& welcome to the FRIB, a Forest Resilience Impact Bond – just when you thought the world was awash with acronyms, here’s SIB for trees…interesting concept it is too.
Fighting Wildfire With Finance
Huffington Post
Saadia Madsbjerg – MD, the Rockefeller Foundation
Adam Connaker – Program Associate at the Rockefeller Foundation for Innovative Finance and Impact Investing
While the U.S. Forest Service (USFS) recognizes the tremendous economic and environmental benefits to be gained from forest restoration — a significant reduction in wildfire severity, as well as up to 16 percent higher water volumes to local utilities — the government agency simply doesn’t have the financial means to undertake the project. The costs of fighting increasingly intense forest fires has severely limited the resources available for prevention activities. Annual fire suppression costs in the U.S. have ballooned from $450 million just 20 years ago to $1.6 billion (and growing) today. With a budget designed for a reality that no longer exists, USFS is trapped in a vicious cycle of paying for today’s fires by borrowing funds intended to prevent tomorrow’s. As droughts get longer and fires larger, this funding deficit for prevention-oriented activities will only widen.
It is clear that we need cost-effective, innovative solutions to build the resilience of the communities in dealing with both mega-fires and the drought. Recognizing that it costs up to 40 times more to put out a fire than prevent it, the private finance community has seen an opportunity to shape a solution that raises the capital needed to fund prevention efforts — not by donating, but by investing through a Forest Resilience Impact Bond. Spearheaded by Blue Forest Conservation, Private Capital for Public Good, and Encourage Capital, the Forest Resilience Impact Bond is a proposed new form of pay-for-success funding that seeks to leverage financial innovation to fund environmental conservation. The effort is funded by The Rockefeller Foundation’s Zero Gap portfolio, which focuses on shaping and supporting the next generation of innovative financing solutions through a venture philanthropy model that leans heavily on collaboration with both private and public sector partners. The inaugural Forest Resilience Impact Bond is being intended to raise capital from private investors to fund forest restoration designed to decrease burn severity and increase water availability for local utilities. Preliminary research suggests that investors are expected to earn market returns as real economic results — USFS cost savings from reduction in number and severity of fires, and increased revenue for water utilities as a result of increased water flow — are achieved.