time…) is not cheap. Many start-ups, like those who bet on the success of reforestation in the CDM, fail. As Martin Burt, from Fundación Paraguaya (www.fundacionparaguaya.org.py ), put it: to escape poverty people need to ask themselves two questions: Is it worth it (motivation)? Can I do it (skills)? I think that as ecosystem services entrepreneurs we have to constantly ask ourselves the same questions. And for me, a key part of the answer to the second question is that ES start-ups cannot do it alone, we need a whole new natural landscapes entrepreneurship ecosystem to emerge in parallel to our individual efforts. And here is where the SWF is so encouraging, as it showcases the sheer breadth of entrepreneurs engaging with the problem. From Martin’s work with indigenous empowerment and rights in Colombia (www.gaiaamazonas.org ), to the forest & ecosystem service remote sensing work of Imazon (www.imazon.org.br ), to the indigenous digital inclusion work of Rodrigo’s CDI (www.cdiglobal.org), to the market information service of Forest Trends (www.ecosystemarketplace.com) .

On a reflective note, and as highlighted by Daniel Nepstad, of IPAM (www.youtube.com/watch?v=gcHQV4VLQPw), over the last 7 years, Brazil has achieved an 80% reduction in the rate of deforestation.  This represents a 2% reduction in global emissions - as much as the entire Kyoto process has achieved - principally through better law enforcement and policy initiatives. So markets are not the only route... My question is how sustainable this fantastic short term achievement in Brazil will be, if the underlying economic fundamentals linking forests and markets do not change soon?

This Friday I was in Oxford University’s Said Business School taking part in a seminar exploring advances in ecosystem science, policy, and markets, convened by Marc Ventresca, a strategy and market formation scholar at Oxford’s Institute for Science, Innovation and Society. The event was attended by students, academics, and ecosystem service (ES) practitioners from four continents, as well as international natural capital think tanks such as the Global Canopy Program (GCP).

The day’s conversations were nourished by a set of cross-disciplinary presentations, starting with David Galbraith from Oxford’s Environmental Change Institute. David spoke about the risks of Amazon dieback, focusing on both the nature of these risks and how different organizations are going about assessing it. Connie McDermott, who leads forest governance work at the Oxford Centre for Tropical Forests, then addressed the issue of equity and specifically the work she is doing with colleagues in other parts of the world to develop more robust frameworks for assessing equity in ES schemes. Andrew Mitchell, from the GCP, then spoke about policy advocacy for recognizing the value of natural capital, with some inspiring examples of how they are engaging the finance sector with this new asset class.

Jan Fehse, of consultancy Value for Nature, and ex-head of forestry at Ecosecurities, gave a global overview of current investments into different types of ES schemes. Forbes Elworthy of Craigmore Sustainables spoke about their fund management experiences with forest carbon in New Zealand and the characteristics of investors that are entering this space. I myself gave a talk on how ‘on the ground’ REDD initiatives and start-ups in Peru are progressing and how they in turn are interacting and influencing regional and national policy progress.

From the conversations over lunch and after, two main conclusions from the day started to become clearer to me: First, that the emerging ecosystem service credit value chain spans a broad constellation of social settings and actors, and that these different stakeholders contribute very different levels of intellectual, social and financial capital to projects.  In second place, it would seem that actors in different nodes of the chain have different risk and return perceptions and expectations. The types of risks considered and deemed ‘acceptable’ are very different for a climate scientist, an indigenous representative, a project developer, and an investor. While, for example, ecological risks are of prime concern to a climate scientist and trade-offs are inevitable, an investor is primarily concerned with financial risks and returns and has clear thresholds for those which he has to respect in his decision making. Several of the indigenous leaders with whom we work in Peru are primarily concerned with social risks, and questions surrounding the resilience of ES schemes to market and social change are crucial to them.

These ideas have parallels with a meeting of Peruvian fund managers and finance specialists that we held in Lima a month ago, under the auspices of USAID’s Forest Carbon, Markets, and Communities Project (FCMC). Banks and other finance institutions have many tools to measure and manage risk in natural resource management projects, but the language and systems they use are very different to those with which ES project managers in Peru are acquainted. As Alberto Paniagua, Director of Peru's Protected Area Fund (Profonanpe) pointed out, Peruvian ES market participants do not yet have a good map of the risks in the sector. As a result, I think many ES practitioners mistakenly feel that they have to develop risk management tools from scratch, making their work much more difficult and more likely not to fit with risk management approaches further along the chain.

How then do we start speaking the same language and utilizing compatible tools regarding risk and return objectives in ES initiatives? I think the answer may be some time in coming, but there’s no time like the present to start exploring this topic more deeply.

Recently I participated in a national workshop on financial mechanisms for forest conservation, sponsored by the National Forest Conservation Program (Programa Nacional de Conservación de Bosques para la Mitigación del Cambio Climático – PNCB). The event was really worthwhile as it brought together public and private practitioners of forest conservation and ecosystem service (ES) schemes from key countries in South America, to support the discussions of Peruvian practitioners at the event.

Peru’s recently launched National Forest Programme is creating an enabling environment for ES schemes in the country’s tropical and dry forests, and looking to increase the transparency and equity of initiatives, while encouraging broader participation by both the State and the private sector. As Jorge Rodriguez, president of Costa Rica’s FUNDECOR and ex-Minister of Environment, pointed out, the key reason for the success of ES schemes in Costa Rica has been the strong social basis for the governance of these initiatives. He mentioned specifically the country’s long term commitment to education, a development model based on solidarity and institutional consolidation, the consolidation of democracy and grass root support for biodiversity conservation. However, as Oscar Sanchez of Costa Rica’s national forest finance fund (FONAFIFO) pointed out; ‘ more funds are necessary to satisfy the demand of land holders wanting to enter the ecosystem service incentive schemes’, so involving the private sector in ES scheme development is necessary, even in countries where State participation has been deemed widely successful.

Yolanda Puemape, conservation finance specialist at the Peruvian Ministry of Environment gave a interesting update on the state of watershed services schemes in Peru and the Cañete river hydrological ES scheme in particular, which involves a great variety of service users and providers in this valley close to Lima.

Victor Salviati from Fundación Amazonas Sostenible (FAS) spoke about the Bolsa Floresta Program in Brazil, and some of the innovations of this Forest conservation incentive program, specifically their emphasis on strengthening value chains for rainforest products (cacao, fish, NTFPs) and the importance  of technology (for example debit cards) to reduce transaction costs in incentive distribution. The Socio Bosque program in Ecuador is also making interesting headway as a national effort to recognize the services of nature.

For me, Kees van Dijk from Tropenbos International summarized our current key challenge for making Peru really ‘a country of forests’, and that is that the forestry ,international finance, indigenous communities and other development sectors remain worlds apart in their social, economic and environmental valuation off forests. Our challenge starts by bridging the language, approaches and mental settingss of the different sectors. Consolidating this discussion is essential for achieving successful multi-value forest management and converting Peru’s forests into a source of wellbeing locally and internationally.

  

Yesterday I came back from Puerto Maldonado, the bustling frontier capital of Madre de Dios. When I worked in Puerto back in 2000, I remember there were 6 cars in the whole town! With the completion of the Interoceanic Highway imminent, the town now looks like a showroom for Toyota Hilux and other 4 by 4's.  Big changes are in store for Madre de Dios, its fantastic rainforests and its easy going pace of life.

I passed through Puerto on my way back from Posada Amazonas lodge , where my colleague Patricio Zanabria and I participated in the creation of a new network of indigenous leaders and enviropreneurs. In essence, the purpose of this network will be to help incubate and bring to scale businesses that keep the Amazon forest standing and generate genuine wellbeing for its inhabitants. Though it is always good to have an ambitious goal when starting something new, the truth is that the odds are against us. Alluvial gold mining, much of it illegal, is growing explosively in the region. With new record highs of US$1,400 an ounce, this problem is set to get worse by the day. The Interoceanic Highway itslef, although good for commerce and communication, also brings threats in the form of land speculators and logging companies hungry for Madre de Dios' timber resources. 
Our network is  bringing together a new generation of indigenous leaders that span the Peruvian Amazon and a truly diverse mixture of 'standing forest' businesses; sustainable wood art company PATS, award winning nature tourism outfit Rainforest Expeditions, finance boutique Asesorandes, sustainable trade and development organization Ecotribal, designer Violeta Villacorta and our ecosystem management hybrid SePeru / Nature Services Peru. The core concept is to pool our skills and assets in order to create a more robust infrastructure for the individual businesses.

Members of the network are brought together by a set of shared beliefs in order to sustain the flow of life itself in the Amazon. Our workshop in Posada builds on a previous event in Tambopata, in which the indigenous/business partnership first met. As indigenous leader Nicolas Reategui put it during the last day: ' We have developed the trust, now let's get on with the work'.

Last week I flew to Lima to present Nature Services Peru’s work to the InvertirPeru angel investor network. I prepared a 15 slide presentation and received some coaching from the InvertirPeru project coordinators the day before. They are great guys with a good idea, to empower innovation in Peru. There were 8 potential investors, including Diego de la Torre, President of La Viga and the UN's Global Compact in Peru and Federico Cuneo, a partner at Amrop, involved in reforestation projects in Peru's central Amazon.  The presentation went well and was followed by insightful questions from the seasoned investors. We then broke up to discuss further over cocktails. Two of the investors said they would like to follow up on a one-to-one basis, which is great news.

However, as I walked home, I realised that no firm investment opportunities had yet materialized from the event, and that I should not feel overconfident about the evenings work. Three concepts from the conversations started to go through my head. The first was the time scale most of the investors were looking at for their investment. On the whole they want to see cash within a year of investing. Although we have done some great work in the field together with our Community partners and SePeru, we are still a fair way off from bringing forest carbon credits to market (we have staked our reputation on 18 months...). Fulfilling this goal would place us amongst a small group of ecosystem entrepreneurs that have sold credits within two and a half years of project start-up, as opposed to the usual 3 to 5 years seen in the carbon forestry sector. Understandably though, a projected stream of cash flows does not have the same appeal to investors as sales has.  

Second, one of the angels pointed out that his perceived lack of clarity with regards to who owns the rights to ecosystem services and a lack of enforceability of contracts signed with ecosystem/land holders (in our case indigenous communities and the Peruvian State) was for him the key stumbling block for entering this market. This points to the importance of the continued development of the regulatory framework in Peru (a new Forestry Law and an Ecosystem services Law are currently under review in Congress) and the capacity of institutions to uphold the law. We are already working with the Peruvian Society for Environmental Law on robust contract design.  We are also investing heavily in building solid relationships with partners on the ground, and this, more than contracts, will hold our projects together.

Last, but not least, was a comment by a potential investors during the cocktails.  He thought that for an emerging market start-up investment like ours, we should be using a discount rate of 25%, rather than the 20% used in our financial calculations. This is a key issue, as even the 20% discount rate makes ecosystem-based emission reductions in 2020 of little financial significance. What then is the incentive to secure forests 20 to 30 years down the line? Hepburn and other natural resource management academics have argued that discount rates should decrease asymptotically with time in forestry (ecosystem management) projects. Unfortunately angel investors asses a portfolio of start up opportunities and use a fixed discount rate in order to compare an investment in Nature Services Peru with a comparable investment, for example, in a biofuel initiative. I have not yet heard of angels or venture capital firms decreasing discount rates for long term investments.  This raises the question of how we could de-risk ecosystem management investments in order to qualify for lower discount rates?

As I reached home, I understood that this search, like this Blog, has a fascinating road ahead...

Like good friends, I guess the reasons for starting-up Nature Services Peru, and its non-profit sister organization SePerú (Servicios Ecosistémicos Peru), deserve a proper introduction. 

Conservation, in its broadest sense, is about man’s struggle to coexist with the rest of nature. With all of it, not just the 12% covered by National Parks and other reserves. Nature in our oceans, our agricultural landscapes and in the parks of our cities. In the remaining wilderness areas where modern civilization, as yet, has not significantly made its mark. For the past 10 years I have worked in Park conservation, first in the Manu and Tambopata regions of Peru, then in the Luangwa valley of Zambia. My overall sense, in spite of the many successes and countless good memories I have from these privileged years, is that Parks are becoming islands in a sea of land use change, de-coupled form the emerging economic activity that surrounds them. If we do not balance conservation action and awareness-raising with the implementation of wealth creation systems for local actors that are dependent on sustaining natural ecosystems, then we are heading for real trouble. In essence, we need to re-connect people and healthy ecosystems through their day-to-day work and life styles.

I have experienced firsthand some of the main stumbling blocks to successful conservation. Weak institutionality of government organizations and NGO’s, as presented by John Terborgh in his excellent book Requiem for Nature, is a key one. The pervasiveness of a short-term Project mentality is another. The rise of the ‘conservation consultant’ is maybe  less serious, but certainly worrying. While working in North Luangwa, Zambia, we had to endure paying US$900 per day to a Donor mandated consultant, while justifying a US$200 per month salary for our well qualified workshop mechanics.

By our current economic yardsticks, the asset value of the infrastructure and the rents produced in 1 square kilometer (around 50 blocks) in Lima or Lusaka is ‘worth’ more to society than the 30,000 square kilometers of the entire Manu and North Luangwa National Parks combined.  Ludicrous, but true. This is why I think a much greater emphasis on wealth generation, as well as on cost control, is key to the success of the conservation movement. Some organizations have already done this by developing  for-profit nature tourism or sport hunting initiatives. But tourism and sport hunting are just the cusp of the pyramid of the value of nature. Apart from their intrinsic value, the most significant value of nature lies in the life support services of ecosystems at the base of the pyramid; climate regulation, water purification and soil maintenance, to name a few. Intrinsic value?

In the UK, a business can be structured as a Community Interest Corporation (CIC) which is mandated to reinvest a high proportion of its profits in its social mission. In Peru, this formula does not exist, and so we decided to start both a non-profit and a for-profit entity and to operate them as a hybrid, a solution often used by social enterprises. Our underlying hypothesis is that the institutionality of State and civil organizations in society is upheld and facilitated through wealth creation by businesses, and that institutionality for nature conservation will be strengthened if a stronger business ecosystem for the stewardship of nature is created. A business community that creates jobs, pays taxes, and develops infrastructure that depend on sustaining nature. This is especially true in the case of nature’s services, which have so far remained mostly outside the human economy, and which we are degrading at an alarming rate. The 2005 Millennium Ecosystem Assessment showed that more than 60% of the services of nature are in decline. The percentage is higher if provisioning services (food, fibre and fuels resulting from agriculture) are excluded from the analysis.

How can we effectively combine conservation, social development, and commercial logics in one organization? How can we ensure that that we remain loyal to our purpose of helping society to sustain natural ecosystems in light of the commercial realities that Nature Services Peru will face? How do we manage to grow while respecting the previous considerations?  There are no easy answers to these questions, and we hope to use the collective intelligence of people like you, readers, to answer them along the way.

There is more and more talk about our need to move from a materialistic economy towards an economy of meaning, which I interpret as day-to-day existence in which people are happy because of the friends they have, the festivities they have enjoyed and the achievements they feel they have made, rather than because of the car they have just bought, the latest pay cheque they have received, or the next pair of shoes they are going to buy.


Throughout my life, I have had the privilege  to enjoy time in Nature. First, on bug trapping, fishing, orchid collecting, frog hunting and other trips with my parents and brothers. Then on trekking, beach trips and camel safaris with my friends. Now on excursions with my wife Jessica and our kids. Many of my great memories come from these times. This contact with wild nature has had the effect of putting in context the setbacks and successes I have had in my life, and I feel my life has been the richer for it. I do not know if my children's children will have the same privilege and it worries me. 

I won't go into the statistics of how many wetlands are being replaced by concrete or agriculture per year, or how many species are going extinct each year. I want to do something about it. I know that the challenge ahead is huge. As in '9 billion people on one planet' huge. As in 'I have two good holidays a year and 98% of people don't' huge. Forewarned about how common place institutional mission drift is (fancy ideals of founders being put aside by investors and new management a few years down the line) and that few institutions go the distance (ie. remain solvent for more than 50 years) necessary for adequate stewardship of nature,  I can think of no better way of how to go about this challenge than by starting up Nature Services Peru. Barking up the wrong tree? Ill advised? Unoriginal? Maybe. That is why I am starting this blog. I want to dedicate some time to thrashing these ideas out with anyone in the world that has a few minutes to spare to contest my opinions, or to enrich them. I am new to blogging and so quite curious about the value of it. I am nearly 40 years old, not much of a techy,  so any blogging advice would also be heartily welcome.