The true cost of conservation investments: The opportunity cost of financing land protection
Evaluating costs of large conservation land deals is a vital but complicated component of conservation planning. For the most expensive land deals, simple acquisition costs are often confounded by loans, cost sharing and sale of easements, after which the realized cost of the deal may be significantly different than the estimated purchase price. The practice of financing is rarely considered when evaluating the cost of conservation in the conservation planning literature, even though about half of land trusts use loan financing strategies for land acquisition. We used a case study of historical land deals conducted by The Nature Conservancy, the world’s largest land trust, and financed through internal loans to calculate the ‘conservation opportunity cost’ of financed conservation deals. This conservation opportunity cost is estimated by quantifying dollars that are unavailable through time for other potential projects, because of outstanding loans. These conservation opportunity costs of potential deals may be highly variable because they are affected by the size of the loans and the time required to repay the loans. Recognizing these opportunity costs may be important in the pursuit of cost efficient land protection.
We conclude that conservation opportunity costs are not simply reflective of purchase prices. Opportunity costs do not correlate with upfront costs, and thus may be important to consider separately during a conservation planning and project approval process. We further present a regression model to show how financial characteristics of a deal, such as percent of purchase price in hand, and deal structure characteristics, such as number of conservation partners, affect the opportunity cost. Our results will encourage conservation planners to consider the likely conservation opportunity costs when comparing the return on investment across new conservation projects.