The stock market is collapsing: will these bonds save the wildlife? - Walla! Money

2021-05-10T16:49:46.802Z

This year, the World Bank will sell debentures for the benefit of the rhino population in South Africa, when for the first time in the capital market, the return to investors will be determined according to the increase in the rhino population. Investors are already flocking, are we on the road to a financial-environmental revolution?

Of money

The stock market is collapsing: will these bonds save the wildlife?

Investors are already flocking, are we on the road to a financial-environmental revolution?

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Preserving the rhino population in Africa is a particularly difficult task, as many cultures in East Asia, particularly China and Vietnam, believe that the rhino horn has virtues when it comes to curing cancer and improving male potency, and the horn serves as a status symbol for the rich.

This leads to illegal hunting of the rhinos, after which the horn is sawn over their noses, ground to a fine and sold at an inconceivable profit: one kilogram of the powder is sold on the black market for about $ 60,000 (a price close to the price of a kilogram of gold).

The population of black rhinos (Diceros bicornis) in the world today stands at about 3,140 adult individuals, which puts them in serious danger of extinction, and the population of white rhinos (Ceratotherium simum) stands at about 10,000 adult individuals - with the northern subspecies only two individuals left in the world. Of the female sex.

To date, population conservation has been done primarily by organizations that support donations and with the help of government grants.

Along the way there were also some creative solutions on the subject, like an attempt to issue a virtual currency in favor of saving them.

The new initiative aims to change the approach in which rhinos are preserved - and perhaps even the approach to nature conservation in general.

A revolution in the capital market?

Bonds are bonds issued by a state or by a private company in order to raise capital and finance its various activities. In fact, it is a loan that the issuing body takes from the investing public: after a pre-determined period of time, investors get their investment back (the fund ) Plus interest.

The World Bank, in partnership with the Global Environment Facility (GEF), will be offering for the first time this year $ 45 million in bonds to preserve the rhino population in two South African national parks. Investors will get the fund back after 5 years, along with a return "The yield, profits and overall success of the venture depend on its biological success," explains Dr. Sinia Netanyahu, a resource economist. Nature, Agriculture and the Environment and is currently the director of the Environment and Health Impact Assessment Program at the World Health Organization in Europe.

"There is an economic-biological model here, not a regular economic model."

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A new and unfamiliar field

When an investor chooses how to invest his money, he is usually faced with a balance between risk and return. In most cases, when an investment involves a great deal of uncertainty, the risk is high - but so is the potential profit from it (with a good example of this being the cryptocurrency market). This legality also works in the opposite direction - when the risk in the investment is low, the profit potential inherent in it is also low. Bonds from countries or large and stable companies are considered a relatively safe investment, because the body that guarantees the return of money to investors is a reliable body, whose probability of not being able to meet its debts is very low. Due to the low risk, investors also receive relatively low returns.

"From a purely economic point of view, every investment carries a certain risk," says Netanyahu.

"If I invest in a venture like a power plant, car batteries or a pharmaceutical company, every investment involves risks that are typical of that specific market. When we make a financial investment in a market related to the biological world, there are different types of risks."

According to her, biological risk assessment is a new and unfamiliar field in the world of financial risk assessment.

"There are unfamiliar parameters here: there may be disease, drought, or the effects of a climate crisis. For those who come to put the money there is uncertainty of a kind we did not know."

The beam is worth its weight in gold.

Rhinos (Photo: Reuters)

Money is recycled

The main approach taken to date with regard to the conservation of endangered animals, and in environmental struggles in general, is of transferring money directly to organizations or non-profit organizations, by donations or by government assistance. Underlying the approach of issuing bonds for rhinos is a more circular economic principle: while a grant or donation is one-off, and when the money runs out they need additional grants and assistance, the idea of the new initiative is to reuse the money. "Sustainable," says Netanyahu. "The trend in the world today is to move circularly and not linearly, both economically and environmentally, because resources are limited." She says that today, countries are less and less inclined to give one-time grants, preferring to grant loans on favorable terms. Investments that benefit the environment.

The Rhinoceros Bond Initiative actually creates a situation where different parties have a common interest: increasing the rhinoceros population will of course improve the condition of the animals themselves, South Africa will enjoy a more stable ecosystem and is even expected to increase its revenue from tourism and other investments. In addition, after the set period of time, the money will be returned to investors, who may reinvest it in other projects with similar goals - so that the money can be used again and again for environmental purposes.

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Capitalism - a lifeline?

Many would argue that since the capitalist approach developed, somewhere in the 19th century, the selfish desire of human beings to create more profit and capital has come at the expense of the environment. There is no doubt that in the name of making money individuals, commercial companies and countries are causing immense damage to the planet. In today's world money is the engine of everything, but as it often creates environmental damage, it may also be the one that can fix the situation.

An example of this is our pensions, which are supposed to allow us to live with dignity for many years to come - but in fact, a large part of the money deposited in them is invested in industries and companies that pollute and harm the environment, which could actually harm our future lives. There is already a trend in Europe to shift pension fund investments from polluting industries to investments in sustainable areas, and in Israel, too, in recent months there have been discussions between the Ministry of Environmental Protection and financial regulators That the investing public will be exposed to the nature of the activities and the amount of money they invest in activities that pollute the environment.

Days will tell if the pilot of the rhinos will bring about a real change in the capital market and the financial mechanisms we are familiar with. And who knows - maybe the money, which created a large part of the problems, will be the one to solve them as well.

The article was prepared by Zavit - the news agency of the Israeli Association of Ecology and Environmental Sciences