The need to generate wider interest in coastal management, and to identify new funds flows that can support costly coastal planning, management, and enforcement of regulations, is great. Innovative financing mechanisms are being borrowed from the terrestrial world, adapted for special use in the marine and coastal environment, where property rights are limited and where common pool resources necessitate continued access. Applying innovative financing instruments in the Pacific region holds promise, but examples of success are rare. This report reviews innovative financing mechanisms for marine and coastal conservation used around the world, assesses the processes that have led to use of innovative financing in the few cases that exist in the Pacific region, and makes recommendations for greater use of these powerful financing schemes to boost coastal management in the region.
Financing instruments for use in bolstering conservation and management occur in a wide array of forms, covering a range of temporal and spatial scales. No widely-accepted typology of innovative financing exists. In this report, we classify instruments as of one of two types: 1) innovative financing to support conventional coastal management (i.e. management handled by competent government authorities, including local government where that is a long-established jurisdiction); and 2) financing to support best practices, often undertaken as a part of unconventional management. In the first case, we discuss conservation trust funds and endowments, public-private partnerships, user fees and rights-based fisheries revenues that channel monies into government-led management, eco-certification and eco-revenues that similarly funnel money back into government fisheries and coastal management, and biodiversity or carbon offsets. Innovative financing that supports innovative (unconventional) best practice or management (typically by user groups, communities, or trade associations) include payments for ecosystem services (PES), investments in watershed services (IWS), marine conservation agreements, and responsible investing (including impact investing). Admittedly the segregation of these instruments into two groups is artificial, and many tools can cross the line (for instance PES can be used to support government-led planning and management), however assessing innovative financing across this wide spectrum of schemes allows the greatest possible ability to learn and apply lessons from other parts of the world to the Pacific region.
In the Pacific region, innovative financing examples can be lumped more broadly into end- user or beneficiary financing of management (usually a one-off donation, user fees or tax), private sector investment through sustained or periodic payment for ecosystem services, and foundation or multilateral/ bilateral donor financing. Impact investing and biodiversity banking was also investigated, however information about these instruments in the region is lacking. Overall, innovative financing seems to be recognized as holding promise for improved coastal management, however scheme development is nascent and progress seems to be impeded by a lack of recognition about the value (and marketability of ecosystem services), as well as appropriate models for developing and launching innovative financing schemes from other parts of the world.
A discussion of the possible expansion of innovative financing in the Pacific includes a review of the following: marine/coastal conservation agreements; trust funds; tourism user fees; tourism concessions (PPPs); taxes; PES for coastal protection; PES to maintain scenic beauty; PES to enhance production (biomass) or water quality; entrepreneurial MPA tourism and aquaculture; coastal and pelagic fishing licensing; and biodiversity offsets / biobanking. We selected instruments to consider based on the following 3 criteria:
i. Volumes of cash flow generation adapted to the specific Pacific ICZM budget needs;
ii. Funding stakeholders (business sector, end users, investors, ODA) already present
or with a potential to be present in the Pacific.
iii. Operational and legal pre-feasibility in the Pacific context.
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Based on expert opinion, an additional and specific analysis for RESCCUE sites was performed on the 12 selected instruments. A preliminary assessment of the level of complexity (low-medium-high level) for the development of the proposed instrument in the context of each country was described. Complexity is based on a mix of (i) existing track record of success (influencing the difficulty to convince funding stakeholders), (ii) the environmental friendly profile of the industries and (iii) the legal framework (not adapted, easily adapted, ready) of each country. In the same way, the expected time span for implementation: short term (<2 years), medium (3<x<5 years) and long term (>6 years) was detailed.
We conclude with recommendations and possible next steps catalyzed or mediated by RESCCUE. These include:
1) Establish a forum for South Pacific innovative financing, based on the model put forward by the East African Forum for Payment for Ecosystem Services (www.eafpes.org), in order to build awareness of and capacity for PES projects.
2) Conduct demonstration sites on a short list of selected instruments in the RESCCUE sites. Ideally a tourism user fee scheme, a conservation agreement and a PES mechanism should be represented in the whole project. The main limiting factors in the Pacific will be the legal framework (especially in French overseas territories) and the payment capacities of financing stakeholders. Therefore, creative thinking will be a key factor of success.
3) Conduct a thorough feasibility study for the Regional Trust Fund. The fundraising potential must be assessed as one of the main priorities. In the same way, conducting a fundraising campaign in the early stage will be crucial. The model of the Caribbean Biodiversity Fund (CBF) covering 8 countries and counting with US$40M in endowment fund from KFW, GEF and TNC could be used as a model.
4) Build capacity for Pacific nations to conduct feasibility assessments in order to determine whether innovative financing is both appropriate and achievable. Using the criteria developed by Forest Trends (described in the annex), rapid assessment of enabling conditions can help quickly pinpoint what areas need further investigation in order to conduct robust feasibility assessments, and plan effective innovative financing schemes.
Finally, we present a list of considerations that planners, project developers, and investors might consider before attempting an innovative financing scheme. An extensive reference list provides additional background.