Money matters: Financing multi-sector ocean planning and management

MEAM

Moving from single-sector to multi-sector ocean planning and management – and conducting it in an ecosystem-based way – can be expensive. It often requires funding beyond what is provided by government budget allocations. To give a sense of scale, a 2012 survey of representatives from MSP projects in Europe, the United States, Azores, and St Kitts and Nevis found most projects cost between US$100K and US$5M[1]. Funds were used for a variety of activities including current and future assessments of ecosystem health and human impacts, as well as stakeholder engagement processes.

Finding additional funding for critical activities can be a big – if not the biggest – challenge for ocean planners and managers. In a separate 2012 survey of coastal management professionals in the US, more than two-thirds of respondents believed that insufficient funding for coastal and marine spatial planning would greatly impact its implementation in their region.

Some additional funding sources for multi-sector planning and management – grants and donations, fees from businesses using ocean resources, etc. – do exist, however. (See Table 3 of Marine Spatial Planning: A Step-by-Step Approach toward Ecosystem-based Management for more examples.) And market-based financing for conservation is an area that is developing rapidly and could potentially be utilized for multi-sector planning and management.

This month, MEAM interviews with three ocean planning and finance experts about different aspects of financing multi-sector marine planning and management, including examples of successful marine management user fee systems and debt-for-marine-planning swaps, tips for reducing costs of ocean planning, and areas of financial innovation that can be used for ocean planning and management. We will follow up on this article in the coming year with in-depth articles and live webinars on specific ocean planning and management finance topics such as impact investing.


Establish financing for all of the essential elements of marine management

Editor’s note: Charles “Bud” Ehler is a marine planning consultant and co-author of the MSP “bible”, the 2009 UNESCO Intergovernmental Oceanographic Commission guide “Marine Spatial Planning: A Step-by-Step Approach toward Ecosystem-based Management.” He can be contacted at charles.ehler [at] mad.com.

MEAM: In your experience, is the success of ocean planning initiatives a function of how much funding they have available for the process?

Ehler: The American entrepreneur Malcolm Forbes said, “Money isn’t everything as long as you have enough.” Adequate financing is critical to any marine planning process and should ideally include financing not only for planning, but also implementation, enforcement, monitoring, and evaluation. In other words, financing should be established for all of the essential elements of marine management—at least through the first cycle of planning and implementation.

But this is rarely the case. It’s unusual for governments — from the United States to Vietnam — to invest adequate financial resources in marine management activities even though they have responsibilities to manage marine resources for the benefit of their country. In some cases, however, governments have figured out creative solutions for financing marine management (see an example in the question and response below). And in other cases, philanthropic organizations such as the Gordon and Betty Moore Foundation have stepped up to fund pioneering marine management activities. Examples of this include the Massachusetts Ocean Management Plan, the Northeast (USA) Ocean Plan, and the Marine Plan Partnership (MaPP) for the North Pacific Coast in Canada. The Moore Foundation has also funded UNESCO’s Marine Spatial Planning Programme that has stimulated many countries to initiate MSP.

MEAM: Can you tell us about any sustainable ocean management financing schemes that you have seen?

Ehler: One creative and sustainable financing scheme has been implemented in the People’s Republic of China (PRC). Its 2002 Law on the Management of Sea Use identified three principles: (1) a system authorizing the right to use the sea that declares the sea is owned by the State, i.e., the PRC, and that the State Council exercises the ownership of the seas on behalf of the State. Any entity or individual who intends to use the sea must apply in advance and obtain the right to use the resources of the sea; (2) a system of “Marine Functional Zoning” that stipulates that any use of the sea areas must comply with marine functional zoning plans established by the national, provincial, and local governments; and (3) a user-fee system that requires all entities and individuals that use the sea to carry out economic activities must pay for its use.

An allocation formula for use of the funds collected through the user-fee system was laid out in the 2007 Notice to Strengthen the Management of Sea User Fees issued by the Chinese Ministry of Finance and the State Oceanic Administration. Seventy percent of the fees collected from sea users are returned to provincial governments, and thirty percent go directly to the national government as revenue toward marine development, protection, and management. The provincial governments decide what proportion goes to local governments, and this varies from province to province. For example, in Shandong province, 60% out of the provincial allocation goes to local governments. China collected over RMB67.1 billion (about US$10.4 billion) in user fees between 2005-2014. No other national government has made such an extensive application of user charges to finance marine management.

MEAM: What aspects of ocean planning processes generally cost the most? Do you have any advice for projects looking to control costs while not shortchanging the overall process?

Ehler: Without a doubt, most money is spent on data collection and, to a lesser extent, synthesis—a disproportionate amount in many cases. Too little money is spent on specifying objectives, developing scenarios of the future, identifying management actions, developing the management plan, implementation, and monitoring and evaluation. Often these other activities of marine planning are left to the last hour—if addressed at all. It is far easier to collect data and construct data layers and portals than to write SMART objectives or construct scenarios. My best advice is to develop a thorough work plan at the start to ensure that adequate resources are allocated to all of the activities essential to completing the overall process and be prepared to adapt the work plan as marine planning unfolds.


Field testing market finance for coastal-marine conservation and management

Editor’s note: Nicolas Pascal is a conservation finance expert and director of the UNEP-funded Blue Finance project. He is currently focused on structuring a suite of impact investments for marine conservation biodiversity. He can be contacted at npascal [at] blue-finance.org.

MEAM: Ocean planning and management processes have historically relied on government appropriations and/or philanthropic funding. What new funding mechanisms are emerging for multi-sector ocean planning and management work?

Pascal: Recent studies have confirmed that total funding for protected areas and biodiversity conservation needs to increase dramatically to achieve the targets set at national and international levels such as the Convention on Biological Diversity (CBD) Aichi targets. Currently, 80% of biodiversity finance is generated from non-market mechanisms. And with the exception of philanthropy, non-market mechanisms are public sector mechanisms – domestic budget allocation, official development assistance, debt-for-nature swaps, subsidies reform, etc. – that rely on public opinion and political will for allocation of public finance and implementation.

Although these mechanisms could scale-up in the future, market-based mechanisms have a greater potential to increase in scale. The CBD recently identified seven areas of financial innovation that could increase funding to support the Convention objectives, five of which involve private finance: schemes for payment for ecosystem services; biodiversity offset mechanisms; markets for green products; business-biodiversity partnerships and new forms of charity; and development of new and innovative sources of international development finance. A 2012 study estimated that market-based mechanisms such as these could generate up to 50% of coral reef biodiversity finance in 2020.

The challenge now is to establish and strengthen long-term, reliable sources of market financing for biodiversity conservation. There is little practical experience using these mechanisms for marine and coastal environments, but several organizations such as the Reef Trust (Australia) and Blue finance (Eastern Caribbean) are currently working to provide empirical experiences of non-public funding mechanisms for integrated coastal management. The Reef Trust is looking to pilot conservation projects for the Great Barrier Reef utilizing conservation finance mechanisms developed with impact investors. My organization Blue finance is exploring new ways of utilizing the business world for marine conservation while staying true to the triple bottom line – environmental, social, and financial returns. Its primary activity is structuring and managing impact investments in marine conservation biodiversity, and we’re currently developing a suite of projects in the Eastern Caribbean.

MEAM: Can you tell us more about Blue finance’s work in the Caribbean?

Pascal: Blue finance is working with the national governments of Martinique and Barbados to find sustainable financing for and assist in the establishment of Marine Management Areas (MMAs). For example, the Barbados Marine Management Area (BMMA) will be approximately 20 km2 of fishery, tourism, and conservation areas in the most intensively developed coastal zones on the south and west coasts of the island. Meetings have been held with local stakeholders and relevant government agencies. The private tourism sector fully supports the project and is extremely interested in becoming a business partner in the new management regime under specific conditions of fund management. Some fishers are open to the idea of the MMA as a means of preserving their livelihood and potentially earning income from resource monitoring.

The project will be implemented by the Barbados Ministry of the Environment and Drainage. The operator of the BMMA is expected to be set-up through a long-term agreement with the government and will be in charge of the asset investment and management of the MMA. The operator, with private capital (both from national and international impact investors), will be steered by an advisory committee with members from government, NGOs, and private sector.

MEAM: Do you think that available means for funding multi-sector ocean planning and management (e.g., marine spatial planning projects or ecosystem-based management efforts) are different than the available means for funding biodiversity conservation projects? In other words, does the multi-sectoral nature of this work open up or close down any funding streams open to conservation projects?

Pascal: Marine biodiversity conservation efforts are often focused on creating MPAs. In many cases, the MPAs created are not very large or ecologically connected and do not address major biodiversity issues such as water quality and coastal development. MSP broadens the approach and, in theory, allows most of the issues (e.g., ridge to reef, multiple human uses) affecting an ecosystem to be addressed. I do not have any proof that MSP attracts more public funding for project development and enforcement, but it should. For the private sector impact investor, bigger is better. So it should be easier to attract impact investors for a 50 km2 MMA than a 2 km2 MPA, both for the size of the investment and potential returns (millions of dollars instead of thousands) and the size of the environmental impact.


A debt-for-conservation-adaptation-and-spatial planning swap in Seychelles

Editor’s note: Robert Weary is Director of Conservation Finance at The Nature Conservancy. He currently leads an initiative to assist Small Island Developing States with debt-conversions to finance climate change adaptation projects. He can be contacted at rweary [at] tnc.org.

MEAM: Can you give us a brief description of the Seychelles debt swap?

Weary: The debt swap converts a portion of the Seychelles’ debt to other countries (United Kingdom, Italy, Belgium, and France) into more manageable debt held by a local entity. To accomplish this refinancing, The Nature Conservancy provided US$15.2 million in an impact capital loan and US$5 million in grants to buy-back US$22.8 million of Seychelles debt at a seven percent discount. The Government of Seychelles debt service is now redirected to an independent, nationally based public-private trust fund called the Seychelles Conservation and Climate Adaptation Trust (SeyCCAT).

Debt service payments will fund three distinct streams: one to repay impact investors, one to capitalize SeyCCAT’s endowment, and one to fund work on the ground that advances marine and coastal conservation, including strategies for ecosystem-based climate adaptation and disaster risk reduction. The amount to be invested in these conservation activities and the endowment through the debt swap is upwards of US$11 million, with nearly 70 percent of this payable in local currency rather than hard currency, averting the extra cost of conversion for the government. In essence, this US$11 million in debt service has been redirected from the external creditors for investment in the Seychelles, an obvious benefit for the government of the Seychelles.

In addition, the period for debt payment will be extended from eight years to 20 years, reducing the government’s annual debt service by over US$2 million annually, freeing up funds for other needs of the citizens of Seychelles.

As part of the swap, the government of the Seychelles has committed to placing 30% of its Exclusive Economic Zone (EEZ) into Marine Protected Areas (MPAs), with half of this area in high biodiversity zones. Given the large size of the Seychelles EEZ, this will result in 400,000 square kilometers of new MPAs. Currently less than one percent of the Seychelles EEZ is in MPAs. The design of the expanded MPAs will be determined by a science-based, stakeholder-driven Marine Spatial Plan (MSP), which will be adopted as official policy by the government of the Seychelles.

MEAM: What is the potential for replicating this sort of arrangement with other countries, particularly with regard to supporting multi-sector ocean planning efforts?

Weary: We are already actively working on six additional similar debt conversion projects with other Small Island Developing States in the Caribbean and Pacific. We expect to close three of these debt conversions during 2017. Similar to the Seychelles, we will complete MSPs with all six countries, as part of the projects.

MEAM: Any lessons learned from this process so far?

Weary: A key lesson is patience as the Seychelles debt conversion took four years to conclude. However, we expect the next set of deals to move more quickly. Not surprisingly, the Ministry of Finance plays an important and active role, along with our more traditional partner, the Ministry of Environment. Additionally, it has been helpful to get high-level commitments for the deals, such as Cabinet or Minister’s endorsement of the overall project, including the MSP.


[1] This survey was conducted by Jennifer McCann, director of U.S. Coastal Programs at the Coastal Resources Center and director of Extension Programs for Rhode Island Sea Grant. It is available upon request at meam [at] openchannels.org.

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