1 00:00:17,570 --> 00:00:20,850 Hi, I'm Helen Avery and you're listening to Financing Nature. 2 00:00:21,250 --> 00:00:24,490 In this episode, I'm joined by Adam Davis, Co Founder and 3 00:00:24,490 --> 00:00:28,930 Managing Partner at Ecosystem Investment Partners EIP, to talk 4 00:00:28,930 --> 00:00:32,250 about the billion dollar market of mitigation banking in the US. 5 00:00:37,360 --> 00:00:41,760 Clean water, stable and resilient living systems, and, 6 00:00:42,000 --> 00:00:45,640 you know, a stable climate are ecosystem services that the 7 00:00:45,640 --> 00:00:48,360 healthy world provides. And it says that those things 8 00:00:48,360 --> 00:00:51,840 are incredibly valuable. But of course, for most people, 9 00:00:51,840 --> 00:00:55,000 they aren't valuable. You get paid by cutting the tree 10 00:00:55,000 --> 00:00:57,400 down, not by leaving the tree standing. 11 00:00:57,920 --> 00:01:00,680 But in our business, you actually get paid for 12 00:01:00,680 --> 00:01:03,840 scientifically verifiable improvement in ecological 13 00:01:03,840 --> 00:01:06,160 health. So the money comes from the 14 00:01:06,160 --> 00:01:09,520 health of the world and I that's where I think the real power is 15 00:01:09,520 --> 00:01:22,010 in the whole model. Hello and thank you for joining 16 00:01:22,010 --> 00:01:25,810 us today as we continue our journey into mitigation banking, 17 00:01:26,170 --> 00:01:30,210 learning from the largest market in the world, the US And I'm 18 00:01:30,210 --> 00:01:32,970 going to be joined today by Adam Davis, Co Founder and Managing 19 00:01:32,970 --> 00:01:36,250 Partner, Ecosystem Investment Partners, which is a private 20 00:01:36,250 --> 00:01:39,210 equity firm and project developer in mitigation banking, 21 00:01:39,840 --> 00:01:42,640 whose projects, as Adam will share I'm sure, have restored 22 00:01:42,640 --> 00:01:48,240 over 53,000 acres of wetland and 260 miles of streams since their 23 00:01:48,240 --> 00:01:50,360 inception. And we're going to have, I hope, 24 00:01:50,360 --> 00:01:54,280 a really candid conversation about how and why the US model 25 00:01:54,280 --> 00:01:57,000 is something we should absolutely be considering in 26 00:01:57,000 --> 00:01:59,080 other countries. So let's crack on. 27 00:02:08,030 --> 00:02:09,750 So, Adam. First of all, thank. 28 00:02:09,750 --> 00:02:11,270 You so much for joining us today. 29 00:02:11,870 --> 00:02:13,510 You're welcome. It's a pleasure to be here. 30 00:02:13,920 --> 00:02:16,160 And just As for our audience. Where? 31 00:02:16,160 --> 00:02:17,400 Where are you based? Today. 32 00:02:17,880 --> 00:02:21,800 So I'm sitting in San Rafael, CA, just north of San Francisco, 33 00:02:22,360 --> 00:02:26,560 and I run the West Coast Office for Ecosystem Investment 34 00:02:26,560 --> 00:02:28,600 Partners, which is headquartered in Maryland. 35 00:02:28,800 --> 00:02:33,080 Well, San Rafael, CA sounds just wonderful and thank you so much 36 00:02:33,080 --> 00:02:35,480 for joining us in what's obviously your very early 37 00:02:35,480 --> 00:02:37,360 morning. So I mean. 38 00:02:37,360 --> 00:02:38,600 First of all, it'd be. Great. 39 00:02:38,600 --> 00:02:41,400 To give us a bit of an introduction for those who don't 40 00:02:41,400 --> 00:02:42,600 know. EIP. 41 00:02:42,840 --> 00:02:45,000 Or, you know, ecosystems and vessel partners. 42 00:02:45,400 --> 00:02:47,600 But obviously we heard from Tim Mail in the last. 43 00:02:47,600 --> 00:02:50,000 Episode where we talked. A little bit about mitigation 44 00:02:50,000 --> 00:02:52,840 banking, but what I think is so interesting and what I want to 45 00:02:52,840 --> 00:02:55,240 talk to you today is. That you really sort of. 46 00:02:55,360 --> 00:02:57,960 Evidence what the financial opportunity. 47 00:02:57,960 --> 00:02:59,760 Is of. Regulated markets like 48 00:02:59,760 --> 00:03:02,320 mitigation banking. So I just wondered if you could 49 00:03:02,320 --> 00:03:04,960 just give us a bit of an introduction as to why you Co 50 00:03:04,960 --> 00:03:07,600 founded ecosystem investment partners and and talk. 51 00:03:07,600 --> 00:03:09,960 Us a bit through its. Evolution and and what you're 52 00:03:09,960 --> 00:03:11,880 doing. Sure. 53 00:03:11,960 --> 00:03:16,200 And, and for the listeners who heard Tim mail last week or on 54 00:03:16,200 --> 00:03:20,000 the last episode, he did a great job in sort of introducing the 55 00:03:20,000 --> 00:03:24,360 markets broadly. And so I'll be building off of 56 00:03:24,360 --> 00:03:27,520 that. And I can maybe summarise what 57 00:03:27,520 --> 00:03:30,480 he said a little bit about the, the types of markets we invest 58 00:03:30,480 --> 00:03:33,200 in. But basically EIP was founded in 59 00:03:33,200 --> 00:03:37,480 2007. I founded it with two partners 60 00:03:38,080 --> 00:03:41,160 with the basic notion of bringing mitigation banking to 61 00:03:41,160 --> 00:03:43,880 scale. So mitigation banking, if you 62 00:03:43,880 --> 00:03:46,640 again heard the the episode with Tim, you'll, you'll have some 63 00:03:46,640 --> 00:03:50,400 background, but it's basically ecological restoration to a 64 00:03:50,400 --> 00:03:55,240 government standard that helps provide compliance for people in 65 00:03:55,240 --> 00:03:59,560 the US who have impacts under the Clean Water Act and other 66 00:03:59,560 --> 00:04:02,960 environmental laws. At the time we got started in 67 00:04:02,960 --> 00:04:06,640 the business of mitigation, banks were all around. 68 00:04:06,640 --> 00:04:10,240 They had been in business I guess for 20 years or so when we 69 00:04:10,240 --> 00:04:14,040 started in 2007, but they were quite small and opportunistic. 70 00:04:14,400 --> 00:04:19,360 The average size was maybe 100 acres and they were either 71 00:04:19,800 --> 00:04:23,520 developers who had had to buy mitigation and thought they 72 00:04:23,520 --> 00:04:28,400 might like to try to sell some, or farmers and other property 73 00:04:28,400 --> 00:04:31,280 owners with some low wet ground that they couldn't farm 74 00:04:31,280 --> 00:04:33,760 effectively. And so they thought they'd try 75 00:04:33,760 --> 00:04:36,880 and make money off of that land through this mitigation banking 76 00:04:36,880 --> 00:04:39,480 concept. But there wasn't a lot of 77 00:04:39,480 --> 00:04:41,760 professional focus. There weren't specialised 78 00:04:41,760 --> 00:04:45,040 companies and there wasn't capital. 79 00:04:45,520 --> 00:04:50,040 And so with two partners the the three of us set off to try and 80 00:04:50,040 --> 00:04:54,840 get enough capital together to do larger projects, both because 81 00:04:54,840 --> 00:04:58,600 they would be better ecologically larger projects 82 00:04:58,600 --> 00:05:02,320 sort of fit into landscape scale or watershed scale, the 83 00:05:02,320 --> 00:05:05,360 conservation goals, but also because it'd be more 84 00:05:05,360 --> 00:05:09,760 economically efficient. You've got a lot of fixed costs 85 00:05:09,840 --> 00:05:13,480 in developing a project, all the design and permitting work and 86 00:05:13,480 --> 00:05:15,560 so on. And so if you can spread those 87 00:05:15,560 --> 00:05:20,160 costs over 1000 acres instead of 100, simply your cost per acre 88 00:05:20,160 --> 00:05:22,760 will go down. So, so that was the vision of of 89 00:05:22,760 --> 00:05:26,000 working at scale to improve things both ecologically and 90 00:05:26,000 --> 00:05:28,840 economically with this mitigation banking programme. 91 00:05:29,400 --> 00:05:34,600 So we raised $27 million back in 2007 and invested it in three 92 00:05:34,600 --> 00:05:39,560 projects, Florida, Virginia and Delaware, each of which was 93 00:05:39,560 --> 00:05:43,040 about 2000 acres. And they weren't perfect. 94 00:05:43,040 --> 00:05:45,840 We learned a lot along the way. We sort of think of that as our 95 00:05:45,840 --> 00:05:48,200 laboratory. But they were good enough that 96 00:05:48,200 --> 00:05:51,520 we were able to make a fair rate of return for the investors. 97 00:05:51,960 --> 00:05:54,920 And that was enough to get us started with our first real 98 00:05:54,920 --> 00:06:01,000 institutional fund, which we called EIP 2, which was closed 99 00:06:01,000 --> 00:06:06,920 in 2012 at $180 million. So that gave us the wherewithal 100 00:06:06,920 --> 00:06:09,160 to go out and do some really large projects. 101 00:06:09,280 --> 00:06:14,600 We did 8 major projects in EIP 2, and those included some of 102 00:06:14,600 --> 00:06:18,440 the largest restoration projects ever done by private companies, 103 00:06:19,400 --> 00:06:24,320 including things like 17,000 acres of coastal marsh in 104 00:06:24,320 --> 00:06:28,640 Louisiana on the critical land bridge between New Orleans and 105 00:06:28,640 --> 00:06:34,480 the waters of the open Gulf. We did 23,000 acres of peat bogs 106 00:06:35,000 --> 00:06:40,040 in Minnesota, about an hour north of Duluth that provided 107 00:06:40,040 --> 00:06:44,800 mitigation for iron mining along with other activities in the in 108 00:06:44,800 --> 00:06:48,280 the northern part of the United States there where almost all of 109 00:06:48,280 --> 00:06:51,800 our iron comes from. And then we also got into stream 110 00:06:51,800 --> 00:06:56,520 restoration in a big way and started doing 10s of miles. 111 00:06:57,160 --> 00:07:02,240 We've now done 260 miles of stream restoration primarily in 112 00:07:02,240 --> 00:07:05,400 Appalachia and some in the Chesapeake Bay region. 113 00:07:06,120 --> 00:07:13,040 After 2012, we we raised another fund in 2016 and a subsequent 114 00:07:13,240 --> 00:07:17,440 round of capital in 2020. And so today the the sort of the 115 00:07:17,440 --> 00:07:19,920 dream has come true. We've raised over a billion 116 00:07:19,920 --> 00:07:26,520 dollars and we've restored some 53,000 acres of wetlands, about 117 00:07:26,520 --> 00:07:32,200 260 miles of streams, planted over 6,000,000 trees, and 118 00:07:32,520 --> 00:07:36,840 reduced over 18,000,000 lbs of nutrients and sediments that 119 00:07:36,840 --> 00:07:41,080 were going into waterways. So in all those different types 120 00:07:41,080 --> 00:07:45,400 of environmental problems, this notion of capital being able to 121 00:07:45,400 --> 00:07:49,000 do restoration at scale really has been effective and it's been 122 00:07:49,360 --> 00:07:51,600 wonderful to be part of all the way through. 123 00:07:52,320 --> 00:07:56,680 So EIP is the biggest mitigation banking developer, shall we say 124 00:07:56,920 --> 00:07:59,840 in the US, but are there many similar businesses? 125 00:07:59,840 --> 00:08:02,480 I'm, I'm keen to understand, Adam, what's, what's the size of 126 00:08:02,480 --> 00:08:05,640 the entire market? Oh, it's quite extensive. 127 00:08:06,360 --> 00:08:10,640 There's a trade association, the Ecological Restoration Business 128 00:08:10,640 --> 00:08:16,000 Association, or IRBA. There are state chapters of IRBA 129 00:08:16,000 --> 00:08:18,000 in in many states around the country. 130 00:08:18,560 --> 00:08:20,760 At the national trade association, I think there is 131 00:08:20,760 --> 00:08:23,400 something like 80 very active members. 132 00:08:24,160 --> 00:08:28,480 Some are more local or regional. There are some other national 133 00:08:28,480 --> 00:08:32,120 companies as well. So there's a varied landscape of 134 00:08:32,120 --> 00:08:35,960 people that are using business models from ours. 135 00:08:35,960 --> 00:08:38,880 We we're a private equity company, so we raise committed 136 00:08:38,880 --> 00:08:42,280 capital to take a project all the way through from investment 137 00:08:42,280 --> 00:08:45,040 to completion. There are other people that have 138 00:08:45,240 --> 00:08:49,600 like operating businesses with much larger payrolls, you know, 139 00:08:49,600 --> 00:08:51,640 thousands of employees and so on. 140 00:08:52,040 --> 00:08:57,360 I think Tim mentioned that there are more employees or or workers 141 00:08:57,360 --> 00:09:01,320 in ecological restoration now than in coal mining and in many 142 00:09:01,320 --> 00:09:03,360 other major industries that people think of. 143 00:09:03,360 --> 00:09:08,000 So it really is, AI would say, a rapidly growing industry in the 144 00:09:08,200 --> 00:09:11,120 US. Before we sort of come on to 145 00:09:11,360 --> 00:09:15,840 sort of the broader picture of what has enabled it to grow at 146 00:09:15,840 --> 00:09:19,680 the pace and scale rather the scale that it has grown in the 147 00:09:20,000 --> 00:09:24,120 US, Could you just talk to us about sort of what is that 148 00:09:24,120 --> 00:09:27,640 investor appeal? Obviously you can't share the 149 00:09:27,760 --> 00:09:30,440 the returns, but if you give us sort of a sense of who are the 150 00:09:30,440 --> 00:09:33,480 types of investors that have been in the funds? 151 00:09:34,000 --> 00:09:36,280 Let me see a couple things. First of all, I'll I'll sort of 152 00:09:36,280 --> 00:09:40,800 summarise Tim's podcast with you by saying that these markets are 153 00:09:40,800 --> 00:09:45,800 investable because they have a stable framework, the regulatory 154 00:09:45,800 --> 00:09:50,960 framework that's been in place for over 20 years and because it 155 00:09:50,960 --> 00:09:55,360 provides real value for customers, the people who need 156 00:09:55,360 --> 00:10:00,120 to get compensatory mitigation for the impacts that they have 157 00:10:00,400 --> 00:10:04,080 that are unavoidable. Those laws call for avoiding and 158 00:10:04,080 --> 00:10:06,440 minimising impacts. But at the end of the day, there 159 00:10:06,440 --> 00:10:09,800 are impacts from energy, infrastructure, Rd building, 160 00:10:09,800 --> 00:10:11,880 housing construction, all the other things. 161 00:10:12,800 --> 00:10:18,360 And mitigation banking offers a 50% reduction in the amount of 162 00:10:18,360 --> 00:10:19,840 time it takes to get your permit. 163 00:10:20,480 --> 00:10:22,960 And the reason is that we've already done the restoration 164 00:10:22,960 --> 00:10:25,520 upfront. So instead of having to do 165 00:10:25,520 --> 00:10:29,400 restoration yourself to make up for that impact, you can simply 166 00:10:29,400 --> 00:10:33,160 buy the finished result from someone that's already done it 167 00:10:33,160 --> 00:10:38,040 to a government standard. So mitigation banking provides, 168 00:10:38,040 --> 00:10:42,120 you know, verifiable durable conservation and restoration 169 00:10:42,120 --> 00:10:46,920 outcomes that also are a real value proposition for people who 170 00:10:46,920 --> 00:10:48,920 need compliance with environmental laws. 171 00:10:49,200 --> 00:10:52,200 So that's, that's the basic reason why we're in business. 172 00:10:52,600 --> 00:10:57,720 In terms of the investors, they are institutional investors that 173 00:10:57,720 --> 00:11:01,160 are looking for market rate risk adjusted returns. 174 00:11:01,560 --> 00:11:06,600 They are looking for, you know, dispassionate fiduciaries who 175 00:11:06,600 --> 00:11:09,680 are willing to make good business decisions and in this 176 00:11:09,680 --> 00:11:12,200 case it aligns with environmental goals for those 177 00:11:12,200 --> 00:11:16,720 reasons that I've just said. But the investors are people who 178 00:11:16,720 --> 00:11:21,600 are evaluating risk and return and comparing what we do to 179 00:11:21,600 --> 00:11:25,120 other forms of land based activity. 180 00:11:25,120 --> 00:11:28,000 So you could think of natural resources in real estate. 181 00:11:28,600 --> 00:11:31,960 So they would look at what are the risks and rewards in timber 182 00:11:32,160 --> 00:11:36,400 or commercial real estate or mining or oil and gas or 183 00:11:36,400 --> 00:11:39,480 renewable energy. And they basically now can 184 00:11:39,480 --> 00:11:45,080 compare the sort of track record of delivering returns in a 185 00:11:45,080 --> 00:11:49,920 regulated market, which we offer with, you know, the types of 186 00:11:49,920 --> 00:11:53,640 returns that other natural resource and real estate funds 187 00:11:53,640 --> 00:11:56,680 provide. And so that that's the kind of 188 00:11:56,680 --> 00:12:00,000 investors that are involved with our business. 189 00:12:00,400 --> 00:12:02,720 They're institutional investors. So they're things like 190 00:12:02,720 --> 00:12:08,080 university endowments, high net worth, family offices, but also 191 00:12:08,160 --> 00:12:12,320 pension funds and actually over half of our investment now comes 192 00:12:12,320 --> 00:12:15,120 from pension funds, both US and European. 193 00:12:15,440 --> 00:12:18,480 Gosh, I think it's so interesting like where in a 194 00:12:18,480 --> 00:12:20,640 investor portfolio that this sits. 195 00:12:20,960 --> 00:12:23,520 So as you say, like alongside my link, commercial real estate you 196 00:12:23,520 --> 00:12:25,080 mentioned you just wouldn't expect it. 197 00:12:25,800 --> 00:12:27,920 Is there any interest in mitigation banking investments 198 00:12:27,920 --> 00:12:33,600 within an ESG portfolio though? Well, people do categorise what 199 00:12:33,600 --> 00:12:37,800 we do in different ways. I look objectively at what we do 200 00:12:37,840 --> 00:12:42,800 and what I see is ecological restoration at scale. 201 00:12:42,800 --> 00:12:46,640 So we're basically taking degraded streams, degraded 202 00:12:46,640 --> 00:12:49,960 wetlands that have been drained or damaged in other ways, 203 00:12:50,480 --> 00:12:54,440 polluted waterways, and basically improving the 204 00:12:54,480 --> 00:12:59,840 ecological health of those areas in a very rigorous way that 205 00:12:59,840 --> 00:13:02,760 meets high standards and is quite verifiable. 206 00:13:03,320 --> 00:13:05,040 So that's what we do all day long. 207 00:13:05,640 --> 00:13:11,000 We make money by selling compliance essentially to third 208 00:13:11,000 --> 00:13:14,360 parties who need it. But as Tim went into in a bit of 209 00:13:14,360 --> 00:13:18,720 detail on the last podcast, that doesn't enable permits. 210 00:13:19,040 --> 00:13:22,840 That actually makes permits more responsible than they would be 211 00:13:22,840 --> 00:13:26,080 otherwise, because they're able to buy restoration from a 212 00:13:26,080 --> 00:13:30,760 finished, completed project rather than getting permission 213 00:13:30,760 --> 00:13:33,080 based on a promise to do something in the future. 214 00:13:33,640 --> 00:13:37,600 So is your point there that they could be included in any issue 215 00:13:37,600 --> 00:13:39,760 portfolio? Yeah, I mean, it's all 216 00:13:39,760 --> 00:13:43,160 definitional, right? When I started in environmental 217 00:13:43,160 --> 00:13:48,600 business in the 1980s, we talked about double bottom line or 218 00:13:48,600 --> 00:13:51,720 triple bottom line or socially responsible investment. 219 00:13:52,040 --> 00:13:54,000 There were different terms of art, of course. 220 00:13:54,000 --> 00:13:57,720 Sustainability was all the focus throughout the 1990s and early 221 00:13:57,720 --> 00:14:00,160 2000s. You don't hear sustainability so 222 00:14:00,160 --> 00:14:03,720 much now, it's nature based solutions or ESG. 223 00:14:04,600 --> 00:14:07,200 So clearly there's an environmental and social element 224 00:14:07,200 --> 00:14:13,120 to ecological restoration. We focus on delivering fair risk 225 00:14:13,120 --> 00:14:16,320 adjusted returns to institutional investors through 226 00:14:16,320 --> 00:14:20,040 ecological restoration and I'll let other people categorise it 227 00:14:20,040 --> 00:14:24,720 as they like. Love it, especially in today's 228 00:14:24,720 --> 00:14:29,760 environment where is ESG is not always a popular phrase. 229 00:14:31,520 --> 00:14:34,400 So. Can you walk us just through the 230 00:14:34,400 --> 00:14:36,480 process of setting up a mitigation bank? 231 00:14:36,480 --> 00:14:40,160 I, I just think it'd be helpful for others to sort of understand 232 00:14:40,320 --> 00:14:44,080 how you go about doing that in terms of identifying locations. 233 00:14:44,080 --> 00:14:46,080 And then are you purchasing land? 234 00:14:46,080 --> 00:14:48,720 Is it a lease of land? How? 235 00:14:48,720 --> 00:14:49,880 How does that? Work all the way to. 236 00:14:49,880 --> 00:14:54,080 Sort of developing the credits. So there are four sort of basic 237 00:14:54,080 --> 00:14:59,400 steps in delivering A restoration result a a 238 00:14:59,440 --> 00:15:04,400 mitigation bank, and those are real estate design, permitting 239 00:15:04,400 --> 00:15:08,400 and construction. And each one of those has 240 00:15:09,160 --> 00:15:11,800 particular standards and requirements under law. 241 00:15:12,840 --> 00:15:18,800 But essentially, you prepare a public notice, what's called a 242 00:15:18,800 --> 00:15:21,760 prospectus that is publicly available. 243 00:15:21,760 --> 00:15:25,280 People can look at it. And actually, I think it would 244 00:15:25,280 --> 00:15:28,720 be really useful for your listeners to take a few minutes 245 00:15:28,760 --> 00:15:33,400 and go to the public website where all of these documents are 246 00:15:33,400 --> 00:15:35,200 available. And actually just take a look at 247 00:15:35,200 --> 00:15:37,760 1:00, there are thousands and thousands. 248 00:15:37,760 --> 00:15:41,760 But if you just take a look at one of these prospectuses or one 249 00:15:42,000 --> 00:15:45,080 what's called MBI, which is a mitigation bank instrument, 250 00:15:45,400 --> 00:15:48,720 which is the document that actually allows the bank to earn 251 00:15:48,720 --> 00:15:51,400 credits and sets the standards for those credits. 252 00:15:51,760 --> 00:15:54,560 If you just look at one of those documents and just even go 253 00:15:54,560 --> 00:15:58,440 through the table of contents of such a document, you'll learn a 254 00:15:58,440 --> 00:16:01,920 lot about the level of detail that's involved in the 255 00:16:01,920 --> 00:16:05,320 requirements and what we actually do all day long in 256 00:16:05,320 --> 00:16:07,560 building these things and earning credits. 257 00:16:08,080 --> 00:16:11,720 So the place is called Ribbits, like the sound a frog makes. 258 00:16:12,440 --> 00:16:16,320 So that's RIBITS. So if you just do a search for 259 00:16:16,320 --> 00:16:21,720 Ribbits and go to, for example, public notices on the left hand 260 00:16:21,720 --> 00:16:27,080 side of the page there you click on cyber repository and when you 261 00:16:27,080 --> 00:16:30,520 do, you can actually go to the documents, the the enabling 262 00:16:30,520 --> 00:16:33,320 documents for banks. And that's why I go into the 263 00:16:33,320 --> 00:16:36,400 detail there because it's really worth looking at just one or two 264 00:16:36,400 --> 00:16:42,240 examples and you'll see the sort of land conservation 265 00:16:42,240 --> 00:16:44,960 requirements for permanent protection. 266 00:16:45,360 --> 00:16:51,760 Tim talked about easements. We buy land at EIP, sometimes in 267 00:16:51,760 --> 00:16:55,320 fee title, sometimes we do leasing arrangements with land 268 00:16:55,320 --> 00:16:58,600 owners. But in either case, there's a 269 00:16:58,600 --> 00:17:01,960 requirement for durability over time, right? 270 00:17:02,120 --> 00:17:05,200 You can't just do an ecological result and sell a credit from 271 00:17:05,200 --> 00:17:09,240 that if there's a risk that that land would be converted back to 272 00:17:09,240 --> 00:17:11,960 something else later. So there are requirements for 273 00:17:11,960 --> 00:17:16,200 permanent easements. There's very rigorous evaluation 274 00:17:16,200 --> 00:17:19,440 of design and print, and the permitting process sometimes 275 00:17:19,440 --> 00:17:23,240 takes several years working with multiple agencies. 276 00:17:23,800 --> 00:17:28,240 So the banking programme is led by the Army Corps of Engineers 277 00:17:28,560 --> 00:17:30,720 and the EPA at the federal level. 278 00:17:30,960 --> 00:17:34,720 But there are state agencies that sit on the panel that 279 00:17:34,720 --> 00:17:38,640 basically evaluates your mitigation bank and that's 280 00:17:38,640 --> 00:17:42,240 called an interagency review team or an IRT. 281 00:17:42,880 --> 00:17:45,880 So again, without dragging people into all the detail, 282 00:17:46,120 --> 00:17:50,720 suffice to say it's a very rigorous science based process 283 00:17:50,720 --> 00:17:56,440 that has standards for the critical elements of control 284 00:17:56,440 --> 00:17:58,720 that are needed for durability over time. 285 00:17:58,720 --> 00:18:03,320 So basically a credit, which is the thing you earn at the end of 286 00:18:03,320 --> 00:18:07,760 the day, represents ecological success criteria. 287 00:18:07,880 --> 00:18:13,360 So specific uplift on the landscape that is verifiable, 288 00:18:13,360 --> 00:18:17,760 right along with legal and financial assurances. 289 00:18:18,240 --> 00:18:21,640 The legal assurances are like the conservation easement or 290 00:18:21,640 --> 00:18:25,960 deed restriction that make sure the land can be protected over 291 00:18:25,960 --> 00:18:30,920 time, but also financial assurances like an endowment 292 00:18:31,360 --> 00:18:34,480 that goes with the land. So even after the bank is 293 00:18:34,480 --> 00:18:39,680 closed, after the restoration is complete, there is a fund that's 294 00:18:39,680 --> 00:18:42,840 tied to the land, not to our company. 295 00:18:43,440 --> 00:18:45,760 So even if we were to go out of business, there'd be a non 296 00:18:45,760 --> 00:18:48,680 wasting endowment that has sufficient money in it to pay 297 00:18:48,680 --> 00:18:51,560 for long term maintenance and monitoring. 298 00:18:52,320 --> 00:18:55,960 So those things together, when people use the word credit, it 299 00:18:55,960 --> 00:18:59,720 does mean different things in different markets, if you will. 300 00:19:00,120 --> 00:19:02,920 And people often think these mitigation banking credits are 301 00:19:02,920 --> 00:19:07,160 somehow the same as carbon credits or something like that. 302 00:19:07,200 --> 00:19:10,280 They're really not. They're they're, they're based 303 00:19:10,280 --> 00:19:13,560 on permanent land protection along with legal and financial 304 00:19:13,560 --> 00:19:18,920 assurances that goes on top of measurable ecological success 305 00:19:18,920 --> 00:19:21,160 criteria that are set by the agencies. 306 00:19:22,000 --> 00:19:25,080 And that's not only like super rigorous as you've said, but 307 00:19:25,200 --> 00:19:27,760 highly transparent, which I think. 308 00:19:27,760 --> 00:19:30,840 Is some of the trouble. We're having, if I could say 309 00:19:30,840 --> 00:19:33,560 that in, in England at the moment is just, it's, it's so 310 00:19:33,560 --> 00:19:36,920 nascent that that kind of level of transparency and and 311 00:19:36,920 --> 00:19:39,240 robustness just isn't, just isn't there. 312 00:19:39,760 --> 00:19:42,040 Well, there's been a lot of trial and error in the 313 00:19:42,040 --> 00:19:46,240 development of our programme and a lot of good lessons learned. 314 00:19:46,680 --> 00:19:51,320 So I really do encourage people to to look at the place that 315 00:19:51,320 --> 00:19:55,960 we've arrived with things like the requirement for permanent 316 00:19:55,960 --> 00:19:59,600 land protection. There were philosophies of 317 00:19:59,600 --> 00:20:03,520 regulation that said. The duration of the credit 318 00:20:03,680 --> 00:20:06,160 should equal the duration of the impact. 319 00:20:06,160 --> 00:20:09,000 So if you had a temporary impact of construction, you could buy a 320 00:20:09,000 --> 00:20:11,720 temporary credit. This turned out to be not really 321 00:20:11,720 --> 00:20:17,320 workable in practise. Another example, Helen, is the 322 00:20:17,320 --> 00:20:21,760 discussion about on site mitigation versus off site. 323 00:20:22,360 --> 00:20:25,360 I've heard a lot of people in the biodiversity net gain 324 00:20:25,360 --> 00:20:28,800 context talk about how it's preferable to have the 325 00:20:28,800 --> 00:20:33,600 restoration at the location of the construction rather than far 326 00:20:33,600 --> 00:20:36,360 away. That's how we used to do it in 327 00:20:36,360 --> 00:20:41,200 the US, but what we ended up experiencing was that you were 328 00:20:41,200 --> 00:20:45,920 attracting wildlife to the developed areas, and the 329 00:20:45,920 --> 00:20:50,080 conservation areas became little isolated fragments that weren't 330 00:20:50,080 --> 00:20:51,760 particularly ecologically productive. 331 00:20:52,160 --> 00:20:56,080 So it was actually better to purchase restoration within a 332 00:20:56,080 --> 00:20:59,240 scientifically relevant distance, but not at the site of 333 00:20:59,240 --> 00:21:03,240 construction, right? Some place in the watershed or 334 00:21:03,240 --> 00:21:06,200 in the region where you could put together a, you know, 335 00:21:06,200 --> 00:21:11,720 ecologically relevant parcel of land that was contiguous with 336 00:21:11,720 --> 00:21:14,760 other protected areas. By doing that, you would 337 00:21:14,760 --> 00:21:18,560 actually create green space outside the developed area and 338 00:21:18,560 --> 00:21:22,120 allow infill development, what people call smart development. 339 00:21:22,640 --> 00:21:25,600 So you would allow infill development but require 340 00:21:25,600 --> 00:21:28,720 protection of the watershed or the green space outside the 341 00:21:28,720 --> 00:21:32,520 urban area, and that way you'd create both denser development 342 00:21:32,520 --> 00:21:35,960 in your transportation corridors, but also larger 343 00:21:35,960 --> 00:21:41,640 protected areas that had more relevance to both biodiversity 344 00:21:41,640 --> 00:21:45,280 and water quality. And in theory, it should be a 345 00:21:45,280 --> 00:21:47,920 win win for conservation in the case of just say housing 346 00:21:47,920 --> 00:21:49,600 development based on what you're sharing there. 347 00:21:49,600 --> 00:21:52,920 Because not only would you get off site conservation which is 348 00:21:52,920 --> 00:21:56,080 needed and sort of joined up, but you know, you got to think 349 00:21:56,080 --> 00:21:59,000 most housing developments anyway will want to have some green 350 00:21:59,320 --> 00:22:02,800 elements in them purely because homes will just have more appeal 351 00:22:02,800 --> 00:22:05,360 if if green is built in. Absolutely. 352 00:22:05,360 --> 00:22:08,480 And and also let me just say as a matter of principle, there are 353 00:22:08,480 --> 00:22:13,720 some types of environmental features or ecological resources 354 00:22:13,720 --> 00:22:15,720 that simply shouldn't be touched. 355 00:22:16,480 --> 00:22:20,520 And so the answer is simply no. You may not develop if you're 356 00:22:20,640 --> 00:22:26,720 going to impact very rare and precious resources, but a lot of 357 00:22:26,720 --> 00:22:31,240 ecological health isn't dependent on a particular bird 358 00:22:31,240 --> 00:22:35,760 or a particular hector, right? It's about landscape scale, 359 00:22:35,760 --> 00:22:39,200 ecological health. And so if we're going to have 360 00:22:39,200 --> 00:22:43,800 human cities and human roads and so on out on the landscape, the 361 00:22:43,800 --> 00:22:48,280 notion of saying no to every impact just doesn't make sense. 362 00:22:48,280 --> 00:22:50,120 You're not going to be able to win that fight. 363 00:22:50,800 --> 00:22:54,840 So in order to say yes to development and economic 364 00:22:54,840 --> 00:22:59,320 activity, having a scientifically verifiable offset 365 00:22:59,360 --> 00:23:03,440 that meaningfully makes up for it is actually probably the best 366 00:23:03,440 --> 00:23:07,200 course forward. And in terms of net gain, the 367 00:23:07,200 --> 00:23:09,360 way to do that is simply require a ratio. 368 00:23:10,000 --> 00:23:14,160 So for every acre of impact, there are two acres of 369 00:23:14,160 --> 00:23:17,880 restoration. And that way, over time, you're 370 00:23:17,880 --> 00:23:22,840 actually restoring damaged parts of the landscape faster than 371 00:23:22,840 --> 00:23:25,600 you're degrading additional parts of the landscape. 372 00:23:26,480 --> 00:23:28,880 Well, I was going to ask you about that actually and say, is 373 00:23:28,880 --> 00:23:30,920 there a net game built in in the US? 374 00:23:32,160 --> 00:23:35,960 The objective of the US laws is no net loss, right? 375 00:23:36,800 --> 00:23:40,280 And so that that has been the standard and continues to be the 376 00:23:40,280 --> 00:23:44,400 standard to this day. There there are individual cases 377 00:23:44,400 --> 00:23:48,880 where interagency review teams, these IR TS that are the panel 378 00:23:48,880 --> 00:23:52,080 of the government agencies, might require a ratio for a 379 00:23:52,080 --> 00:23:55,680 particular type of resource. But the overall objective of the 380 00:23:55,680 --> 00:23:59,560 law is no net loss. People often focus on that and 381 00:23:59,560 --> 00:24:01,800 say, well, that's not good enough, we want net gain. 382 00:24:02,200 --> 00:24:05,600 But you have to admit that where we're starting is tremendous net 383 00:24:05,600 --> 00:24:08,040 loss. We are losing these resources 384 00:24:08,040 --> 00:24:10,400 really quickly. So if we could get from that 385 00:24:10,400 --> 00:24:15,000 state of play to no net loss, that would be a tremendous 386 00:24:15,000 --> 00:24:17,640 improvement. The alternative to no net loss 387 00:24:17,840 --> 00:24:22,040 realistically is loss, and that's not a good thing. 388 00:24:22,160 --> 00:24:26,040 So no net loss is actually a very high standard and should be 389 00:24:26,040 --> 00:24:28,400 applied, I think, more broadly throughout the economy. 390 00:24:28,720 --> 00:24:31,400 It's a good point actually. And we'll we'll come back to 391 00:24:31,400 --> 00:24:33,520 this no net loss question in a bit because I think there's 392 00:24:33,520 --> 00:24:36,560 something to be unpicked there. And and as we discuss the Clean 393 00:24:36,560 --> 00:24:40,360 Water Act and the Endangered Species Act have created this 394 00:24:40,360 --> 00:24:43,640 mitigation banking conservation at scale possibility. 395 00:24:44,160 --> 00:24:46,960 Adam, do you see opportunities for mitigation banking to be 396 00:24:46,960 --> 00:24:50,440 used beyond those created by these specific legislations? 397 00:24:50,560 --> 00:24:55,000 Well, our business runs primarily under one section of 398 00:24:55,000 --> 00:24:59,480 the Clean Water Act, OK. It's the section that talks 399 00:24:59,480 --> 00:25:05,160 about filling of wetlands and streams waters of the US And so 400 00:25:05,160 --> 00:25:08,200 that's called section four O 4 of the Clean Water Act and 401 00:25:08,200 --> 00:25:11,440 that's where the, as I say, the no net loss provisions live. 402 00:25:12,080 --> 00:25:16,280 Now, there are similar types of opportunities with species and 403 00:25:16,280 --> 00:25:19,360 biodiversity. And in California, because of 404 00:25:19,360 --> 00:25:23,320 the state endangered species law and the conservation banking 405 00:25:23,320 --> 00:25:27,560 programme in this state, we're able to invest just as we do in 406 00:25:27,560 --> 00:25:31,360 wetlands in habitat for particular species. 407 00:25:31,920 --> 00:25:35,200 We're investing in habitat restoration projects for about 408 00:25:35,200 --> 00:25:38,720 15 different species now in California through the same 409 00:25:38,720 --> 00:25:42,080 basic structure, right? This notion of real estate 410 00:25:42,080 --> 00:25:46,240 design, permitting and construction, that creates a 411 00:25:46,240 --> 00:25:49,920 credit that people can use for compliance, in that case with 412 00:25:49,920 --> 00:25:51,560 the state endangered species law. 413 00:25:52,160 --> 00:25:56,640 But there's also natural resource damage laws that apply 414 00:25:56,640 --> 00:26:00,880 after oil or chemical spills. There are nutrient reduction 415 00:26:00,880 --> 00:26:03,160 laws under different parts of the Clean Water Act. 416 00:26:03,160 --> 00:26:06,440 I think you have a nutrient neutrality law in England. 417 00:26:07,520 --> 00:26:11,720 We have similar things like that under other sections of the 418 00:26:11,720 --> 00:26:15,400 Clean Water Act that are allowing us to do restoration 419 00:26:15,400 --> 00:26:17,640 specifically to improve water quality. 420 00:26:18,400 --> 00:26:21,240 And then there are habitat conservation plans, which are 421 00:26:21,560 --> 00:26:25,880 regional biodiversity and other natural resource planning tools 422 00:26:26,360 --> 00:26:29,800 that often need private investment in real estate in 423 00:26:29,800 --> 00:26:33,040 order to advance beyond theory, right, and actually get put into 424 00:26:33,040 --> 00:26:36,600 the ground. So those are different silos of 425 00:26:36,600 --> 00:26:41,120 regulation, all of which could use the basic model that exists 426 00:26:41,120 --> 00:26:44,720 under the Clean Water Act. But once you have this notion of 427 00:26:44,720 --> 00:26:49,280 using scientifically verifiable offsets to make up for the 428 00:26:49,280 --> 00:26:54,120 impacts of construction and development, you can use them 429 00:26:54,120 --> 00:26:57,520 for other types of things as well, including carbon 430 00:26:57,520 --> 00:27:01,200 emissions, other water quality impacts, whatever your 431 00:27:01,200 --> 00:27:04,400 environmental damage is. You can think of this basic 432 00:27:04,400 --> 00:27:09,280 structure as requiring high quality offsets upfront to 433 00:27:09,280 --> 00:27:13,520 internalise the externality, make the business activity more 434 00:27:13,520 --> 00:27:17,080 responsible and ethical than it would be otherwise, and provide 435 00:27:17,080 --> 00:27:19,160 a very efficient means of compliance. 436 00:27:19,560 --> 00:27:22,800 And in the current environment, if I can put it like that, do we 437 00:27:22,800 --> 00:27:25,760 see that there is an appetite for expanding the application of 438 00:27:25,760 --> 00:27:28,560 mitigation banking beyond what's traditionally been done? 439 00:27:28,800 --> 00:27:31,680 Well, it's happening. As I say, we're investing in 440 00:27:31,680 --> 00:27:35,800 projects specifically to reduce nutrient and sediment runoff 441 00:27:35,800 --> 00:27:37,640 going into polluted water bodies. 442 00:27:38,080 --> 00:27:41,480 We're doing projects specifically for restoration of 443 00:27:41,680 --> 00:27:46,920 habitat for endangered species. We're doing projects for the 444 00:27:46,920 --> 00:27:50,440 realisation of the goals of habitat conservation plans. 445 00:27:50,840 --> 00:27:52,520 So all these things are happening. 446 00:27:53,600 --> 00:27:57,040 Really what it's about is the ability to solve problems and, 447 00:27:57,040 --> 00:28:01,600 and to the extent that private capital can come in and build on 448 00:28:01,600 --> 00:28:06,400 the good work of government agencies and nonprofits that 449 00:28:06,400 --> 00:28:09,600 have been researching and implementing programmes in 450 00:28:09,600 --> 00:28:12,200 various ways all around the country and around the world, 451 00:28:12,200 --> 00:28:14,160 right? We build on that knowledge base, 452 00:28:14,400 --> 00:28:16,760 but bring capital to do things at scale. 453 00:28:17,480 --> 00:28:20,480 Then it really is all about solving problems. 454 00:28:21,080 --> 00:28:25,200 And you know, we're doing projects in plenty of red states 455 00:28:25,440 --> 00:28:28,160 as well as blue states. We have lots of projects in 456 00:28:28,160 --> 00:28:32,400 Texas and Louisiana and Florida, and it's not necessarily because 457 00:28:32,480 --> 00:28:35,240 the people in charge of those states love environmental 458 00:28:35,240 --> 00:28:38,120 regulation. It's because they have problems 459 00:28:38,120 --> 00:28:42,520 that they really want to solve. The algae blooms in the 460 00:28:42,520 --> 00:28:46,600 waterways of Florida are quite serious. 461 00:28:46,600 --> 00:28:50,720 They've led to fish die offs, They've led to algae clogging 462 00:28:50,720 --> 00:28:53,600 waterways to the point where you can't really take your boat out. 463 00:28:54,320 --> 00:28:58,000 And so that's not really a question of whether you like 464 00:28:58,000 --> 00:29:00,320 regulation. That's something you cannot have 465 00:29:00,480 --> 00:29:02,360 in your state. It's not acceptable. 466 00:29:02,760 --> 00:29:04,960 And so that's a problem that needs to get solved. 467 00:29:05,600 --> 00:29:08,360 And so then the question is very practically, what do you do to 468 00:29:08,360 --> 00:29:11,200 solve it? And it turns out that land based 469 00:29:11,240 --> 00:29:14,400 restoration and improving the health of ecosystems that 470 00:29:14,400 --> 00:29:18,680 actually improves water quality is a very pragmatic way to do 471 00:29:18,680 --> 00:29:19,960 it. Yeah. 472 00:29:19,960 --> 00:29:21,920 And I love the way you're framing. 473 00:29:21,920 --> 00:29:24,280 This is just. It's so simple. 474 00:29:24,760 --> 00:29:28,360 So obvious. Non political makes complete 475 00:29:28,360 --> 00:29:31,880 sense. I mean what do you think is the 476 00:29:31,880 --> 00:29:36,760 sticking point for other countries in moving forward? 477 00:29:36,800 --> 00:29:39,560 I mean, we have such great examples as you've shared in 478 00:29:39,560 --> 00:29:41,400 the. US of how this works. 479 00:29:41,800 --> 00:29:46,000 And you know, in the EU, the discussions around voluntary 480 00:29:46,000 --> 00:29:49,120 biodiversity credits as a sort of means to sort of testing 481 00:29:49,120 --> 00:29:51,240 first before they consider regulatory and you sort of 482 00:29:51,240 --> 00:29:52,960 think, well, we haven't got time for that, let's just do 483 00:29:52,960 --> 00:29:55,240 regulatory. And what's your sense on what's 484 00:29:55,240 --> 00:29:58,360 holding other countries back? Was there anything that you 485 00:29:58,360 --> 00:30:02,360 learned through the US process that we could learn from 486 00:30:02,360 --> 00:30:05,320 ourselves? Well, first of all, let me say 487 00:30:05,320 --> 00:30:09,560 that the US programme is far from perfect and we do have 488 00:30:09,600 --> 00:30:12,360 still plenty of lessons to learn and improvements to make. 489 00:30:12,360 --> 00:30:16,040 Here in California, there's a large government effort called 490 00:30:16,040 --> 00:30:19,760 Cutting the Green Tape, and that's all about improving the 491 00:30:19,760 --> 00:30:22,800 permission process for restoration projects. 492 00:30:23,640 --> 00:30:27,880 The things that you have to go through to get permission to do 493 00:30:27,880 --> 00:30:32,040 restoration are sometimes more rigorous than the things you 494 00:30:32,040 --> 00:30:34,640 have to go through to damage the natural world. 495 00:30:35,120 --> 00:30:36,680 And you wouldn't think that would be possible. 496 00:30:36,680 --> 00:30:40,200 Like, how could that be? But it turns out that 497 00:30:40,240 --> 00:30:45,760 restoration is, I guess, controversial in the sense that 498 00:30:45,760 --> 00:30:51,040 the agencies that oversee it are, are often natural resource 499 00:30:51,040 --> 00:30:54,920 scientists, biologists, hydrologists who know a lot 500 00:30:54,920 --> 00:30:57,720 about natural systems and care about them very much. 501 00:30:58,160 --> 00:31:00,680 And so they want sort of perfection in the restoration 502 00:31:00,680 --> 00:31:04,320 project and hold it to a very high standard because they know 503 00:31:04,320 --> 00:31:06,000 it's going to be used for mitigation. 504 00:31:06,600 --> 00:31:10,720 And so the permission process for restoration is often more 505 00:31:10,720 --> 00:31:13,640 time consuming and difficult than the process for permitting 506 00:31:13,640 --> 00:31:16,880 damage. So that needs to get worked on. 507 00:31:18,920 --> 00:31:23,720 It's also true that there is still resistance to the basic 508 00:31:23,720 --> 00:31:27,920 notion of regulation, but I think the business community 509 00:31:27,920 --> 00:31:31,520 itself is at least divided on that issue, because many people 510 00:31:31,520 --> 00:31:36,920 who run large businesses actually would prefer efficient 511 00:31:36,920 --> 00:31:41,480 regulation to no regulation. Efficient regulation provides a 512 00:31:41,480 --> 00:31:45,760 level playing field and it also avoids the most egregious damage 513 00:31:45,760 --> 00:31:48,800 that then leads to inevitable pushback on their businesses. 514 00:31:48,800 --> 00:31:51,720 Right. They'd rather have solid common 515 00:31:51,720 --> 00:31:55,840 sense regulation that gives them predictable outcomes. 516 00:31:56,560 --> 00:32:00,400 The challenges when regulation isn't predictable and isn't 517 00:32:00,400 --> 00:32:04,920 efficient, it becomes a real drag on business and also sort 518 00:32:04,920 --> 00:32:07,920 of a let's make a deal situation which is not predictable. 519 00:32:08,480 --> 00:32:12,640 So having credits that actually make up for the impacts 520 00:32:12,640 --> 00:32:17,520 available on a larger scale would allow people to meet a 521 00:32:17,520 --> 00:32:21,040 high standard of responsibility and ethics in their business 522 00:32:21,600 --> 00:32:25,560 without dragging their company into endless, you know, legal 523 00:32:25,560 --> 00:32:29,400 and permitting processes that really are not supportable from 524 00:32:29,400 --> 00:32:33,720 the business point of view. So I, I really think we have 525 00:32:33,720 --> 00:32:37,880 improvements to make in the way we run the process here. 526 00:32:38,400 --> 00:32:42,360 But it has gotten to the point where it is investable and it is 527 00:32:42,360 --> 00:32:45,520 happening at larger, larger scale, employing more and more 528 00:32:45,520 --> 00:32:48,200 people, creating really meaningful results on the 529 00:32:48,200 --> 00:32:50,360 ground. So the proof is in the pudding 530 00:32:50,600 --> 00:32:55,800 and I think we will see support for mitigation banking and 531 00:32:55,800 --> 00:33:00,040 programmes like it because of the results and the way that it 532 00:33:00,040 --> 00:33:02,320 provides efficient and fair compliance. 533 00:33:03,000 --> 00:33:05,360 In terms of how it applies around the world, Helen, I mean 534 00:33:05,360 --> 00:33:08,840 basically the thing I'm trying to do with EIP, one of the 535 00:33:08,840 --> 00:33:14,760 things I hope we do is provide a model of what it looks like when 536 00:33:14,760 --> 00:33:18,880 large scale capital comes into a regulated marketplace where the 537 00:33:18,880 --> 00:33:22,280 government sets the rules and the government sets the 538 00:33:22,280 --> 00:33:26,320 objectives, right? So we then get paid if we meet 539 00:33:26,320 --> 00:33:29,520 those rules and objectives. So it aligns private and public 540 00:33:29,520 --> 00:33:33,600 interest in a really fundamental way, and there's no reason that 541 00:33:33,600 --> 00:33:36,480 this type of thing couldn't happen in any country in the 542 00:33:36,480 --> 00:33:40,000 world. There needs to be some level of 543 00:33:40,000 --> 00:33:43,840 oversight on the results. So there's accountability and 544 00:33:43,840 --> 00:33:48,280 there needs to be a customer. And if the local business or 545 00:33:48,400 --> 00:33:52,320 government can't be the customer, the customer could be 546 00:33:52,720 --> 00:33:58,200 a bilateral or multilateral international agency that buys a 547 00:33:58,200 --> 00:34:01,160 result. And I think it would be way more 548 00:34:01,160 --> 00:34:05,280 effective, frankly, than giving grants and hoping for the best, 549 00:34:05,640 --> 00:34:09,440 which is what we do now. That is very interesting. 550 00:34:10,120 --> 00:34:13,520 Could you offer an example of what that might look like? 551 00:34:14,080 --> 00:34:17,120 Well, there are lots of folks that can answer better than me, 552 00:34:17,120 --> 00:34:20,360 Helen, in that I mean, I so I was part of a thing called the 553 00:34:20,360 --> 00:34:24,080 Katoomba Group, which is an international consortium of 554 00:34:24,080 --> 00:34:26,280 thought leaders on market mechanisms. 555 00:34:26,840 --> 00:34:30,760 It was run by a nonprofit called Forest Trends out of Washington, 556 00:34:30,760 --> 00:34:36,480 DC And we met for 10 or 15 years all around the country, all 557 00:34:36,480 --> 00:34:40,199 around the world. And so there are programmes like 558 00:34:40,400 --> 00:34:44,120 what we're talking about that recognise the value of nature 559 00:34:44,120 --> 00:34:47,560 and what nature does in different ways all around the 560 00:34:47,560 --> 00:34:51,080 world. And I don't think people fully 561 00:34:51,080 --> 00:34:54,920 understand what it takes to get private capital to be involved. 562 00:34:56,840 --> 00:35:01,880 Private capital needs to be able to make a fair rate of return or 563 00:35:01,880 --> 00:35:04,400 else they can't. So it's different than a grant 564 00:35:05,120 --> 00:35:10,720 or a, a philanthropic contribution to an NGO, right? 565 00:35:11,440 --> 00:35:16,000 It needs a return. But the difference is the, you 566 00:35:16,000 --> 00:35:18,640 know, as Tim was saying, the philanthropic dollars are guided 567 00:35:18,920 --> 00:35:20,800 by whoever gives the grant, right? 568 00:35:21,520 --> 00:35:23,800 You know, So it's, it's quirky in that way and that it's 569 00:35:23,800 --> 00:35:28,640 personality driven to some degree, but it's also that, I 570 00:35:28,640 --> 00:35:32,840 mean, the money for that came from conventional economic 571 00:35:32,840 --> 00:35:35,800 activity and someone got really rich and then they're giving 572 00:35:35,800 --> 00:35:38,160 some of it back to help the natural world. 573 00:35:38,160 --> 00:35:41,320 So that's certainly honourable, but it's, it's hardly an 574 00:35:41,320 --> 00:35:44,240 economic engine in the sense that the money comes from 575 00:35:44,280 --> 00:35:47,240 conventional activity. And that's the same with taxes, 576 00:35:48,240 --> 00:35:50,880 right? The money comes from raising 577 00:35:50,880 --> 00:35:54,040 taxes on people's conventional economic activity and then you 578 00:35:54,040 --> 00:35:57,680 use some to make up for the damage later. 579 00:35:58,280 --> 00:36:02,120 But it's much better to use capital upfront to do 580 00:36:02,120 --> 00:36:05,000 restoration before damage. That's helpful. 581 00:36:05,640 --> 00:36:09,040 And then also the money actually comes from the improvement in 582 00:36:09,040 --> 00:36:11,840 ecological health of the world. That's where the money comes 583 00:36:11,840 --> 00:36:14,080 from. And that's why I think our 584 00:36:14,080 --> 00:36:17,880 business is ultimately interesting is because ecosystem 585 00:36:17,880 --> 00:36:23,040 services theory talks about how, you know, clean water, stable 586 00:36:23,040 --> 00:36:27,440 and resilient living systems, and, you know, a stable climate 587 00:36:27,920 --> 00:36:30,960 are ecosystem services that the healthy world provides. 588 00:36:31,360 --> 00:36:34,120 And it says that those things are incredibly valuable. 589 00:36:35,040 --> 00:36:37,240 But of course, for most people, they aren't valuable. 590 00:36:38,000 --> 00:36:41,080 You get paid by cutting the tree down, not by leaving the tree 591 00:36:41,080 --> 00:36:43,520 standing. But in our business, you 592 00:36:43,520 --> 00:36:46,600 actually get paid for scientifically verifiable 593 00:36:46,600 --> 00:36:48,600 improvement in ecological health. 594 00:36:49,320 --> 00:36:51,600 So the money comes from the health of the world. 595 00:36:51,840 --> 00:36:54,200 And I that's where I think the real power is in the whole 596 00:36:54,200 --> 00:36:56,400 model. And but people should focus on 597 00:36:56,400 --> 00:36:58,440 more. I mean, I, I couldn't agree 598 00:36:58,440 --> 00:37:00,760 more. And I think regulation 599 00:37:00,800 --> 00:37:04,720 mitigation banking is totally overlooked or criticised as a 600 00:37:04,720 --> 00:37:07,720 means of really tackling some of the systemic issues we have. 601 00:37:08,160 --> 00:37:10,520 And instead there's, you know, a lot of discussion we see around 602 00:37:10,520 --> 00:37:13,960 new Fandango models that can unlock private capital when we 603 00:37:13,960 --> 00:37:18,160 already have a model that that really works regulated markets. 604 00:37:18,640 --> 00:37:21,200 Well, a couple things about that there. 605 00:37:21,240 --> 00:37:24,880 There is a big debate in in Europe and the UK about the 606 00:37:24,880 --> 00:37:28,320 difference between credits and offsets, right? 607 00:37:28,320 --> 00:37:30,880 And a lot of people have said, well, credits are good, but 608 00:37:30,880 --> 00:37:33,600 offsets are bad. Matter of fact, offsets are 609 00:37:33,600 --> 00:37:37,040 unethical because you're using it to make up for something 610 00:37:37,040 --> 00:37:40,360 else. There's a couple problems with 611 00:37:40,360 --> 00:37:44,560 that way of thinking. One of them is that a credit is 612 00:37:44,560 --> 00:37:46,200 simply a way of measuring something. 613 00:37:47,040 --> 00:37:50,240 And so unless you have a customer for that credit, 614 00:37:51,040 --> 00:37:54,480 there's no reason to do it and go through all the difficult 615 00:37:54,480 --> 00:37:57,240 work of buying the land and doing all the conservation and 616 00:37:57,240 --> 00:37:59,160 restoration work. And it's very hard. 617 00:37:59,720 --> 00:38:01,880 It's really time consuming and difficult work. 618 00:38:02,320 --> 00:38:04,840 So you have to have a customer. And so they say, well, the 619 00:38:04,840 --> 00:38:08,720 government can be the customer. So you're basically repurposing 620 00:38:08,880 --> 00:38:11,800 the existing government money that now goes for conservation 621 00:38:12,160 --> 00:38:14,800 and using it to buy credits, but you're not increasing the amount 622 00:38:14,800 --> 00:38:16,600 of money. And it's the same with 623 00:38:16,600 --> 00:38:19,040 philanthropic monies. Philanthropic monies could buy 624 00:38:19,040 --> 00:38:22,640 credits and that would be fine, but you're not increasing the 625 00:38:22,640 --> 00:38:25,240 amount of money that's actually available for the health of the 626 00:38:25,240 --> 00:38:28,080 natural world. If you say you can use these 627 00:38:28,080 --> 00:38:31,640 things for offsets, there's actually two different economic 628 00:38:31,640 --> 00:38:36,200 signals. 1 is it makes restoration more valuable than 629 00:38:36,200 --> 00:38:39,920 it used to be. So it actually expands the range 630 00:38:39,920 --> 00:38:44,920 of customers that care about these ecological results, and it 631 00:38:44,920 --> 00:38:49,120 makes it investable, but it also makes damage more expensive. 632 00:38:50,080 --> 00:38:54,640 This is what the critics miss is that when you say not only can 633 00:38:54,640 --> 00:38:58,480 you buy an offset, but you must buy an offset in order to do 634 00:38:58,480 --> 00:39:00,880 business, you have to buy an offset. 635 00:39:01,440 --> 00:39:05,320 But what that means is, is that damaging the natural world or 636 00:39:05,320 --> 00:39:08,400 creating pollution is more expensive than it used to be. 637 00:39:08,680 --> 00:39:10,880 And that's a good thing, not a bad thing. 638 00:39:11,120 --> 00:39:14,200 That's exactly as it should be, and that creates a natural 639 00:39:14,200 --> 00:39:17,600 incentive to be better about your business and avoid damaging 640 00:39:17,600 --> 00:39:20,720 so much, avoid polluting so much, because it's in your 641 00:39:20,720 --> 00:39:23,160 economic interest to do so. Right? 642 00:39:23,920 --> 00:39:27,000 So the notion that it's unethical to require offsets is 643 00:39:27,000 --> 00:39:30,160 completely misguided. And I know you and I have spoken 644 00:39:30,160 --> 00:39:33,760 before about some of those vocal critics and, and actually that 645 00:39:33,760 --> 00:39:36,080 their concerns could be simply addressed by by having 646 00:39:36,080 --> 00:39:39,120 mitigation banking programmes, you know, that are transparent, 647 00:39:39,120 --> 00:39:42,320 scientifically robust, ethical, with high standards, high 648 00:39:42,320 --> 00:39:45,680 enforcement, which you know, they they end up morphing into 649 00:39:46,240 --> 00:39:49,320 as they work through their sort of teething challenges often. 650 00:39:49,560 --> 00:39:53,600 But actually it's not offsetting per SE that is the issue, so. 651 00:39:54,120 --> 00:39:58,760 So, yeah, so I've watched that things like on site versus off 652 00:39:58,760 --> 00:40:04,600 site, mitigation credits versus offsets, permanence versus the 653 00:40:04,600 --> 00:40:09,000 30 year requirement, these various things that I'm watching 654 00:40:09,000 --> 00:40:12,840 in the development of the policy over there and wishing that the 655 00:40:12,840 --> 00:40:17,520 folks would just spend more time on rivets really just go look at 656 00:40:17,520 --> 00:40:20,680 the things that have been done. There's thousands of them. 657 00:40:21,320 --> 00:40:24,600 They're really, really rigorous. We've answered all these 658 00:40:24,600 --> 00:40:27,520 questions through trial and error, including real error. 659 00:40:28,160 --> 00:40:30,520 Seriously. I mean that we made mistakes 660 00:40:30,520 --> 00:40:34,360 along the way, but we course corrected because there was a 661 00:40:34,360 --> 00:40:38,000 robust public discussion between environmental advocates, 662 00:40:38,000 --> 00:40:42,000 business people, developers, policy makers, scientists. 663 00:40:42,360 --> 00:40:45,880 And that that conversation has been really active and and 664 00:40:45,880 --> 00:40:49,720 involved for over 30 years. And that's LED us to a place 665 00:40:49,720 --> 00:40:52,640 where I feel pretty good about our projects. 666 00:40:52,640 --> 00:40:56,600 They're not perfect, We're not perfect, but they're really 667 00:40:56,600 --> 00:40:59,080 defensible projects, like every single one. 668 00:40:59,080 --> 00:41:01,560 I could talk to you in great detail about what we had to go 669 00:41:01,560 --> 00:41:03,520 through. You could talk to the regulators 670 00:41:03,520 --> 00:41:05,600 that oversee them. You could talk to the 671 00:41:05,600 --> 00:41:08,200 neighbours, you could talk to the customers, or you could talk 672 00:41:08,200 --> 00:41:11,560 to the investors. And all of them would say, yeah, 673 00:41:11,560 --> 00:41:14,040 this is working. Well, I think between you and 674 00:41:14,040 --> 00:41:18,200 Tim, hopefully we've really sold our European listeners that that 675 00:41:18,200 --> 00:41:20,880 mitigation banking is a solution that needs to be considered 676 00:41:20,880 --> 00:41:24,320 specifically as the pressures on land are just not going to go 677 00:41:24,320 --> 00:41:26,480 away as you say. Or something like it. 678 00:41:26,480 --> 00:41:28,520 Yeah, a credit and offset programme. 679 00:41:28,600 --> 00:41:32,320 Yeah, it does internalise the externality of damage and it 680 00:41:32,320 --> 00:41:34,160 creates an incentive for restoration. 681 00:41:34,440 --> 00:41:37,760 Well, thank you so much, Adam. And just finally, I suppose 682 00:41:37,760 --> 00:41:40,600 we'd, we'd just love to hear about EIP and your future plans. 683 00:41:40,600 --> 00:41:43,360 You've, you've had a fund every four years, so it feels like 684 00:41:43,360 --> 00:41:45,720 maybe it's time for another one, but I won't press you on that. 685 00:41:45,920 --> 00:41:47,960 And what are your future ambitions for EIP? 686 00:41:48,600 --> 00:41:50,040 Yeah. I mean, I think my ambition for 687 00:41:50,040 --> 00:41:54,600 the next 5 years is to continue to create a model that others 688 00:41:54,600 --> 00:41:58,520 can follow for how to put private capital to work in a way 689 00:41:58,520 --> 00:42:01,680 that works for the investors, but also really works for the 690 00:42:01,680 --> 00:42:04,320 environment and works for the customers. 691 00:42:05,080 --> 00:42:09,560 So the goal for our business really is to deliver solid 692 00:42:09,560 --> 00:42:11,360 results for all the stakeholders. 693 00:42:11,880 --> 00:42:16,200 So we're really focused on the knitting, the daily chores of 694 00:42:16,200 --> 00:42:20,520 getting this work done because providing a model at scale 695 00:42:20,600 --> 00:42:24,680 really I think is the thing that people can then point to and 696 00:42:24,680 --> 00:42:29,400 say, you know, this is possible. I don't know everything about 697 00:42:29,400 --> 00:42:32,400 how this would apply in other countries. 698 00:42:32,400 --> 00:42:36,880 I think there are probably lots of nuances and lessons that I 699 00:42:36,880 --> 00:42:40,520 would need to learn to really be useful in that conversation. 700 00:42:40,920 --> 00:42:44,320 But I do think that the basic notion of putting institutional 701 00:42:44,320 --> 00:42:48,880 capital to work to improve the environment is just tremendously 702 00:42:48,880 --> 00:42:51,600 exciting and I look forward to doing more of it. 703 00:42:52,440 --> 00:42:56,600 Last thing I'll say about that, you know, in the pension funds 704 00:42:56,640 --> 00:43:00,840 that invest in our business, but that money belongs to 705 00:43:00,840 --> 00:43:04,440 firefighters, teachers, other public employees, right? 706 00:43:04,960 --> 00:43:10,360 And it's for their future. So they actually do need to make 707 00:43:10,360 --> 00:43:14,280 a market rate of return on the money in order to be in a good 708 00:43:14,280 --> 00:43:16,720 place 30 years from now when they retire. 709 00:43:17,120 --> 00:43:21,000 But they also need clean water, healthy biodiversity and a 710 00:43:21,000 --> 00:43:23,600 stable climate. They really do. 711 00:43:23,600 --> 00:43:27,240 And they, they're going to need it more 30 years from now than 712 00:43:27,240 --> 00:43:31,800 they do today. And so I just think that being 713 00:43:31,800 --> 00:43:36,960 part of a business that can address both parts of that is 714 00:43:37,480 --> 00:43:39,640 sort of my dream come true personally. 715 00:43:39,640 --> 00:43:41,200 And it's, it's what I want to keep doing. 716 00:43:41,200 --> 00:43:42,880 So I just plan on doing more of it. 717 00:43:43,280 --> 00:43:45,800 And we're we're grateful that you are. 718 00:43:45,800 --> 00:43:48,480 Thank you so much, Adam. Thanks for the opportunity. 719 00:43:56,600 --> 00:43:59,920 Well, that's it for this week. You can find out more about EIP 720 00:44:00,120 --> 00:44:06,840 at ecosystempartners.com and Ribits, that's RIBITS is what 721 00:44:06,840 --> 00:44:09,120 you might be looking for. So you can just Google that and 722 00:44:09,120 --> 00:44:13,760 then head to public notices on the left hand menu and then look 723 00:44:13,760 --> 00:44:16,520 for any prospectuses in that whole list of projects that 724 00:44:16,520 --> 00:44:18,160 you'll see. If you're really interested to 725 00:44:18,160 --> 00:44:19,960 see that level of detail that Adam mentioned. 726 00:44:19,960 --> 00:44:21,720 And I do recommend it. It's a real eye opener. 727 00:44:21,720 --> 00:44:24,680 And I also wanted to remind you that we have a guide book on US 728 00:44:24,680 --> 00:44:27,120 mitigation banking on our revenues for site. 729 00:44:27,120 --> 00:44:31,520 If you Google GFI, Hive, UNFFI, UNDP, Biofin and revenues for 730 00:44:31,520 --> 00:44:33,720 Nature in any order, you should get there. 731 00:44:34,520 --> 00:44:36,680 Just a few more episodes in this series to go. 732 00:44:36,680 --> 00:44:39,600 We have Dorothy Masika at FSC Africa. 733 00:44:39,840 --> 00:44:43,000 We have Gabriella Weber Demares from Natura, who's going to talk 734 00:44:43,000 --> 00:44:44,560 about the living Amazon mechanism. 735 00:44:44,920 --> 00:44:46,840 And we've actually got to squeeze in a couple more as well 736 00:44:46,840 --> 00:44:50,240 before we wrap up in what looks like to be October this year. 737 00:44:50,720 --> 00:44:52,680 So thanks for listening and for all your support. 738 00:44:52,680 --> 00:44:55,760 It's really lovely to hear from you which episodes have been 739 00:44:55,760 --> 00:44:57,880 resonating. So thanks for all the 740 00:44:57,880 --> 00:45:00,400 correspondence there. And just a note to let you know 741 00:45:00,400 --> 00:45:03,960 that it's ambition at the end of this season to summarise all the 742 00:45:03,960 --> 00:45:07,000 learnings into some sort of document for everyone with some 743 00:45:07,000 --> 00:45:08,960 useful links. So that will be coming, and I 744 00:45:08,960 --> 00:45:12,280 hope that's useful to you. Until next time, I hope you have 745 00:45:12,280 --> 00:45:12,920 a great week.