MPA Finance Mechanisms

A tiger shark (Galeocerdo cuvier) swimming in a shallow reef patch the Bahamas.

This toolkit groups potential MPA finance mechanisms into four primary types: 

Please note: the terms "mechanism" and "instrument" are used interchangeably in this toolkit.

Four Primary Types of Finance Mechanisms

Primary types of finance instruments most appropriate for marine protected areas. Source: Blue Nature Alliance

Some funding instruments can be enacted by managers, but others must occur through the national or regional government. It may make sense to think about funding for a single MPA (what this toolkit calls the "site level") or funding for a network of protected areas (what this toolkit refers to as the "system level"). Often, it will be a combination of efforts at both the managerial and governmental levels that will secure funding at both the site and system levels. Based on multiple sources from 2003 to 2015, about half of MPAs, particularly in developed nations, rely on government (local, regional, and national) allocations for at least half of their funding. ref

The suitability of each finance instrument will depend on the size and context of the MPA as well as the MPA’s growth stage (e.g., Is the MPA just getting started? Is it actively growing, or is it mature or stable? Is the MPA's funding in decline or in need of reconsideration?). For more information on determining what tools and strategies will work for a particular site or system in your local context, please refer to the Prioritizing Finance Mechanisms page of this toolkit. 

Grant-Based Instruments

The table below lists several common grant-based finance instruments for MPAs, along with key points about enabling conditions for implementation and other considerations to have in mind when evaluating each instrument.  

click each instrument name for a brief description of that instrument

GRANT-BASED INSTRUMENTS
Instrument Enabling Conditions Additional Considerations
Government Allocations
  • Must have political support for conservation
  • Funding must be available to allocate
  • Often provide >50% of MPA funding, but require supplemental funding through other mechanisms
Example: United States Announces $508 Million to Protect Our Ocean
Official Development Assistance
  • Must be an eligible ODA recipient country
  • Must have high impact potential
  • Presence of co-funding opportunities increase likelihood of assistance
  • Must have political support for conservation
  • Almost always acts in support of other primary funding sources
  • Often helpful if there is an existing focus on sustainable blue economy in country
Further Reading: OECD's explainer page on ODAs
Philanthropic Grants
  • MPA must have high impact potential to draw interest from donors
  • Must be ready to demonstrate effective use of funding to maintain donor interest
  • Rarely the primary source of funding, but does act in that manner in some cases
  • Opportunity for Indigenous Peoples and local community engagement
Example: The Nature Conservancy Launches New Grant Program Across Northern Appalachian States
Crowdfunding
  • MPA should have site characteristics (e.g., charismatic species or features) of interest to the public
  • Should have concrete plans for use of funds and clear assessment of success to maintain funding health
  • Very few constraints, providing flexibility in use of funds but also potential for misuse
  • Has potential to erode political pressure for more consistent funding sources
Example: Island Nation Sets Up World’s First Crowdfunded Marine Protected Area

Compensation-Based Instruments

Compensation-based financing instruments can be either voluntary or compulsory, but are typically designed to offset negative environmental impacts. The table below lists several common compensation-based finance instruments for MPAs, along with key points about necessary preconditions for implementation and other considerations to have in mind when considering each instrument.  

click each instrument name for a brief description of that instrument

COMPENSATION-BASED INSTRUMENTS
Instrument Enabling Conditions Additional Considerations
Eco-Taxes
  • Country or region must have taxable industries outside or inside MPAs
  • Must have enforcement capacity to assess and assign taxes
  • Taxes may be insufficient to achieve MPA goals with long-term sustainability
  • Risk of ecological damage to the MPA if taxes do not sufficiently regulate behavior
  • Need to ensure tax income is ear-marked for conservation so it returns to MPA
Example: Canada's Greenhouse Gas Pollution Pricing Act: 2020 Annual Report
Extractive Fees, Royalties, and Permits
  • Extractive or prospecting value must exist inside (or near) the MPA
  • Environmental protection regulation in place, to ensure that extraction stays within bounds
  • May allow more extraction than sustainable, risking ecological damage to MPA
  • Need to ensure fee income is ear-marked for conservation so it returns to the MPA
  • Increasing popularity of eco-tourism presents opportunity for implementing this instrument
Further Reading: Millage, K., et al. "Self-financed marine protected areas." Environmental Research Letters 16.12 (2021): 125001.
Blue Carbon Offsets
  • Blue carbon ecosystems must be present or being actively restored within the MPA
  • There must be acceptance that sequestration will not occur without a conservation project
  • Must utilize standardized and robust calculation methods of carbon offset
  • May have co-benefits that make funding more diverse and robust
  • Requires up-front financing to cover the validation, verification, registration, and issuance of carbon credits
  • Due to high transaction costs, small-scale projects may not benefit from blue carbon offsets
Further Reading: For more information about blue carbon, including examples of blue carbon projects, please visit the RRN Blue Carbon Toolkit
Biodiversity Offsets
  • Acceptance that impacts can be compensated for if sufficient habitat can be protected or restored elsewhere
  • Ability to restore ecosystem
  • Regulatory or voluntary scheme in place 
  • Seek permanent protection of ecosystem via legal protection and restoration (aim for “No Net Loss” or “Net Gain”)
  • Risk of external threats damaging ecosystem, effectively negating credit and thus enabling pollution without long-term net gain
Further Reading: IUCN Issues Brief: Biodiversity Offsets

Investment-Based Instruments

Investment-based financing instruments are public or private funding seeking financial returns along with positive social or environmental impact. The table below lists several common investment-based finance instruments for MPAs, along with key points about necessary preconditions for implementation and other considerations to have in mind when considering each instrument.  

click each instrument name for a brief description of that instrument

INVESTMENT-BASED INSTRUMENTS
Instrument Enabling Conditions Additional Considerations
Blue Bonds
  • Need a sufficiently large MPA (or many smaller MPAs) to have sufficient scale for accessing financial markets that require high transaction values
  • Potential for positive returns (direct or indirect to overall economy)
  • Needs a well-defined project with the potential to generate returns within a specific time frame
  • Needs to show enough profit potential within a reasonable time to pay back both the borrowed money and interest
Further Reading: The Asian Development Bank's "Bonds to Finance the Sustainable Blue Economy: A Practitioner's Guide"
Blended Finance Funds
  • Employ multiple financial mechanisms simultaneously, such as debt or equity supported by grants, to help mitigate risk
  • High potential for positive returns
  • Potential to provide equitable and attractive deal terms to investors with various timeframe and risk expectations
  • Investors (including impact investors) must have high tolerance for risks (though the intent of blended finance is to mitigate risks)
  • Must reach sufficient scale to make investment attractive
Example: Impact investment firm Mirova's Althelia Sustainable Ocean Fund (SOF)
Public-Private Partnerships
  • High potential for positive returns (i.e., recreational value could be realized)
  • Clear safeguards must be in place to protect public interests
  • Can involve both for-profit and non-profit partners
  • Requires clear definition of safeguards, responsibilities, and privileges of concessionaries
  • Must maintain public oversight of Indigenous Peoples’ and local communities’ inputs into privately-run areas
Example: Blue Alliance co-manages several MPAs in different parts of the world with national, provincial, and local governments, including executing strategies, business modeling, and generating blended financing.
Debt-for-Nature Swaps
  • A country must be looking to refinance debt, and/or have a poor credit rating
  • Requires NGO engagement for conservation framework/strategy and to enable debt refinancing
  • Requires strong leadership and support from government
  • Entails clear repayment and risk management strategy
  • Typically require grouping with other instruments to attain feasibility
  • High level of complexity and long negotiation timeframe that often requires close collaboration across environmental agencies, NGOs, financial institutions, insurance agencies, and other partners
  • Creditors may only make a minor debt concession
  • Typically sets criteria for funding use and designates an independent trust to administer funds
Further Reading: The Debt-for-Nature Lifeline, by John Antonio Briceño, Prime Minister of Belize, and Jennifer Morris, CEO of The Nature Conservancy

 

Examples: Utilizing Investment-Based Instruments to Finance MPAs in the Western Indian Ocean

In the following video, Dr. Fahd Al-Guthmy, Programme Director for Conservation Finance, Wildlife Conservation Society, describes the Global Fund for Coral Reefs and the Miamba Yetu Programme for sustainable reef investments, a blended finance solution that addresses the drivers of coral reef degradation.

 

In the following video, Alain de Comarmond, Fundraising & Partnership Manager for SeyCCAT, discusses the debt-for-nature swap and blue finance experience in The Seychelles. The planning process for this US$21.6 million debt restructuring took over six years to happen and involved many partners from the government, NGO, and finance sectors, but unlocked several 20-year-long cash flows to enable The Seychelles' marine spatial planning policy and the protection of at least 30% of its marine area.

Ecosystem Value-Based Instruments

Ecosystem value-based financing instruments involve putting a price on the value of healthy marine ecosystems. The table below lists several common ecosystem value-based finance instruments for MPAs, along with key points about necessary preconditions for implementation and other considerations to have in mind when considering each instrument.  

click each instrument name for a brief description of that instrument

ECOSYSTEM VALUE-BASED INSTRUMENTS
Instrument Enabling Conditions Additional Considerations
Levies on Sustainable Use
  • Demand for MPA use
  • Enforcement capacity
  • Generating demand can be challenging in remote areas
  • Requires enforcement capacities to ensure sustainable use
  • Increasing demand for eco-tourism
Example: Financing Protected Areas in Palau
Payment for Ecosystem Services (PES)
  • Ecosystems that generate services for which there is a demand
  • Strong governance structure and enforceability of payments
  • Requires ongoing monitoring and management to maintain financial stability
  • Must ensure that payments flow to beneficiaries, and that beneficiaries (often Indigenous Peoples and local communities) are party to the project
  • Conservation requires ability to guarantee continued provision or restoration of ecosystem services
Further Reading: Mohammed, E. Y. Payments for coastal and marine ecosystem services: prospects and principles. (2012).
Parametric Insurance
  • Ecosystem/blue infrastructure that provides value to adjacent communities
  • Clear group of insurance beneficiaries with control over mitigation measures
  • Must have a clear valuation of ecosystem benefit widely agreed upon by all stakeholders and insurers
Example: In 2022, TNC announced the first-ever coral reef insurance policy in the United States, which will provide funding for rapid coral reef repair and restoration across Hawai‘i immediately following hurricane or tropical storm damage.
Nature Credits
  • High-quality and high-value conservation must be in place
  • There must be external/independent validation of conservation claims
  • There must be interested entities to purchase generated credits
  • Funding from purchased credits would flow directly to the MPA
  • As of 2023, there is a lot of momentum in the Nature Credits space, with many standards in development around the world
Example: Australia’s Reef Credit Scheme rewards land managers for improving water quality (through sediment, nutrient, and/or pesticide retention) with “Reef Credits,” which are tradeable units with set values that are then sold to parties (e.g., industry, philanthropists, or the government) seeking to invest in water quality or offset their own impacts.

 

 

Return to Page 1: MPA Finance
Continue to Page 3: Cross-Cutting Finance Mechanisms

 

The MPA Finance Toolkit was developed in partnership with the Blue Nature Alliance, a global partnership to catalyze effective large-scale ocean conservation. In September 2023, the Western Indian Ocean Marine Science Association and Blue Nature Alliance co-hosted an MPA finance workshop with marine managers in the Western Indian Ocean region. The resources presented in this toolkit were developed for and piloted by the managers in attendance. 

BNA logo

Resources

CSF: Introduction to Conservation Finance online course

ICRI: Finance mechanism training tools for coral reef conservation

UNDP: BIOFIN Catalogue of Finance Solutions

UNEP: Marine Protected Area Tool Hub (MPAth)

 

Translate »