Opinion

Rhino Roulette: Impact Investors Set to Gamble on New ‘Rhino Bond’

Following World Rhino Day on September 22, Benjamin Thompson asks whether the upcoming ‘rhino bond’ will be enough to help to save dwindling populations.

A mother and baby black rhino in Lewa Conservancy, Kenya. Image by David Clode, via Unsplash

Would you bet money that the population of black rhinos will increase by 65% within five years? That’s the question that conservationists are asking impact investors.

Last month, UK-based conservation charity, the Zoological Society of London, and sustainable finance firm, Conservation Capital, together announced the imminent issuing of a ‘rhino impact bond’. The initiative seeks to raise about fifty million dollars in debt finance that will be spent on conservation efforts to increase black rhino populations at five sites across Kenya and South Africa. Intriguingly, investors will only receive a financial return if the 65% target is achieved. Biodiversity conservation remains severely underfunded, and the rhino bond is a timely and ambitious initiative that, if successful, could revolutionise how conservation efforts are financed. Yet, the core question at the heart of any environmental impact investment is whether ecological benefits and financial returns can be delivered in tandem.

Diversifying the impact bond market

Impact investments aim to address sustainability challenges while delivering a profit to investors. In the environmental arena, this novel investment strategy often comes in the form of green bonds: essentially loans that are put towards environmental projects, such as renewable energy or the sustainable production of agroforestry commodities. Over one hundred billion dollars worth of green bonds were issued in the first half of 2019 alone. Media-friendly twists on this term are beginning to proliferate. Last year, the Seychelles issued the first ‘blue bond’ – partly backed by the Leonardo DiCaprio Foundation – to improve sustainable fisheries. Now, the rhino bond will be the first aiming to address the challenge of endangered species loss.

Over the last decade, these innovative financing strategies have received extensive promotion from think tanks and supra-national organisations. It is understandable that conservationists have been lured as they strive to find a solution to the funding shortfalls that plague their practice. So, is rhino bond likely to deliver both ecological benefits and financial returns?

Generating ecological benefits

Increasing the population of any species by 65% within five years is ambitious. Let alone a species that typically reproduces every three to five years, has a gestation period of sixteen months, and gives birth to a single calf. Black rhinos exist in areas rife with poaching, their horn is more valuable than gold, and while there are currently around 5,500 black rhinos in the world, in 2018, almost 900 were poached.

Nevertheless, most black rhino populations are tiny, so a flurry of births coupled with improved anti-poaching strategies could see large proportional increases, even if absolute numbers remain fairly low. Meanwhile, measuring and verifying this ecological benefit is straightforward. Although black rhinos are elusive, they are easy to count using ecological census techniques (including use of drones), and compare to baseline data. The ecological benefit also extends beyond the black rhino. If rhino poaching decreases, so too does that of other prized megafauna, such as lions, elephants, and white rhinos that coexist in the same area.

A lingering concern is that the targeted 65% increase regards only the populations at the five focal sites, not the total global population. The reality is that poachers may simply move elsewhere, reducing the global impact of the bond.

Generating financial returns

While rhino bond’s path to ecological impact is apparent, its financial returns are more cryptic. If the target is met, investors will receive a return higher than their initial investment. This return will be provided by traditional conservation donors such as the Global Environment Facility. This is significant for two major reasons.

Firstly, it means that these donors will only fund the project once its success has been verified. This differs to traditional funding models whereby donors speculatively provide funding to projects, and can only hope that they deliver results. Conversely, with rhino bond, the donor does not pay if the project fails to meet its target, meaning investors would lose their money. Hence, the financial risk is transferred from donor to investor. It is up to the investor to decide if the goals of the rhino bond are achievable and verifiable, based on the proposed conservation management plan and monitoring protocols, respectively. For donors, this ‘outcome payment’ model certainly appears more efficient than the ‘pay-up-front’ model that has dominated conservation funding over the last several decades.

Secondly, from the perspective of a scholar interested in the viability of environmental impact investing, it is somewhat disappointing that the return on investment is not generated by the same activity that delivers the ecological benefit. Rhinos themselves can’t be sold, unlike renewable energy or sustainably-farmed agroforestry commodities. In this regard, relying on donors does little to suggest that biodiversity conservation makes financial sense. There could be scope for generating direct returns; for example, in theory, more black rhinos should result in more ecotourism revenue that could be fed back to investors. However, this would be difficult to guarantee and separate from the countless political, social, and economic factors that affect tourist numbers.

Investor confidence in rhino bond will likely be bolstered by the novelty of the financing instrument, charisma of the animal, and that innate passion to conserve a critically endangered species. If this pioneering approach is successful, other species-specific bonds will likely follow; tiger-bond and elephant-bond, for example, have equal allure.

The rhino impact bond will be issued in early 2020. All on black.


Benjamin S. Thompson is a Postdoctoral Research Associate in the Sydney Southeast Asia Centre at the University of Sydney.His research investigates current financing strategies for environmental management, including Payments for Ecosystem Services, Corporate Social Responsibility, and Impact Investing. He explores the economic viability of these strategies, and highlights implementation challenges related to politics, institutions, and social inequalities. Much of his research has been conducted in socio-ecological systems of coastal Southeast Asia.

Dr Thompson will be speaking about the rhino bond on October 24, at the Sydney Southeast Asia Centre seminar ‘Financing environmental conservation in the Asia-Pacific’, co-hosted with the Sydney Environment Institute. More information and registration available here.