Risk Reduction As an Incentive for Climate Solutions
This Impact Alpha podcast explores how some impact investors and environmental organizations are developing risk-reduction schemes as a tool to incentive environmental solutions and preventative practices. Examples include:
The “Sustainable Commodity Conservation Mechanism," a financing tactic developed by Lestari Capital, with support from the David and Lucile Packard Foundation, that creates a fund for large-scale forest restoration from the penalties owed by palm oil suppliers who have not met certain environmental standards.
The Nature Conservancy's scheme to finance reef restoration using insurance premiums from storm protection paid by hotels along Mexico’s Mayan Riviera. Hotels purchase the insurance policy to fund storm-related damage. Reinsurer Swiss Re pays for repairs to the reef, incentivizing hotel owners to better protect their land.
A $152 million Forest Bond that offers investors the choice of repayment in either cash or carbon credits, a tradable permit for the right to release one ton of carbon dioxide or equivalent.