Date posted: 12/08/2022 10 min read

Frances Carter CA: “It’s a business risk when the natural capital we rely upon starts to degrade”

After successful projects in developing countries, conservation financing specialist Conservation Capital is setting its sights on Australia and New Zealand, where there is a need for its services.

In Brief

  • Headquartered in London, Conservation Capital’s aim is to bring private capital to conservation efforts.
  • Adelaide based Frances Carter CA is Conservation Capital's operations director, a role that takes her to places most of us would be lucky to visit once in a lifetime.
  • Conservation Capital is now turning its focus to Australia and New Zealand, where there’s a huge need for conservation financing.

Growing up in Kenya, Giles Davies always wanted to work in conservation. He was advised by the late Kenyan paleoanthropologist, conservationist Richard Leakey, that the most useful thing he could do was learn about money. So, instead of a “cool job wearing shorts in the field” he worked as an accountant and management consultant at PwC for seven years.

In a “moment of madness” on a trip home to Kenya, he and a friend leased a 24,000-hectare cattle ranch and set out to turn it into a thriving conservation area that could sustain itself financially. Much to everyone’s surprise they succeeded and Conservation Capital was born.

Headquartered in London, Conservation Capital’s aim is to bring private capital to conservation efforts. It designs progressive financial models with the purpose of breaking natural capital away from the traditional donor and government funding model (which, according to Davies, is not sufficient) and into the mainstream, self-sustainable financing models that are integrated into the financial services system.

A 2020 report published by the Paulson Institute, Cornell University and The Nature Conservancy found the global economy directs an average of between US$124 billion and US$143 billion annually to biodiversity funding. But this will leave an annual financing gap of as much as US$824 billion by 2030, according to the report, Financing Nature: Closing the Global Biodiversity Financing Gap. Conservation Capital aims to help close that gap with private sector money.

In 2020, Davies hired Frances Carter CA, who works out of Adelaide in Australia. Initially on contract with the business, Carter is now Conservation Capital’s operations director, a role she took up at the end of last year.

Carter’s job takes her to places most of us would visit once in a lifetime – if at all.

In April, it took her to Tanzania, trekking with chimpanzees and devising a business plan with the Jane Goodall Institute to increase the financial resilience and sustainability of Gombe National Park through private sector engagement.

A chimpanzee photographed during Carter’s recent trip to Tanzania.Pictured: A chimpanzee photographed during Carter’s recent trip to Tanzania

In March, she travelled to Bangladesh’s Sundarbans mangrove area where she boarded a boat on the lookout for tigers. She was searching for a holistic understanding of the sole remaining habitat of the Bengal tiger – where there could be as few as 100 left – the environment of the world’s largest mangrove ecosystem, the Sundarbans.

Bangladesh hosts 100,000 tourists a year and Carter is seeking to develop a more sustainable tourism business model as well as blue carbon mangrove restoration offset projects.

Biodiverse Sundarbans mangroves in Bangladesh are the habitat of the critically endangered Bengal tiger.Pictured: Biodiverse Sundarbans mangroves in Bangladesh are the habitat of the critically endangered Bengal tiger. The trees also produce oxygen that purifies the air we breathe.

Conservation Capital is now turning its focus to Australia and New Zealand, where Davies and Carter say there’s a huge need for conservation financing.

What is conservation financing?

Conservation financing is an emerging concept. Broadly, it aims to bring conservation out of the original donor and government funding model and into more mainstream, self sustainable financing models that are integrated into the financial services system, Carter explains.

It uses a range of financial tools to create a business or organisation that can self-sustain as time goes on and to create the permanence of financing to protect large areas of land and its conservation biodiversity value.

“As the world is showing now, whether it’s COVID or fires or floods, when the system becomes imbalanced it’s a business risk when the natural capital we rely upon starts to degrade or is no longer usable,” Carter says.

“So it’s in the business’ interests to maintain this natural capital for their own operations and supply chain resilience.”

Conservation Capital has three main arms: conservation area business planning (the sort of work Carter was doing in Tanzania and Bangladesh), innovative conservation finance and engaging mainstream corporations.

“It’s about creating incentives by building economies based on nature or helping other people to build economies based on nature and sustainability,” Davies says. “And it’s making sure the processes which are traditionally destructive to the environment can be remodelled in more sustainable ways,” he adds.

Conservation Capital founder Giles DaviesPictured: Giles Davies

“It’s about creating incentives by building economies based on nature or helping other people.”
Giles Davies

Natural capital in the developing world

Much of the company’s work is in the developing world, particularly Africa, partly because that’s where Conservation Capital was founded and because much of the world’s natural capital remains in the tropical belt.

The company has created for-profit investment vehicles for conservation in Africa and for rewilding in Europe and is developing Corporate Biodiversity Bonds, specialist debt instruments designed to fund the implementation of biodiversity offsets and other conservation interventions.

It has worked on more than 200 transactions, mobilising almost US$250 million in innovative financing across 40 countries.

It has also advised many conservation area businesses, such as Ol Pejeta Conservancy, the world-famous wildlife conservancy in Nanyuki, Kenya and Zimbabwe’s Savé Valley Conservancy, one of the largest private game reserves in Africa.

Capital markets are desperate for investment opportunities and Davies sees this as a huge chance to bring investment capital to conservation.

But there are hurdles. Transformational conservation projects tend to be small and therefore do not fit with many funds’ desire to invest large tickets (often running into $US10 million) in the interest of managing transaction costs. Funds are also risk averse and impatient, which makes financing projects with long payoff periods problematic.

Is there a solution? “On the supply side, the more mainstream capital markets need to work out how to disaggregate their minimum ticket sizes into smaller components,” says Davies. “And on the demand side, conservation practitioners need to work out ways of aggregating product into consolidated projects that are capable of absorbing larger amounts of financing.”

This will also help to create more portfolio effect and mitigate risk – something that is key for these new financial markets, Davies adds. “On the wider subject of risk the markets need to look at it more holistically – not just the project risk but the risk that these projects are working to offset at a macro level – climate impacts, loss of ecosystem services, the collective impact of all these on the global economy, social and political stability.”

Hiron Point in Bangladesh in March 2022.Pictured: Hiron Point in Bangladesh in March 2022. The photo shows the destruction caused during the June—October 2021 monsoon season.

Much to be done locally

Turning their focus to the Antipodes, Davies and Carter stress there is a lot to be done. Carter cites statistics showing eastern Australia is considered a global deforestation frontier and hotspot. Australia has the highest mammal extinction rate in the world and the fourth highest biodiversity extinction rate. The Great Barrier Reef is under serious stress to the point it’s nearly irreversible and the koala is an endangered species along much of the East Coast.

A 2019 Environment Aotearoa study found New Zealand is considered one of the most invaded countries in the world, with 75 animal and plant species becoming extinct since human settlement. Ninety per cent of seabirds are threatened with or at risk of extinction, the study found.

Water quality is another big issue in New Zealand, which has one of the most degraded waterways in the developed world. “We don’t have a great report card, so what we need to do is start rethinking how we fund conservation because our conservation investment per GDP is one of the lowest in the world,” Carter says.

Frances Carter CAPictured: Frances Carter CA

“Conservation investment [in Australia] per GDP is one of the lowest in the world.”
Frances Carter CA

“We need to start looking at innovative models of shifting to private sector financing, engagement of private sector in conservation and start seeing our natural capital as an asset.”

There is an enormous need and a massive opportunity locally, she says, particularly with agriculture. “Farmers in Australia are starting to understand that if they maintain the conservation value of their land, it also improves their yield, soil health and drought resilience. Financial services are starting to clue on to this, providing conservation loans to farmers with improved rates,” she says.

“Farmers have the potential to earn carbon credits on the international carbon market from both regenerating their land and increasing their biodiversity, while also providing degraded, non-rehabilitated land to renewable energy projects, such as solar,” Carter says, adding it’s a better outcome than clearing areas of vegetation for renewable energy.

Plus, carbon credits are effectively a payment for an ecosystem service.

“You can also engage Indigenous communities. They have a lot of knowledge in this area of managing this land and can benefit from actually being paid for protecting the natural areas.”

However, Carter says the thinking in Australia about the natural world and the value in conserving it and investing in it is lagging behind the US and Europe. Locally, investing in natural assets is seen as a risk.

Businesses’ thinking about natural capital “is just not there yet”, she says, adding “our attitude towards the environment is not the same as other parts of the world.”

How to use CA skills

Carter’s background as a financial accountant has stood her in good stead in her current role. With the number of sustainability standards being issued around the world, understanding how to read and apply accounting standards is important. So too is understanding financial reports and business risk and strategy, and communicating financial information to non-financial people.

“It’s really being entrepreneurial with those numbers – understanding the story behind those numbers,” she says.

“What’s their impact in a non-financial space? You can’t look back in this area. You have to be able to forecast, financially and geopolitically.”

Carter tries to communicate in a way that makes sense to the business world, in the way that a scientist without a business background couldn’t. She can explain conservation to a business in reputational risk terms, in reduction in cost, increase in revenue and resilience of the infrastructure in its supply chain – again leaning on capabilities she learned training to be a CA.

While many of the projects Carter works on focus on tourism, there are other opportunities for building a sustainable business model: Payments for Ecosystem Services (PES) such as water filtration and carbon sequestration, green energy, food security through honey harvesting and agroforestry, sustainable forestry, and non-timber forest products such as medicinal and cosmetic plants and fungi, to name a few.

Even hunting if it can be managed in a limited and sustainable way and can provide food for the local population, Carter says.

In Tanzania, for example, “even though I was trekking with chimps, I had to still bear in mind: ‘what’s the quality of the tracks? How many tourists were coming today? What’s the entry fee that I would have to pay if I was a tourist?’” she explains.

“We put together an entire business model to see how that natural area in Tanzania can self-sustain, engaging the community so they still have their livelihoods,” she says, adding the model involves seeing the natural environment as an asset in its intact form, rather than something to be used up and exploited – as an unsustainable forestry model would, for instance.

“We put together an entire business model to see how that natural area [in Tanzania] can self-sustain.”
Frances Carter CA

“Some days I’m doing financial models. Some days I’m having to work out conservation threats and look at species lists of national parks,” she shares.

“Some days I have to look at security, like poaching rates and what rangers are on the ground – and do they have the support they need?” There is never a “normal day” in the office.

Building a career in conservation

Frances Carter CAPictured: Frances Carter CA

After receiving a Bachelor of Commerce from the University of Adelaide in 2004, Frances Carter CA joined Grant Thornton Australia as an auditor before moving into funds management with State Street Global Advisors.

But she wanted a role that had more impact. “I wanted to do something more involved in conservation in other areas of the world,” she says, adding the aspiration was a result of her upbringing. Her mother is an environmental scientist and her father is a geologist in mining exploration.

Carter volunteered through DFAT’s AVID program with Community Housing International, a not-for-profit that assists the Timor community build affordable housing from local resources, while offering training in construction skills and employment to locals.

Next was a year-long stint with Women’s Finance House Botswana, in partnership with Red Cross Australia and DFAT AVID, to provide micro loans and savings facilities to female entrepreneurs. She completed an MBA with the IE Business School in Madrid, specialising in social impact and emerging markets, followed by a Master of Science in Sustainability Management at Columbia University in New York.

Explaining the postgraduate education, Carter says she needs to have a grasp of social science, natural sciences and economics so she can perform her job to the best of her ability.

“You need to understand the linkages between people, people’s impact on the environment and vice versa, and businesses’ impact and the impact on the business economically,” she says.

“I don’t have to be an expert but at least understand what’s happening, so when I talk to a farmer, a hydro engineer, social scientist or ecologist, I understand what they’re talking about.”

It’s a career that inspires her every day. “I get to work with people, with CEOs of companies, with ministers of governments or with amazing NGOs like the Jane Goodall Institute, on the ground,” she says. “And I get to work with communities.”

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