Hi, I'm Helen Avery and you're listening to Financing Nature.
In this episode, I'm joined by Adam Davis, Co Founder and
Managing Partner at Ecosystem Investment Partners EIP, to talk
about the billion dollar market of mitigation banking in the US.
Clean water, stable and resilient living systems, and,
you know, a stable climate are ecosystem services that the
healthy world provides. And it says that those things
are incredibly valuable. But of course, for most people,
they aren't valuable. You get paid by cutting the tree
down, not by leaving the tree standing.
But in our business, you actually get paid for
scientifically verifiable improvement in ecological
health. So the money comes from the
health of the world and I that's where I think the real power is
in the whole model. Hello and thank you for joining
us today as we continue our journey into mitigation banking,
learning from the largest market in the world, the US And I'm
going to be joined today by Adam Davis, Co Founder and Managing
Partner, Ecosystem Investment Partners, which is a private
equity firm and project developer in mitigation banking,
whose projects, as Adam will share I'm sure, have restored
over 53,000 acres of wetland and 260 miles of streams since their
inception. And we're going to have, I hope,
a really candid conversation about how and why the US model
is something we should absolutely be considering in
other countries. So let's crack on.
So, Adam. First of all, thank.
You so much for joining us today.
You're welcome. It's a pleasure to be here.
And just As for our audience. Where?
Where are you based? Today.
So I'm sitting in San Rafael, CA, just north of San Francisco,
and I run the West Coast Office for Ecosystem Investment
Partners, which is headquartered in Maryland.
Well, San Rafael, CA sounds just wonderful and thank you so much
for joining us in what's obviously your very early
morning. So I mean.
First of all, it'd be. Great.
To give us a bit of an introduction for those who don't
know. EIP.
Or, you know, ecosystems and vessel partners.
But obviously we heard from Tim Mail in the last.
Episode where we talked. A little bit about mitigation
banking, but what I think is so interesting and what I want to
talk to you today is. That you really sort of.
Evidence what the financial opportunity.
Is of. Regulated markets like
mitigation banking. So I just wondered if you could
just give us a bit of an introduction as to why you Co
founded ecosystem investment partners and and talk.
Us a bit through its. Evolution and and what you're
doing. Sure.
And, and for the listeners who heard Tim mail last week or on
the last episode, he did a great job in sort of introducing the
markets broadly. And so I'll be building off of
that. And I can maybe summarise what
he said a little bit about the, the types of markets we invest
in. But basically EIP was founded in
2007. I founded it with two partners
with the basic notion of bringing mitigation banking to
scale. So mitigation banking, if you
again heard the the episode with Tim, you'll, you'll have some
background, but it's basically ecological restoration to a
government standard that helps provide compliance for people in
the US who have impacts under the Clean Water Act and other
environmental laws. At the time we got started in
the business of mitigation, banks were all around.
They had been in business I guess for 20 years or so when we
started in 2007, but they were quite small and opportunistic.
The average size was maybe 100 acres and they were either
developers who had had to buy mitigation and thought they
might like to try to sell some, or farmers and other property
owners with some low wet ground that they couldn't farm
effectively. And so they thought they'd try
and make money off of that land through this mitigation banking
concept. But there wasn't a lot of
professional focus. There weren't specialised
companies and there wasn't capital.
And so with two partners the the three of us set off to try and
get enough capital together to do larger projects, both because
they would be better ecologically larger projects
sort of fit into landscape scale or watershed scale, the
conservation goals, but also because it'd be more
economically efficient. You've got a lot of fixed costs
in developing a project, all the design and permitting work and
so on. And so if you can spread those
costs over 1000 acres instead of 100, simply your cost per acre
will go down. So, so that was the vision of of
working at scale to improve things both ecologically and
economically with this mitigation banking programme.
So we raised $27 million back in 2007 and invested it in three
projects, Florida, Virginia and Delaware, each of which was
about 2000 acres. And they weren't perfect.
We learned a lot along the way. We sort of think of that as our
laboratory. But they were good enough that
we were able to make a fair rate of return for the investors.
And that was enough to get us started with our first real
institutional fund, which we called EIP 2, which was closed
in 2012 at $180 million. So that gave us the wherewithal
to go out and do some really large projects.
We did 8 major projects in EIP 2, and those included some of
the largest restoration projects ever done by private companies,
including things like 17,000 acres of coastal marsh in
Louisiana on the critical land bridge between New Orleans and
the waters of the open Gulf. We did 23,000 acres of peat bogs
in Minnesota, about an hour north of Duluth that provided
mitigation for iron mining along with other activities in the in
the northern part of the United States there where almost all of
our iron comes from. And then we also got into stream
restoration in a big way and started doing 10s of miles.
We've now done 260 miles of stream restoration primarily in
Appalachia and some in the Chesapeake Bay region.
After 2012, we we raised another fund in 2016 and a subsequent
round of capital in 2020. And so today the the sort of the
dream has come true. We've raised over a billion
dollars and we've restored some 53,000 acres of wetlands, about
260 miles of streams, planted over 6,000,000 trees, and
reduced over 18,000,000 lbs of nutrients and sediments that
were going into waterways. So in all those different types
of environmental problems, this notion of capital being able to
do restoration at scale really has been effective and it's been
wonderful to be part of all the way through.
So EIP is the biggest mitigation banking developer, shall we say
in the US, but are there many similar businesses?
I'm, I'm keen to understand, Adam, what's, what's the size of
the entire market? Oh, it's quite extensive.
There's a trade association, the Ecological Restoration Business
Association, or IRBA. There are state chapters of IRBA
in in many states around the country.
At the national trade association, I think there is
something like 80 very active members.
Some are more local or regional. There are some other national
companies as well. So there's a varied landscape of
people that are using business models from ours.
We we're a private equity company, so we raise committed
capital to take a project all the way through from investment
to completion. There are other people that have
like operating businesses with much larger payrolls, you know,
thousands of employees and so on.
I think Tim mentioned that there are more employees or or workers
in ecological restoration now than in coal mining and in many
other major industries that people think of.
So it really is, AI would say, a rapidly growing industry in the
US. Before we sort of come on to
sort of the broader picture of what has enabled it to grow at
the pace and scale rather the scale that it has grown in the
US, Could you just talk to us about sort of what is that
investor appeal? Obviously you can't share the
the returns, but if you give us sort of a sense of who are the
types of investors that have been in the funds?
Let me see a couple things. First of all, I'll I'll sort of
summarise Tim's podcast with you by saying that these markets are
investable because they have a stable framework, the regulatory
framework that's been in place for over 20 years and because it
provides real value for customers, the people who need
to get compensatory mitigation for the impacts that they have
that are unavoidable. Those laws call for avoiding and
minimising impacts. But at the end of the day, there
are impacts from energy, infrastructure, Rd building,
housing construction, all the other things.
And mitigation banking offers a 50% reduction in the amount of
time it takes to get your permit.
And the reason is that we've already done the restoration
upfront. So instead of having to do
restoration yourself to make up for that impact, you can simply
buy the finished result from someone that's already done it
to a government standard. So mitigation banking provides,
you know, verifiable durable conservation and restoration
outcomes that also are a real value proposition for people who
need compliance with environmental laws.
So that's, that's the basic reason why we're in business.
In terms of the investors, they are institutional investors that
are looking for market rate risk adjusted returns.
They are looking for, you know, dispassionate fiduciaries who
are willing to make good business decisions and in this
case it aligns with environmental goals for those
reasons that I've just said. But the investors are people who
are evaluating risk and return and comparing what we do to
other forms of land based activity.
So you could think of natural resources in real estate.
So they would look at what are the risks and rewards in timber
or commercial real estate or mining or oil and gas or
renewable energy. And they basically now can
compare the sort of track record of delivering returns in a
regulated market, which we offer with, you know, the types of
returns that other natural resource and real estate funds
provide. And so that that's the kind of
investors that are involved with our business.
They're institutional investors. So they're things like
university endowments, high net worth, family offices, but also
pension funds and actually over half of our investment now comes
from pension funds, both US and European.
Gosh, I think it's so interesting like where in a
investor portfolio that this sits.
So as you say, like alongside my link, commercial real estate you
mentioned you just wouldn't expect it.
Is there any interest in mitigation banking investments
within an ESG portfolio though? Well, people do categorise what
we do in different ways. I look objectively at what we do
and what I see is ecological restoration at scale.
So we're basically taking degraded streams, degraded
wetlands that have been drained or damaged in other ways,
polluted waterways, and basically improving the
ecological health of those areas in a very rigorous way that
meets high standards and is quite verifiable.
So that's what we do all day long.
We make money by selling compliance essentially to third
parties who need it. But as Tim went into in a bit of
detail on the last podcast, that doesn't enable permits.
That actually makes permits more responsible than they would be
otherwise, because they're able to buy restoration from a
finished, completed project rather than getting permission
based on a promise to do something in the future.
So is your point there that they could be included in any issue
portfolio? Yeah, I mean, it's all
definitional, right? When I started in environmental
business in the 1980s, we talked about double bottom line or
triple bottom line or socially responsible investment.
There were different terms of art, of course.
Sustainability was all the focus throughout the 1990s and early
2000s. You don't hear sustainability so
much now, it's nature based solutions or ESG.
So clearly there's an environmental and social element
to ecological restoration. We focus on delivering fair risk
adjusted returns to institutional investors through
ecological restoration and I'll let other people categorise it
as they like. Love it, especially in today's
environment where is ESG is not always a popular phrase.
So. Can you walk us just through the
process of setting up a mitigation bank?
I, I just think it'd be helpful for others to sort of understand
how you go about doing that in terms of identifying locations.
And then are you purchasing land?
Is it a lease of land? How?
How does that? Work all the way to.
Sort of developing the credits. So there are four sort of basic
steps in delivering A restoration result a a
mitigation bank, and those are real estate design, permitting
and construction. And each one of those has
particular standards and requirements under law.
But essentially, you prepare a public notice, what's called a
prospectus that is publicly available.
People can look at it. And actually, I think it would
be really useful for your listeners to take a few minutes
and go to the public website where all of these documents are
available. And actually just take a look at
1:00, there are thousands and thousands.
But if you just take a look at one of these prospectuses or one
what's called MBI, which is a mitigation bank instrument,
which is the document that actually allows the bank to earn
credits and sets the standards for those credits.
If you just look at one of those documents and just even go
through the table of contents of such a document, you'll learn a
lot about the level of detail that's involved in the
requirements and what we actually do all day long in
building these things and earning credits.
So the place is called Ribbits, like the sound a frog makes.
So that's RIBITS. So if you just do a search for
Ribbits and go to, for example, public notices on the left hand
side of the page there you click on cyber repository and when you
do, you can actually go to the documents, the the enabling
documents for banks. And that's why I go into the
detail there because it's really worth looking at just one or two
examples and you'll see the sort of land conservation
requirements for permanent protection.
Tim talked about easements. We buy land at EIP, sometimes in
fee title, sometimes we do leasing arrangements with land
owners. But in either case, there's a
requirement for durability over time, right?
You can't just do an ecological result and sell a credit from
that if there's a risk that that land would be converted back to
something else later. So there are requirements for
permanent easements. There's very rigorous evaluation
of design and print, and the permitting process sometimes
takes several years working with multiple agencies.
So the banking programme is led by the Army Corps of Engineers
and the EPA at the federal level.
But there are state agencies that sit on the panel that
basically evaluates your mitigation bank and that's
called an interagency review team or an IRT.
So again, without dragging people into all the detail,
suffice to say it's a very rigorous science based process
that has standards for the critical elements of control
that are needed for durability over time.
So basically a credit, which is the thing you earn at the end of
the day, represents ecological success criteria.
So specific uplift on the landscape that is verifiable,
right along with legal and financial assurances.
The legal assurances are like the conservation easement or
deed restriction that make sure the land can be protected over
time, but also financial assurances like an endowment
that goes with the land. So even after the bank is
closed, after the restoration is complete, there is a fund that's
tied to the land, not to our company.
So even if we were to go out of business, there'd be a non
wasting endowment that has sufficient money in it to pay
for long term maintenance and monitoring.
So those things together, when people use the word credit, it
does mean different things in different markets, if you will.
And people often think these mitigation banking credits are
somehow the same as carbon credits or something like that.
They're really not. They're they're, they're based
on permanent land protection along with legal and financial
assurances that goes on top of measurable ecological success
criteria that are set by the agencies.
And that's not only like super rigorous as you've said, but
highly transparent, which I think.
Is some of the trouble. We're having, if I could say
that in, in England at the moment is just, it's, it's so
nascent that that kind of level of transparency and and
robustness just isn't, just isn't there.
Well, there's been a lot of trial and error in the
development of our programme and a lot of good lessons learned.
So I really do encourage people to to look at the place that
we've arrived with things like the requirement for permanent
land protection. There were philosophies of
regulation that said. The duration of the credit
should equal the duration of the impact.
So if you had a temporary impact of construction, you could buy a
temporary credit. This turned out to be not really
workable in practise. Another example, Helen, is the
discussion about on site mitigation versus off site.
I've heard a lot of people in the biodiversity net gain
context talk about how it's preferable to have the
restoration at the location of the construction rather than far
away. That's how we used to do it in
the US, but what we ended up experiencing was that you were
attracting wildlife to the developed areas, and the
conservation areas became little isolated fragments that weren't
particularly ecologically productive.
So it was actually better to purchase restoration within a
scientifically relevant distance, but not at the site of
construction, right? Some place in the watershed or
in the region where you could put together a, you know,
ecologically relevant parcel of land that was contiguous with
other protected areas. By doing that, you would
actually create green space outside the developed area and
allow infill development, what people call smart development.
So you would allow infill development but require
protection of the watershed or the green space outside the
urban area, and that way you'd create both denser development
in your transportation corridors, but also larger
protected areas that had more relevance to both biodiversity
and water quality. And in theory, it should be a
win win for conservation in the case of just say housing
development based on what you're sharing there.
Because not only would you get off site conservation which is
needed and sort of joined up, but you know, you got to think
most housing developments anyway will want to have some green
elements in them purely because homes will just have more appeal
if if green is built in. Absolutely.
And and also let me just say as a matter of principle, there are
some types of environmental features or ecological resources
that simply shouldn't be touched.
And so the answer is simply no. You may not develop if you're
going to impact very rare and precious resources, but a lot of
ecological health isn't dependent on a particular bird
or a particular hector, right? It's about landscape scale,
ecological health. And so if we're going to have
human cities and human roads and so on out on the landscape, the
notion of saying no to every impact just doesn't make sense.
You're not going to be able to win that fight.
So in order to say yes to development and economic
activity, having a scientifically verifiable offset
that meaningfully makes up for it is actually probably the best
course forward. And in terms of net gain, the
way to do that is simply require a ratio.
So for every acre of impact, there are two acres of
restoration. And that way, over time, you're
actually restoring damaged parts of the landscape faster than
you're degrading additional parts of the landscape.
Well, I was going to ask you about that actually and say, is
there a net game built in in the US?
The objective of the US laws is no net loss, right?
And so that that has been the standard and continues to be the
standard to this day. There there are individual cases
where interagency review teams, these IR TS that are the panel
of the government agencies, might require a ratio for a
particular type of resource. But the overall objective of the
law is no net loss. People often focus on that and
say, well, that's not good enough, we want net gain.
But you have to admit that where we're starting is tremendous net
loss. We are losing these resources
really quickly. So if we could get from that
state of play to no net loss, that would be a tremendous
improvement. The alternative to no net loss
realistically is loss, and that's not a good thing.
So no net loss is actually a very high standard and should be
applied, I think, more broadly throughout the economy.
It's a good point actually. And we'll we'll come back to
this no net loss question in a bit because I think there's
something to be unpicked there. And and as we discuss the Clean
Water Act and the Endangered Species Act have created this
mitigation banking conservation at scale possibility.
Adam, do you see opportunities for mitigation banking to be
used beyond those created by these specific legislations?
Well, our business runs primarily under one section of
the Clean Water Act, OK. It's the section that talks
about filling of wetlands and streams waters of the US And so
that's called section four O 4 of the Clean Water Act and
that's where the, as I say, the no net loss provisions live.
Now, there are similar types of opportunities with species and
biodiversity. And in California, because of
the state endangered species law and the conservation banking
programme in this state, we're able to invest just as we do in
wetlands in habitat for particular species.
We're investing in habitat restoration projects for about
15 different species now in California through the same
basic structure, right? This notion of real estate
design, permitting and construction, that creates a
credit that people can use for compliance, in that case with
the state endangered species law.
But there's also natural resource damage laws that apply
after oil or chemical spills. There are nutrient reduction
laws under different parts of the Clean Water Act.
I think you have a nutrient neutrality law in England.
We have similar things like that under other sections of the
Clean Water Act that are allowing us to do restoration
specifically to improve water quality.
And then there are habitat conservation plans, which are
regional biodiversity and other natural resource planning tools
that often need private investment in real estate in
order to advance beyond theory, right, and actually get put into
the ground. So those are different silos of
regulation, all of which could use the basic model that exists
under the Clean Water Act. But once you have this notion of
using scientifically verifiable offsets to make up for the
impacts of construction and development, you can use them
for other types of things as well, including carbon
emissions, other water quality impacts, whatever your
environmental damage is. You can think of this basic
structure as requiring high quality offsets upfront to
internalise the externality, make the business activity more
responsible and ethical than it would be otherwise, and provide
a very efficient means of compliance.
And in the current environment, if I can put it like that, do we
see that there is an appetite for expanding the application of
mitigation banking beyond what's traditionally been done?
Well, it's happening. As I say, we're investing in
projects specifically to reduce nutrient and sediment runoff
going into polluted water bodies.
We're doing projects specifically for restoration of
habitat for endangered species. We're doing projects for the
realisation of the goals of habitat conservation plans.
So all these things are happening.
Really what it's about is the ability to solve problems and,
and to the extent that private capital can come in and build on
the good work of government agencies and nonprofits that
have been researching and implementing programmes in
various ways all around the country and around the world,
right? We build on that knowledge base,
but bring capital to do things at scale.
Then it really is all about solving problems.
And you know, we're doing projects in plenty of red states
as well as blue states. We have lots of projects in
Texas and Louisiana and Florida, and it's not necessarily because
the people in charge of those states love environmental
regulation. It's because they have problems
that they really want to solve. The algae blooms in the
waterways of Florida are quite serious.
They've led to fish die offs, They've led to algae clogging
waterways to the point where you can't really take your boat out.
And so that's not really a question of whether you like
regulation. That's something you cannot have
in your state. It's not acceptable.
And so that's a problem that needs to get solved.
And so then the question is very practically, what do you do to
solve it? And it turns out that land based
restoration and improving the health of ecosystems that
actually improves water quality is a very pragmatic way to do
it. Yeah.
And I love the way you're framing.
This is just. It's so simple.
So obvious. Non political makes complete
sense. I mean what do you think is the
sticking point for other countries in moving forward?
I mean, we have such great examples as you've shared in
the. US of how this works.
And you know, in the EU, the discussions around voluntary
biodiversity credits as a sort of means to sort of testing
first before they consider regulatory and you sort of
think, well, we haven't got time for that, let's just do
regulatory. And what's your sense on what's
holding other countries back? Was there anything that you
learned through the US process that we could learn from
ourselves? Well, first of all, let me say
that the US programme is far from perfect and we do have
still plenty of lessons to learn and improvements to make.
Here in California, there's a large government effort called
Cutting the Green Tape, and that's all about improving the
permission process for restoration projects.
The things that you have to go through to get permission to do
restoration are sometimes more rigorous than the things you
have to go through to damage the natural world.
And you wouldn't think that would be possible.
Like, how could that be? But it turns out that
restoration is, I guess, controversial in the sense that
the agencies that oversee it are, are often natural resource
scientists, biologists, hydrologists who know a lot
about natural systems and care about them very much.
And so they want sort of perfection in the restoration
project and hold it to a very high standard because they know
it's going to be used for mitigation.
And so the permission process for restoration is often more
time consuming and difficult than the process for permitting
damage. So that needs to get worked on.
It's also true that there is still resistance to the basic
notion of regulation, but I think the business community
itself is at least divided on that issue, because many people
who run large businesses actually would prefer efficient
regulation to no regulation. Efficient regulation provides a
level playing field and it also avoids the most egregious damage
that then leads to inevitable pushback on their businesses.
Right. They'd rather have solid common
sense regulation that gives them predictable outcomes.
The challenges when regulation isn't predictable and isn't
efficient, it becomes a real drag on business and also sort
of a let's make a deal situation which is not predictable.
So having credits that actually make up for the impacts
available on a larger scale would allow people to meet a
high standard of responsibility and ethics in their business
without dragging their company into endless, you know, legal
and permitting processes that really are not supportable from
the business point of view. So I, I really think we have
improvements to make in the way we run the process here.
But it has gotten to the point where it is investable and it is
happening at larger, larger scale, employing more and more
people, creating really meaningful results on the
ground. So the proof is in the pudding
and I think we will see support for mitigation banking and
programmes like it because of the results and the way that it
provides efficient and fair compliance.
In terms of how it applies around the world, Helen, I mean
basically the thing I'm trying to do with EIP, one of the
things I hope we do is provide a model of what it looks like when
large scale capital comes into a regulated marketplace where the
government sets the rules and the government sets the
objectives, right? So we then get paid if we meet
those rules and objectives. So it aligns private and public
interest in a really fundamental way, and there's no reason that
this type of thing couldn't happen in any country in the
world. There needs to be some level of
oversight on the results. So there's accountability and
there needs to be a customer. And if the local business or
government can't be the customer, the customer could be
a bilateral or multilateral international agency that buys a
result. And I think it would be way more
effective, frankly, than giving grants and hoping for the best,
which is what we do now. That is very interesting.
Could you offer an example of what that might look like?
Well, there are lots of folks that can answer better than me,
Helen, in that I mean, I so I was part of a thing called the
Katoomba Group, which is an international consortium of
thought leaders on market mechanisms.
It was run by a nonprofit called Forest Trends out of Washington,
DC And we met for 10 or 15 years all around the country, all
around the world. And so there are programmes like
what we're talking about that recognise the value of nature
and what nature does in different ways all around the
world. And I don't think people fully
understand what it takes to get private capital to be involved.
Private capital needs to be able to make a fair rate of return or
else they can't. So it's different than a grant
or a, a philanthropic contribution to an NGO, right?
It needs a return. But the difference is the, you
know, as Tim was saying, the philanthropic dollars are guided
by whoever gives the grant, right?
You know, So it's, it's quirky in that way and that it's
personality driven to some degree, but it's also that, I
mean, the money for that came from conventional economic
activity and someone got really rich and then they're giving
some of it back to help the natural world.
So that's certainly honourable, but it's, it's hardly an
economic engine in the sense that the money comes from
conventional activity. And that's the same with taxes,
right? The money comes from raising
taxes on people's conventional economic activity and then you
use some to make up for the damage later.
But it's much better to use capital upfront to do
restoration before damage. That's helpful.
And then also the money actually comes from the improvement in
ecological health of the world. That's where the money comes
from. And that's why I think our
business is ultimately interesting is because ecosystem
services theory talks about how, you know, clean water, stable
and resilient living systems, and, you know, a stable climate
are ecosystem services that the healthy world provides.
And it says that those things are incredibly valuable.
But of course, for most people, they aren't valuable.
You get paid by cutting the tree down, not by leaving the tree
standing. But in our business, you
actually get paid for scientifically verifiable
improvement in ecological health.
So the money comes from the health of the world.
And I that's where I think the real power is in the whole
model. And but people should focus on
more. I mean, I, I couldn't agree
more. And I think regulation
mitigation banking is totally overlooked or criticised as a
means of really tackling some of the systemic issues we have.
And instead there's, you know, a lot of discussion we see around
new Fandango models that can unlock private capital when we
already have a model that that really works regulated markets.
Well, a couple things about that there.
There is a big debate in in Europe and the UK about the
difference between credits and offsets, right?
And a lot of people have said, well, credits are good, but
offsets are bad. Matter of fact, offsets are
unethical because you're using it to make up for something
else. There's a couple problems with
that way of thinking. One of them is that a credit is
simply a way of measuring something.
And so unless you have a customer for that credit,
there's no reason to do it and go through all the difficult
work of buying the land and doing all the conservation and
restoration work. And it's very hard.
It's really time consuming and difficult work.
So you have to have a customer. And so they say, well, the
government can be the customer. So you're basically repurposing
the existing government money that now goes for conservation
and using it to buy credits, but you're not increasing the amount
of money. And it's the same with
philanthropic monies. Philanthropic monies could buy
credits and that would be fine, but you're not increasing the
amount of money that's actually available for the health of the
natural world. If you say you can use these
things for offsets, there's actually two different economic
signals. 1 is it makes restoration more valuable than
it used to be. So it actually expands the range
of customers that care about these ecological results, and it
makes it investable, but it also makes damage more expensive.
This is what the critics miss is that when you say not only can
you buy an offset, but you must buy an offset in order to do
business, you have to buy an offset.
But what that means is, is that damaging the natural world or
creating pollution is more expensive than it used to be.
And that's a good thing, not a bad thing.
That's exactly as it should be, and that creates a natural
incentive to be better about your business and avoid damaging
so much, avoid polluting so much, because it's in your
economic interest to do so. Right?
So the notion that it's unethical to require offsets is
completely misguided. And I know you and I have spoken
before about some of those vocal critics and, and actually that
their concerns could be simply addressed by by having
mitigation banking programmes, you know, that are transparent,
scientifically robust, ethical, with high standards, high
enforcement, which you know, they they end up morphing into
as they work through their sort of teething challenges often.
But actually it's not offsetting per SE that is the issue, so.
So, yeah, so I've watched that things like on site versus off
site, mitigation credits versus offsets, permanence versus the
30 year requirement, these various things that I'm watching
in the development of the policy over there and wishing that the
folks would just spend more time on rivets really just go look at
the things that have been done. There's thousands of them.
They're really, really rigorous. We've answered all these
questions through trial and error, including real error.
Seriously. I mean that we made mistakes
along the way, but we course corrected because there was a
robust public discussion between environmental advocates,
business people, developers, policy makers, scientists.
And that that conversation has been really active and and
involved for over 30 years. And that's LED us to a place
where I feel pretty good about our projects.
They're not perfect, We're not perfect, but they're really
defensible projects, like every single one.
I could talk to you in great detail about what we had to go
through. You could talk to the regulators
that oversee them. You could talk to the
neighbours, you could talk to the customers, or you could talk
to the investors. And all of them would say, yeah,
this is working. Well, I think between you and
Tim, hopefully we've really sold our European listeners that that
mitigation banking is a solution that needs to be considered
specifically as the pressures on land are just not going to go
away as you say. Or something like it.
Yeah, a credit and offset programme.
Yeah, it does internalise the externality of damage and it
creates an incentive for restoration.
Well, thank you so much, Adam. And just finally, I suppose
we'd, we'd just love to hear about EIP and your future plans.
You've, you've had a fund every four years, so it feels like
maybe it's time for another one, but I won't press you on that.
And what are your future ambitions for EIP?
Yeah. I mean, I think my ambition for
the next 5 years is to continue to create a model that others
can follow for how to put private capital to work in a way
that works for the investors, but also really works for the
environment and works for the customers.
So the goal for our business really is to deliver solid
results for all the stakeholders.
So we're really focused on the knitting, the daily chores of
getting this work done because providing a model at scale
really I think is the thing that people can then point to and
say, you know, this is possible. I don't know everything about
how this would apply in other countries.
I think there are probably lots of nuances and lessons that I
would need to learn to really be useful in that conversation.
But I do think that the basic notion of putting institutional
capital to work to improve the environment is just tremendously
exciting and I look forward to doing more of it.
Last thing I'll say about that, you know, in the pension funds
that invest in our business, but that money belongs to
firefighters, teachers, other public employees, right?
And it's for their future. So they actually do need to make
a market rate of return on the money in order to be in a good
place 30 years from now when they retire.
But they also need clean water, healthy biodiversity and a
stable climate. They really do.
And they, they're going to need it more 30 years from now than
they do today. And so I just think that being
part of a business that can address both parts of that is
sort of my dream come true personally.
And it's, it's what I want to keep doing.
So I just plan on doing more of it.
And we're we're grateful that you are.
Thank you so much, Adam. Thanks for the opportunity.
Well, that's it for this week. You can find out more about EIP
at ecosystempartners.com and Ribits, that's RIBITS is what
you might be looking for. So you can just Google that and
then head to public notices on the left hand menu and then look
for any prospectuses in that whole list of projects that
you'll see. If you're really interested to
see that level of detail that Adam mentioned.
And I do recommend it. It's a real eye opener.
And I also wanted to remind you that we have a guide book on US
mitigation banking on our revenues for site.
If you Google GFI, Hive, UNFFI, UNDP, Biofin and revenues for
Nature in any order, you should get there.
Just a few more episodes in this series to go.
We have Dorothy Masika at FSC Africa.
We have Gabriella Weber Demares from Natura, who's going to talk
about the living Amazon mechanism.
And we've actually got to squeeze in a couple more as well
before we wrap up in what looks like to be October this year.
So thanks for listening and for all your support.
It's really lovely to hear from you which episodes have been
resonating. So thanks for all the
correspondence there. And just a note to let you know
that it's ambition at the end of this season to summarise all the
learnings into some sort of document for everyone with some
useful links. So that will be coming, and I
hope that's useful to you. Until next time, I hope you have
a great week.