GEF CONCEPT NOTE
1. Countries: Philippines
2. Project Name: Asian Conservation Corporation
3. Implementing Agency: World Bank
4. Executing Agency: International Finance Corporation (IFC)
5. Project Sponsor: New Century Partners and WWF-Philippines
6. GEF Focal Area: Biodiversity
7. GEF Operational Program: OP#2: Coastal, Marine and Freshwater Ecosystems
8. Country Eligibility: The Philippines ratified the CBD on October 8, 1993.
9. Project Duration: 10 years
10. PROJECT CONCEPT
The Philippine territory of the Sulu-Sulawesi Seas is located within the world’s center of marine biological diversity. The region contains diverse aquatic ecosystems including coral reefs, mangrove forests, and seagrass beds. It has as many as 450 species of corals, compared to less than 60 in the entire Caribbean, and at least 1,030 species of fish, sixteen of which are considered endemic. In addition, this region is home to six of the world’s seven species of marine turtles, all of which are endangered, at least 22 mostly threatened marine mammals, numerous species of sharks and rays (some of which have only recently been discovered by science), and many other unique and threatened species.
Much of this outstanding biodiversity is threatened in part because of the activities of the private sector. The private sector has a major detrimental impact on biodiversity due to the common lack of environmental controls. While some operators mitigate their impacts, a huge number of private sector actors do not. As a result, private sector operations often devastate the local environment, critical habitats, and populations of important species. However, with the technical assistance of experienced conservation agencies, the private sector has vast potential not only to mitigate its own impacts but also to create new investment models that directly support biodiversity conservation.
The Asian Conservation Corporation (ACC):
The goal of the ACC is to demonstrate that profitable businesses can conserve biodiversity by creating a network of private sector investments that both mitigate their own environmental impacts and go beyond mitigation to actively conserve globally significant biological diversity in priority areas of the Philippine territory of the Sulu-Sulawesi Seas.
The ACC believes that companies should limit their impacts as part of normal business operations; environmental mitigation should be a built in cost of operating. However, threats to biodiversity often come from sources outside these companies’ control. While many companies would like to extend support to eliminate these threats, they typically lack technical expertise and have insufficient operating budgets to cover the incremental costs of this biodiversity conservation. As a result, technical and financial assistance is needed to help cover these incremental costs and support the initiation of models where the private sector can support conservation of biodiversity in the long-term.
The ACC will be a $30-40 million investment company that will make approximately 5-8 equity investments in promising marine and coastal related business ventures that have high potential to conserve biodiversity while still making a profit for their investors. ACC is a product of Next Century Partners (NCP), a private fund manager who will oversee all investments that are undertaken. A Board of Directors will be constituted composed of representatives from the major investors as well as prominent conservationists from the Asian region. NCP will establish the investment parameters and ensure that the objectives of the ACC are satisfactorily attained. It will focus on the Philippine territory of the Sulu-Sulawesi Sea region due to its unparalleled marine biodiversity.
The ACC’s investees will need to have experienced management, though selected start-ups may be considered. ACC’s investee companies will also need to have a clear path to profitability. Beyond providing financing, ACC will seek to make a value-added contribution to its investee firms by maintaining an active working relationship with them and providing advisory services regarding strategy formation, finance, and human resources.
The ACC has already made one initial investment in the El Nido Resort located in biologically rich Bacuit Bay of Northern Palawan, Philippines. Two other initial potential investments have been identified. The first possibility is in Stellar Fisheries, a crab processing company in Negros, Philippines and the second possibility is in a Marine Center and Public Aquarium to be sited in Manila. Other possible investments are likely to be in the tourism and marine food production sectors.
The ACC Biodiversity Conservation Support Program (BCSP)
The ACC seeks a GEF grant of up to US$6 million to establish a Biodiversity Conservation Support Program (BCSP). This program will provide essential support to the ACC goal of creating a network of private sector operations that achieve lastingong-term biodiversity conservation in priority areas of the Sulu-Sulawesi Sea. To establish this network, the BCSP will help pay the initial incremental costs of biodiversity conservation associated with ACC investments as well as the incremental costs of technical support to non-ACC companies that wish to pursue biodiversity conservation. Co-financing will be sought from private foundations and other donors for some incremental components.
The BCSP will primarily serve as a vehicle to enable key businesses to begin incremental biodiversity conservation efforts while they build a sustainable finance mechanism to cover recurring costs of conservation. During the time that the BCSP supports initial incremental costs of biodiversity conservation, separate funds will be generated through private sector sustainable financing mechanisms (such as user fees). These funds will accrue to an endowment for the conservation of the specific site. After a number of years (five on average), it is expected that the endowment in each investment area will be sufficient to play a key role in paying recurring conservation costs. In this way, the ACC will help ensure that the conservation accomplishments achieved through the support of the BCSP are sustained in the long-term through private sector involvement and funding.
The ACC expects the BCSP willto support conservation activities across the ACC’s its portfolio of investments for a total of ten years (approximately five to six years per individual investment). The El Nido resort and the Stellar Fisheries are both in highly diverse areas. With the support of the BCSP, the ACC’s investments in these two companies will support in-situ conservation projects that increase enforcement to limit or eliminate external threats, strengthen multi-stakeholder management mechanisms, monitor the ecosystem condition of the local environment, raise environmental awareness, and create sustainable financing mechanisms to support conservation in the long-term. The BCSP will allow the third potential investment (a marine center and public aquarium) to support biodiversity conservation in a critical network of highly diverse sites.
The BCSP will also enable the ACC to provide outreach and technical support to other companies that are interested in pursuing the mitigation of environmental impacts and the conservation of biological diversity in association with their investments. This will include other companies operating in priority areas of the Sulu-Sulawesi Sea as well as companies operating adjacent to ACC investments.
This project will be closely coordinated with a number of related projects and international institutions' activities in the country. These include ADB's ongoing Fisheries Resource Management Project, the ADB/GEF Integrated Coastal Resource Management Project, and UNDP's proposed Formulation of a Transboundary Diagnostic Analysis and Preliminary Framework of Strategic Action Program for the Sulu-Sulawesi Large Marine Ecosystem. Other projects include the DENR's Coastal Environment Program , the USAID-funded Coastal Resource Management Program, the UNDP-GEF-IMO-funded Regional Program on the Prevention of Pollution in the East Asian Seas, and the World Bank-funded Community-Based Resource Management Project. While all these projects are important to coastal and marine resources management, the proposed ACC program is the only one focused on directly linking long-term biodiversity conservation to the operations of the private sector and therefore has high potential for sustainability.
The BCSP will also enable the ACC to provide technical support and outreach to other companies that are interested in pursuing the mitigation of environmental impacts and the conservation of biological diversity in association with their investments. Expected outcomes include the adoption of techniques to conserve biological diversity in several other private sector companies contributing to the network of private sector companies supporting biodiversity conservation.
11. THREATS TO MARINE AND COASTAL BIODIVERSITY IN THE PHILIPPINES
The marine biodiversity of the Philippines territory of the Sulu-Sulawesi Seas faces a number of threats linked both to private sector and other activities, including:
· Highly destructive fishing practices, employing cyanide, explosives, and other harmful methods;
· Overharvesting of fish for the food and aquarium trades; and
· Unsustainable coastal development, with significant habitat destruction and resource degradation.
The threats described above are in turn caused by the following "root causes":
· Poverty and the lack of viable alternative sustainable livelihoods for local people;
· Inadequate regulatory and/or enforcement capacity on the part of local and national governments; and
· Insufficient understanding of the significance of biodiversity.
These root causes are exacerbated by the following barriers/challenges:
· Lack of experience in developing and implementing innovative conservation partnerships;
· Lack of technical assistance for incorporating biodiversity conservation into productive sector activities;
· Financial constraints limiting businesses’ ability to expend funding on biodiversity conservation and at the same time remain environmentally viable;
· Short term nature of many existing conservation projects and uncertainty about whether activities will continue after project termination;
· Lack of innovative financing mechanisms to generate sustainable funding for conservation activities from private sector activities;
· Lack of financing for environmentally and socially innovative investments;
· Insufficient awareness of and experience with certification systems that allow environmentally benign producers to capture the value of their efforts; and
· Barriers to certification that prevent producers from adopting more ecologically sensitive methods.
12. BASELINE SCENARIO
Under the baseline scenario, the ACC will seek to ensure environmental responsibility of its investments by:
· Investing only in private sector ventures that mitigate their environmental impacts and therefore do not threaten biodiversity themselves;
· Providing managerial and technical assistance with respect to the development of environmental audits and compliance with environmental standards; and
· Encouraging other private sector operators and financiers to limit their impacts on the environment by providing limited outreach on the ACC’s philosophy and approach.
Under the baseline scenario, the ACC investment companies will at best use operating funds to mitigate against negative environmental impacts of their operations and engage in a limited amount of outreach to share their experiences with other companies and financiers. While these activities will be positive for the environment, they will not be sufficient to address many of the root causes and barriers listed above. . These baseline activities will not enable ACC companies to support efforts to limit outside threats to biodiversity and will not provide sufficient support for these companies to set up long-term conservation financing mechanisms. As a result, the ACC will have a set of environmentally responsible investments, but will miss the opportunity to greatly enhance the conservation of the globally outstanding biodiversity of the Philippine territory of the Sulu-Sulawesi Seas. Without GEF support for the establishment of the BCSP, the ACC will not be able to realize its full potential in biodiversity conservation and will not be able to fully protect and restore the biodiversity of its investment areas or achieve a broad demonstration and replication impact in other areas across the Sulu-Sulawesi Seas. Detailed descriptions of the baseline scenarios associated with the first three possible investments are provided in the Appendix.
ACC Investments:
To date, the ACC has identified three initial possible investments. The baseline scenario associated with each investment is described in Annex 1. The first two investments are existing businesses that currently mitigate against the environmental impacts of their operations but do not have sufficient technical or financial resources to go farther to adequately conserve biological diversity in their local areas. The third possible investment, a marine center and public aquarium does not yet exist, but had great potential to mitigate against its environmental impacts and given incremental cost support can establish a significant network of biodiversity conservation efforts. Additional sectors under consideration for possible investment include dive tourism and trade in ornamental species.
13. INCREMENTAL GEF COMPONENT: ESTABLISHMENT OF THE BIODIVERSITY CONSERVATION SUPPORT PROGRAM (BSCP)
The objectives of the BCSP are:
· To support the incremental costs of the ACC’s goal of creating a network of private sector operations that directly conserve outstanding biological diversity,
· To ensure that this model of private sector biodiversity conservation expands to other elements of the private sector and other companies, and
· To ensure that conservation outcomes achieved by the BCSP and the ACC are maintained in the long-term by supporting the establishment of sustainable financing mechanisms by ACC companies and other companies.
The BCSP will fund the initiation of conservation activities in areas where ACC investee companies operate during the period in which sustainable financing sources are being developed. In most if not all cases, it will take several years for the sustainable financing mechanisms (such as user fees) to generate a sufficient resource base to sufficiently fund conservation activities on an ongoing basis. Without incremental support during this period, significant biological diversity and natural resources in outstanding areas would likely be lost. As a result, the BCSP will cover the up-front costs of initiating the conservation activities and thereby begin the immediate protection of the rich biological diversity of the Sulu-Sulawesi Seas. The BCSP will cover the incremental costs of conservation activities that yield globally significant benefits but which go beyond what the private sector would normally incur and will allow comprehensive biodiversity conservation activities to begin several years sooner than would otherwise be the case.
Additionaly, the BCSP will enable the ACC to immediately initiate conservation activities to protect globally outstanding biodiversity while enabling ACC investment companies to also remain competitive in the business sector. The ability to survive and thrive in the business sector is a key to the establishment of long-term conservation success as the successful ACC businesses will generate financing to sustain the conservation outcomes achieved with BCSP support.