Emerging Ecosystem Service Markets Trends, Innovations

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Emerging Ecosystem Service Markets Trends, Innovations

Wednesday, November 25, 2009 - 5:22pm


There are several major macro trends developing globally that will create a need for more innovative market based mechanisms for payments for ecosystem services.

These include:

* Demand by investors for ESG measurement by major corporations
* Increase in socially responsible or "Impact Investing" assets
* Increasing environmental regulation
* Recognition by governments of the need to put a price on ecosystem services

I will now explain each of these four in further depth:

1) The integration of ESG measurements and the growing transparency of corporations’ environmental impacts spur on discussion and demand, as what is measured must then be addressed. Investors and consumers are driving the need for corporations to act in a more socially responsible manner and to reduce their impacts on the environment. One of the methods that will be used by companies to reduce negative environmental impacts is by purchasing offsets, whether directly investing in the projects, or by purchasing environmental credits.

There is a growing trend created by investors to align some of their investable assets with their moral beliefs, so called "Impact Investing". This trend will have a direct effect on the markets for ecosystem services and the demand for investment vehicles and market based mechanisms related to the PES markets. Demand for products and services within this sector will increase and benefit private biodiversity funds, project developers, consultants, and third party service providers, including the regional marketplaces that are being created to more effectively facilitate these transactions.

Climate change regulation is inevitable in the U.S.; behind the scenes and less publicized, however, are more stringent regulations that affect stormwater runoff, watershed pollution, and fisheries management. These will drive demand in markets for water quality credits and "Catch Shares", which are transferable commercial fishing permits.

4) Governments and NGO's worldwide are recognizing the need to price and value ecosystem services, and various efforts are being implemented that will help promote standardized metrics as well as international payment mechanisms for these markets. These include the "Ecosystem Services Benchmark", created by the "Natural Value Initiative", and supported by the UNEP FI. The "Ecosystem Services Benchmark" is a metric that measures the biodiversity footprints of major corporations, beginning with the beverage, tobacco, and food industries. An other innovation is called the "Green Development Mechanism", similar to the CDM under the Kyoto Protocol, which attempts to map out and create an international market-based mechanism for credit transactions, or "Transferable Conservation Obligations". The Green Development Mechanism has been created by a consortium of several global NGO's.

My company, Mission Markets Inc., is anticipating these trends by creating an electronic transactions and communications platform that will facilitate both capital raising and secondary transactions for environmental projects, fisheries trusts, eco-credits and catch shares. Our belief is that over the next several years we will see these trends becoming firmly integrated into the purchasing decisions of consumers and investment processes of investors.

For more information please visit our Mission Markets website and Earthmind, which is creating an international payment for ecosystem services mechanism.

- Mike

Mission Markets operates a private investment exchange facilitating transactions within the social and environmental capital markets. The Mission Markets platform provides companies and organizations with access to funding and impact investors an efficient way to evaluate, invest in and monitor sustainable investment opportunities.