Identifying and mitigating risks

The development team is working to maximize the success of the FRB by preemptively identifying and mitigating risks wherever possible.

  • Risks to the FRB include (1) the development risks to successfully executing transactions and (2) the financial risks to the investors involved.
  • The development team has already mitigated a number of development risks and is currently devising and implementing strategies to mitigate investor-specific risks.

Recommendations for project developers

In an effort to build the field of conservation finance, the development team has identified a process to broadly guide the feasibility and development of environmental financings similar to the FRB.

  • While the path to market is sure to be fluid and iterative, the development team recommends that project developers start the process by identifying an intervention and the associated ecosystem services to ensure the value exceeds the cost.
  • The next steps are to develop a plan to measure the value of the ecosystem services and then identify the beneficiaries likely to pay for such benefits.
  • Beneficiary payments are then structured as investor cash flows.
  • Finally, the total addressable market is estimated to confirm ample scale.

The path to building an environment impact bond

  1. Determine intervention and associated ecosystem services
  2. Develop plan to measure the value of ecosystem services
  3. Identify beneficiaries to target for financing
  4. Structure beneficiary payments into investor cash flows
  5. Estimate total addressable market

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