Can the Private Sector Save Coral Reefs and Turn a Profit? A New Global Fund Hopes So

It is, unfortunately, not hyperbole to say that coral reefs may die out in our lifetime. Warming oceans are cooking them to death. Rapidly rising sea levels could drown them. Half of reefs have been lost in the last 30 years. Scientists say we could lose 90% of the rest in the next 30 years. Extinction is on the table.

It would, however, be premature to write their obituary, as an infamous viral article did for the Great Barrier Reef in 2016. In the increasingly dire reports about the threats, which include overfishing, climate change, agricultural runoff, and plastics, there is one constant refrain: Urgent action can still save coral reefs.

A new philanthropic effort launched last month, the Global Fund for Coral Reefs, is the latest effort to prevent the unthinkable. The fund, which hopes to raise $500 million over the next 10 years, is a product of a partnership that currently includes three United Nations agencies, financial institutions including BNP Paribas, and two foundations—Prince Albert II of Monaco Foundation and the Paul G. Allen Family Foundation.

The goal is to attract $2 billion to $3 billion in public and private sector investment in coral reef projects by using the fund to guarantee loans and take other measures to remove the risk for private investors, according to a presentation by David Meyers, executive director of the Conservation Finance Alliance, which is assisting the fund.

“To encourage the private sector to invest, you need to have returns,” he said on a webinar introducing the fund. “So we’re really looking for revenue-generating opportunities here.”

Possibilities span ecotourism projects, plastics reduction initiatives, sustainable aquaculture, pharmaceutical research and clean energy generation. The aim is for those enterprises also to support the communities that live near and depend on coral reefs for their livelihoods. The great challenge is to make those projects turn a profit.

“These are not obvious solutions,” said Meyers. “If there were pure private investment in all these areas, that didn’t need support from concessionary finance or public monies, then the private sector would be doing them and we wouldn’t need the fund.”

Or, as he put it more bluntly: “Financing conservation is challenging because you’re not extracting something you can sell.”

Using philanthropic dollars to ensure private profits feels questionable. But the scale and urgency of the crisis facing coral reefs—which dwarfs the resources philanthropy can bring—is driving this approach. Organizers point out that the impact investing sector is estimated at a half-trillion dollars in the U.S. alone. Tapping into such markets could bring the kind of resources needed for real impact.

In any case, the partners will first have to raise a half-billion dollars to capitalize the fund. That would be a lot, even for the foundations of princes and tech titans, but the fund is relying on philanthropy for only $125 million of that amount. The two founding funders have each committed $250,000 as seed funding. The remaining $375 million will come in investment capital.

Reefs Face Big Threats But Receive Small Investments

The levels of global investment in coral reefs is as small as the threats facing reefs are great. One widely cited U.N. report estimates at least seven times more overall investment is needed beyond current levels to meet international targets on coral reef conservation.

Less than 0.01% of climate finance from the world’s six largest development banks went to coral reefs between 2010 and 2015, according to another report. It found only three out of the nearly 3,000 projects funded by those banks mentioned coral reefs. The total invested in those efforts: just $4.5 million. Another assessment of nearly 300 coral reef projects found almost three-quarters received less than $1 million and 40% less than $100,000.

“The coral reef crisis has been compounded by the lack of resources for reef conservation and restoration,” said Bill Hilf, CEO of Vulcan, Inc., the company Paul G. Allen founded to manage his projects, at the fund’s launch event.

The Paul G. Allen Family Foundation has a history of supporting coral reefs. Back in 2017, the foundation partnered with the Tiffany & Co. Foundation and Bloomberg Philanthropies on the 50 Reefs project, which looked at the coral reefs around the world that are the least vulnerable to climate change, with the goal of using them to restore more endangered neighboring reefs, a project Bloomberg continues to pursue through its Vibrant Oceans II initiative.

In recent years, ocean conservation has become an increasingly popular cause in U.S. philanthropy, at least among tech and finance billionaires such as Bloomberg. (There are signs wealthy titans from other countries may join the push.) Whether that translates into more support for coral reefs, which traditionally haven’t been the focus of major ocean conservation projects, remains to be seen.

Quantifying the Value of a Coral Reef

Coral reefs support a quarter of all marine life—as many as 9 million species—more per hectare than virtually anywhere else on the planet. It seems impossible—even absurd—to quantify the value of such a fundamental part of our planet. But a battery of statistics contributes to such an evaluation.

More than 500 million people rely on coral reefs for food and jobs. They protect some $6 billion in “built capital” from flooding. They contribute some $36 billion to global tourism. Some estimates put their global annual value as high as $2.7 trillion.

There are even case studies that show investing in coral reefs could have enormous economic benefits over the next decade: $37 billion in Indonesia and $35 billion in the Central American region known as Mesoamerica. Those studies argue that returns on those investments would be as high as 44:1 for certain marine protected areas, or 9:1 for specific erosion management efforts.

Numbers aside, if coral reefs die off, people will likely starve. Homes will likely flood. And yes, a lot of “economic value” will likely be lost. At an even more fundamental level, coral reefs are the cradles of life for the ocean. And at least half the oxygen we breathe—i.e., every other breath we take—is produced by the ocean. So if coral reefs disappear, simply breathing could be difficult.

What’s Next for the Fund?

The idea for the Global Fund for Coral Reefs was birthed during a 2018 workshop in Monaco. Two years later, it has been formally unveiled, but many specifics are still being sorted out. The slow pace illustrates the many challenges of developing global, multi-party partnerships, even in response to rapidly accelerating threats.

Organizers say they’ve seen interest from many other potential donors—including countries, NGOs and other funds—but COVID-19 has delayed the fundraising campaign. To date, the total raised has not been disclosed. Meanwhile, the structure of the fund and its investments is still being developed by the partners and the Conservation Finance Alliance, which is evaluating both site and business model possibilities.

If the fund can find success, it can be a model for both new and existing efforts on the many other issues needing attention. Coral reefs are, by some accounts, low-hanging fruit in biodiversity terms. According to the U.N. report that estimates funding is seven times lower than it should be, some $600 to $960 million in total investment is needed to protect coral reefs. By contrast, the report estimates that confronting pollution, for instance, will require between $77 billion and $772 billion (not a typo) in investment.

Ultimately, the fate of coral reefs depends on the much larger goal of slowing and ultimately reversing climate change. As Prince Albert II of Monaco said at the launch event, “We cannot ignore the fact that it is above all by reducing the damage of a carbon economy that we will be able to protect corals sustainably.”