MarketLab uses economics and finance to advance California’s conservation priorities, like acquiring wildlife habitat, managing freshwater sustainably and restoring our coast.
Human activity is impacting the natural systems we depend on. We have entered a critical decade in which climate change will decide the fate of our planet. When we protect nature, nature protects us—and we now have the opportunity to restore natural systems in ways that meet modern needs. TNC has protected more than 1.2 million acres in California and tens of millions of acres worldwide. This represents only a fraction of the lands people and nature depend on. It’s time to tap the potential of markets to align economic and environmental interests so that we can protect nature on a global scale.
Putting markets to work for conservation
TNC’s MarketLab uses economics and finance to accelerate California’s conservation priorities by:
Making the business case: We illustrate the costs of building in areas at high risk of catastrophic wildfire or by showing savings to solar developers when they site projects on lands with low biodiversity.
Designing market interventions: We partner with and pay farmers who adopt conservation-friendly practices such as groundwater recharge and metering, and create groundwater markets that reduce water use while sustaining agriculture and keeping suburban sprawl at bay.
Blending capital: We bring new types of financing to conservation, to blend with traditional philanthropic and public funding sources. This can take a variety of forms, from structuring insurance payouts that fund reef or wetland restoration to protect coastlines, to using low-interest loans for farms or ranches acquired for conservation. This allows our grant funding to go farther while enabling us to move more nimbly and can protect more habitat in places like Ventura County, the Lassen Foothills and the Tehachapi Mountains.
What is the value of conservation?
In a changing climate, natural landscapes are extremely valuable for the benefits they provide to both people and nature.
MarketLab harnesses the power of markets to drive game-changing investment in conservation by showing stakeholders what nature is really worth. This concept is relatively new, but from BirdReturns to the Fox Canyon Groundwater Market, the examples we have developed have been powerful and promising. Now, it is time to let that work do what markets do best: grow.
We start with a conservation problem.
Migratory birds have limited places to land in California’s Central Valley, and the cost of buying enough habitat in the region is high.
A small team with specialized skills in conservation, economics and finance works to develop creative interventions that will move the needle.
In this case, we designed an incentive program that pays Central Valley rice farmers to flood their fields at the exact times migratory birds need to stop and rest.
As of today, our BirdReturns Program has provided temporary habitat for more than one million migrating birds at a fraction of the cost of buying the land. Our goal is to fit the market-based solution to the conservation problem with interventions that include compelling economic analyses and the development of new funding structures that benefit nature.
Finding the right partners
We work with an influential network of partners to amplify our efforts. Leading economists at universities and think tanks help us demonstrate the value of conservation and craft effective incentives. The benefit works both ways because we have something academics need: real-world application for their theories. Together, with our partners, we use research and real-world examples to drive policy change and enable markets for nature’s benefit.
MarketLab is already a hub of economic ingenuity in California, and our goal is for that influence to make way for a global network of collaborators across fields whose innovation and analysis can address some of the world’s most pressing conservation challenges.
Market-based conservation projects
MarketLab sits in TNC’s California chapter, the largest chapter in the organization. California is MarketLab’s laboratory but we are working to make sure our impact spans the globe.
Wildfire Resilience Insurance
Fox Canyon Groundwater Market
Groundwater markets represent a tool for achieving aquifer resilience while benefiting farmers and other groundwater users. Water markets can provide farmers with flexibility: They create a new revenue stream for farmers who temporarily fallow their lands and sell their water, and let farmers who need more water than allocated buy it without paying fines.
TNC launched the first groundwater market under California’s new Sustainable Groundwater Management Act. In the spring and summer of 2020, farmers of some of California’s most valuable crops traded water in the Fox Canyon pilot groundwater market in Ventura County while complying with cuts to water use. Selling groundwater enabled some farmers to stay afloat while transferring it to others in need of finishing their crops, who in turn, avoided hefty fines for pumping more than initially allocated. TNC also bought water for nature, effectively retiring pumping and helping the basin meet its sustainability goals.
The water market benefits both people and nature by preserving one of the country’s most productive agricultural regions on the outskirts of the Los Angeles metro area, where development pressure is strong. These agricultural lands provide an important buffer for habitat and create opportunities for groundwater recharge and storage that are not possible on developed lands. Through this pilot, TNC demonstrated how a groundwater market can help achieve basin sustainability and created a model that can be replicated by more than 250 across the state.
Blended Finance for Working Lands
In California and across the Western United States, working farms and ranches often form an effective buffer between the pressure of intense urban development and conservation-rich wilderness areas. In many cases, keeping working lands in production is compatible with conservation goals and provides lease payments that can support financing for acquisitions. This increases the impact of public and philanthropic dollars by expanding the total funding available for acquisitions.
MarketLab is building out the use of repeatable, scalable, impact-first financing for the acquisition and protection of working lands.
This past spring, we deployed our first Conservation Loan to outcompete other buyers on a fast-moving deal and acquire a 460-acre ranch in the Lassen Foothills. The property supports three runs of Chinook salmon in the Sacramento River system and includes water rights that may be leased to repay the loan.
We also launched an Acquisition Catalyst Fund that will multiply the impact of traditional philanthropic funding on conservation. In addition to moving large amounts of capital quickly, the $10 million catalyst fund will give us the flexibility to raise grant capital once and recycle it to conservation deals via a variety of repayment structures. Funds of this kind provide rapid access to large amounts of capital, allowing us to act quickly when strategic conservation opportunities arise, an imperative in the era of accelerating climate change.
Restoring Salt Marshes through Insurance
TNC is investigating opportunities for insurance and innovative finance to promote investment in natural infrastructure such as wetlands, to reduce the risk of climate-exacerbated flooding around the San Francisco Bay. This issue is particularly acute in the heart of Silicon Valley. TNC is partnering with leaders in the insurance industry, coastal risk modeling, San Mateo County, and other stakeholders, to create an entirely new asset class around insuring nature.
This work builds on TNC’s role in the creation of a new insurance policy for the Mesoamerican Reef, which protects Mexico’s Yucatan tourism industry from the impacts of hurricanes. Our collaboration in California promises to expand the use of natural infrastructure to protect people and the built environment at a time when our state faces more and more severe disasters.
Siting Solar on Low-Biodiversity Lands
In 2018, California lawmakers set an ambitious climate goal: 100% clean electricity by 2045. While this is an important initiative for climate mitigation, it could also result in major impacts to natural habitat, especially given that California may need between 1.6 and 3.1 million acres of wind and solar by 2050. TNC has developed a method for integrating nature into energy planning, showing that it is possible to meet California’s future renewable energy needs, while minimizing impacts to the environment.
In our recent Greenlight Study, we showed that this approach is not only feasible, it is good for business. Our analysis found that siting utility-scale solar projects in areas of high biodiversity increases total project costs by up to 15% relative to low biodiversity areas, due to higher habitat mitigation requirements. When applied to California’s interim target of 50% clean energy, siting solar projects on low biodiversity lands could collectively save developers $350 million. In addition to validating our low-impact approach to solar siting, this analysis has garnered industry and policymaker support and opened doors to the larger policy change we seek to decarbonize the state while protecting nature.