The Carolinian Zone in southern Ontario is the most biodiverse and endangered ecoregion in Canada. Covering just 0.25% of the country’s land area, it is home to one-third of Canada’s species at risk, one quarter of Canadians, and protects drinking water for 11 million people by acting as part of the buffer for the Great Lakes. Its landscape helps filter water that drains into the lakes, contributing to the health of a fifth of the world’s freshwater. Additionally, it serves as a significant economic engine for Canada. Colonial stewardship has destroyed 85% of the Zone’s natural habitats putting wildlife, people and industry at increasing risk. According to federal and global guidelines, a minimum of 30–50% of natural habitats is required to maintain healthy landscapes that protect both wild and human communities, especially in the face of climate change. The continued decline in the Zone’s habitats makes it increasingly vulnerable.
In response to these challenges, Carolinian Canada has partnered with stakeholders and rights holders to develop the Carolinian Zone Conservation Impact Bond (CIB) — an ambitious impact investing initiative harnessing a combination of impact investing and philanthropic grants to finance positive landscape renewals and improvements in the Zone. The multi-phase initiative seeks to improve a combined 1,000 acres of habitat in this ecologically significant region, protecting the region’s fragile biodiversity, resilience and freshwater reserves in the spirit and practice of reconciliation. It is the first-of-its-kind outcomes financing tool applied to healthy landscapes in Canada.
As Carolinian Canada and its partners advance this work, they are faced with a common and critical question: how do you successfully scale an impact investing innovation? This is particularly important after the novelty of the pilot phase has concluded, and even more challenging when an initiative requires both philanthropic and private capital.
In order to answer this question, let’s first take a look at conservation finance in Canada and the conservation bond model.
A Look at Conservation Financing in Canada
According to a study published by Credit Suisse AG, World Wildlife Fund and McKinsey in 2014, conservation finance is a mechanism of investment in ecosystems to ensure their long-term sustainability, generating financial returns while preserving nature.
Historically, governments have been the primary source of conservation financing through budget allocations, taxes, and conservation easements. Over the past 25 years, the private sector began participating with banks, pension funds, and foundations driving conservation finance through tools like microfinancing, private equity, debt, and many others. Despite rising demand for conservation funding, private sector participation remains modest compared to other classes of investments, especially in Canada. Further, there have been relatively few tools and strategies for conservation financing in Canada in comparison to other countries. We have some initiatives like government green bonds and emerging examples like the Great Bear Project Finance for Performance (PFP), but the Canadian economy for conservation finance is still in very early stages. There is significant opportunity but also a very wide funding gap to advance conservation in Canada.
To bridge the funding gap, conservation finance needs to move away from primarily donor-driven towards blended finance and other strategies that mobilize philanthropic and private capital. This evolution is especially critical as Canada’s conservation finance market is still relatively young in comparison to other developed countries, offering growth opportunities and the ability for investors to spark change.
What is the Conservation Impact Bond (CIB) Model?
Conservation Impact Bonds (CIBs) fit broadly within a category of social finance approaches known as outcomes-based financing, where payments are made for achieving predetermined social or environmental outcomes. In conservation finance, this includes pay-for-performance, payment-for ecosystem-services, avoided-cost and other models. These models recognize the tangible, monetary value associated with a service provided by nature, with entities willing to invest to ensure nature continues providing this service.
The Conservation Impact Bond (CIB) is a place-based collaboration and financial instrument to accelerate healthy landscapes in the spirit and practice of reconciliation. It aims to protect the values of nature for monetary, sociocultural, and ecological returns in the Carolinian Zone. This initiative is co-designed to grow an ethical nature-based green economy across local communities in southern Ontario while centering Indigenous leadership. CIB scaling uses an “economies of relations” model to drive economies of scope and scale, with relationship-building at its core. The “Leadership Team” acts as the main trunk, responsible for growing, nurturing, and funding the many branches (phases of work)”. These branches support the leaves of the project (eg. interventions, outcomes and impact of the overall initiative”.
The CIB has rolled out in multiple phases, with one phase completed and one well underway.
- Phase 1: Deshkan Ziibi Conservation Impact Bond (DZCIB I 2020) — The first pilot phase, the Deshkan Ziibi Conservation Impact Bond, was launched in March 2020 following a two year development process. It raised $300,000 in philanthropic funding from 3M and the government; and $130,000 in investment capital to improve 60 hectares / 150 acres. The Deshkan Ziibi CIB was structured as a loan through the VERGE Breakthrough Fund, as the single investor in the offering. The legally binding loan included an interest rate and schedule for repayment. It is a simple and common way to structure a debt agreement. Impact targets were exceeded with 130 hectares / ac improved. The loan was repaid in 2023 with a 5% annualized return. Learn more about Phase 1.
- Phase 2: Long Point Conservation Impact Bond (LCIB II 2023)- The LCIB II officially launched in April 2023 following a two (2) year development process. It raised $500,000 in investment capital to improve 100 hectares / 250 acres. This region is notable for its high level of biodiversity, significant numbers of species at risk and its concentration of mobilized and engaged conservation organizations. It is one of 11 regions across Canada that have been designated as a natural priority place by Environment and Climate Change Canada (ECCC) in 2017, and the only federally designated priority place in Ontario. This Priority Place is now being expanded to include the whole Carolinian Zone. $650,000 of blended revenue was raised from the Government of Canada, 3M and the bond’s first true outcome payer, Dragonfly Ventures. 85% of the target impact has been achieved with the rest in progress. This phase is on track to close in 2026. Learn more about Phase 2.
Following the announcement of phase two of the Conservation Impact Bond (CIB), Carolinian Canada and partners including the Government of Canada are looking to scale up this social innovation with a larger investment offering across a wider region with a greater impact for the land and people in the Carolinian Zone ecoregion. This would be Phase 3 of this initiative.
The Deshkan Ziibi Conservation Impact Bond Pilot Project
The CIB model has been further developed and refined concurrently with the design and implementation of the Deshkan Ziibi Conservation Impact Bond Pilot Project (DZCIB), a five-year initiative aimed at promoting healthy landscapes, Indigenous reconciliation, and nature-based solutions. The pilot covers 60 hectares of land and serves as a prototype of the CIB model, structured as a loan tied to specific outcomes like benefits for pollinators and species at risk. Payments are triggered by an impact report, and future versions will require third-party audits to confirm results. This pilot helps test the CIB structure and develop pay-for-success metrics with lower investor risk.
DZCIB Pilot Habitat Projects and Impact to Date
From 2019 to July 2021, the DZCIB pilot has supported 53 healthy landscape projects in the Deshkan Ziibi region, creating significant ecological, sociocultural, and economic benefits. Carolinian Canada collaborated with nine habitat partners, including the Chippewas of the Thames First Nation, Oneida Nation of the Thames, and Thames Talbot Land Trust (TTLT), with each partner providing matching funds.
Habitat Restoration at Hawk Cliff Woods
TTLT completed four habitat projects, ranging from habitat creation and enhancement to community leadership. One project occurred at Hawk Cliff Woods in February 2020, where invasive species were removed from 22 acres of native meadow habitat and hosted 3M Canada, the DZCIB’s outcome payer, for a seed collection event in the fall. 15+ buckeyes of seeds were gathered to grow native plants in southern Ontario, which were later used to restore the native meadow plant species at Joany’s Woods.
City of London Parks and ReForest London Partnership
Working with ReForest London, the DZCIB pilot then supported seven habitat projects in City of London Parks. One such project, at Briscoe Woods in Fall 2020, saw 42 volunteers plant 225 native trees and shrubs along a trail, enhancing habitat near The Coves Environmentally Significant Area.
Restoring Woodlands, Wetlands, and Prairies in Southern Ontario
In collaboration with the Lower Thames Valley Conservation Authority (LTVCA) and ALUS Middlesex, the pilot supported habitat restoration on 36 sites across southern Ontario, benefiting woodlands, wetlands, and prairies. This included work with private landowners, Delaware Nation at Moraviantown, and Chippewas of the Thames First Nation, resulting in 41 hectares (101 acres) of restored habitat.
Chippewas of the Thames First Nation: Farmland-River Buffer and Educational Programs
Partnering with the Chippewas of the Thames First Nation, the DZCIB pilot also supported the creation of a farmland-river buffer and a land-based learning program for Anishinaabensag Miikaanens (Little Anishinaabek Trail). The trail includes educational materials in both English and Anishinaabemowin to help preserve and revitalize the local Indigenous language.
So far, the DZCIB pilot has improved 69 hectares (171 acres) of habitat, planted over 39,000 native plants, and engaged 450+ people in land-based learning activities.
“It was a rewarding experience to take part in the 3M Canada and Thames Talbot Land Trust Fall seed collection opportunity with my colleagues. The seeds we collected from native plants and wildflowers at the scenic Hawk Cliff Woods on the shore of Lake Erie had a positive impact on the environment by helping restore healthy landscapes across southwestern Ontario.”
— Soufiane Lamrabet, 3M Canada“Tree planting is the best feeling ever! I’m so happy ReForest London provides opportunities to give back to the land and the community. When I feel sad about climate change and other global issues, I think of ReForest London and all the trees planted, and I feel a little better. I feel motivated to do more! Not to mention it’s super fun and something I can do with my friends safely during Covid!”
— J. H., ReForest London volunteer
Global Success Stories
So how have other organizations scaled impact investing innovations with a focus on conservation? We can look at a number of interesting case examples, particularly in the United States.
1. Forest Resilience Bond
Launched in 2018, the Forest Resilience Bond is a 14,545-acre project in Sierra County that encompasses Tahoe National Forest system lands within the North Yuba Forest Partnership area. The first phase raised $4 million in private capital from four investors to finance ecological restoration treatments across 15,000 acres of national forest. The state and Yuba Water are repaying investors at contracted rates as restoration work is completed, with the Forest Service providing in-kind support and funding for project planning, development, and execution. Phase II of the project is a $25 million bond to finance two more projects planned by the Forest Service. The Trapper Project will reduce the risk of a large damaging wildfire to both forests and nearby communities in the North Yuba River watershed and the Pendola Project will restore forest ecosystems previously impacted by wildfire. These 16,800 treated acres will protect over 48,000 acres of forestland across Sierra and Yuba County.
2. Conservation Fund Green Bonds
The Conservation Fund Green Bonds, closed in September 2019, raised USD $150 million for its Working Forest Fund, which acquire and permanently protect at-risk forestlands in the United States. By the end of 2022, the bonds have directly allowed for the protection of over 420,000 more acres of forest as well as attracting more private financing to impact total forest valued at over USD 453 million, triple the bond offering.
3. The Nature Conservancy (TNC) and NatureVest
NatureVest, the impact investing arm of The Nature Conservancy (TNC), was launched in 2014 to mobilize private capital for the conservation of natural ecosystems. With support from J.P. Morgan Chase & Co., NatureVest aims to structure investment deals that offer both conservation results and financial returns, focusing on water management, ocean protection, and forest management. This initiative showcases how investment capital can significantly contribute to large-scale environmental conservation efforts.
The journey began in 2010 when TNC, a U.S.-based environmental nonprofit, launched a Capital Impact Fund to leverage private investment for conservation. The establishment of NatureVest in 2014 marked a pivotal moment, creating a more dedicated conservation finance platform with J.P. Morgan Chase & Co. The partnership aimed to mobilize substantial funds for conservation projects across various sectors, including agriculture, fisheries, water, and land.
NatureVest’s mission is to bridge the funding gap in conservation by sourcing investable projects that deliver both environmental and financial returns. By developing a global pipeline of conservation deals, NatureVest attracts private and philanthropic capital, engaging investors to scale conservation efforts. The approach also involves generating market insights and advancing the intellectual capital needed to support conservation investments.
The evolution of NatureVest reflects TNC’s long history of innovative conservation financing. Even before NatureVest’s formal establishment, TNC had leveraged private capital for conservation through initiatives like the Conservation Note in 2012, which laid the groundwork for NatureVest’s focus on building scalable, investment-driven solutions for environmental protection.
The creation of NatureVest marked a significant transformation in protecting natural capital. By leveraging the growing impact investment sector, NatureVest became a platform for advancing conservation finance, developing financial transactions, and building an investment pipeline across sectors. This initiative was seen as a natural extension of TNC’s work, unlocking new capital sources for meaningful conservation outcomes.
Insights
So what can we learn from the experience of Carolinian Canada and the case examples above?
There is a pathway to scale for conservation finance.
From the Forest Resilience Bond to NatureVest to Carolinian Canada, there are clear examples of organizations and impact investing innovations focused on conservation that have scaled incrementally and exponentially. Even at early stages of scale, innovators can reach and exceed impact expectations: Carolinian Canada and partners exceeded their objectives for connecting worldviews, habitat, knowledge, opportunities and communities through healthy landscape interventions from Indigenous youth-led programs to regenerative agriculture in phases 1 and 2 of the CIB.
There is a need to resource and continually improve the governance of conservation finance initiatives to reach scale.
Many organizations begin with informal structures or internal program-based strategies, then move to create formal governance structures or even new organizational structures to reach scale. It is critical to invest in the formal governance infrastructure of impact investing innovations to ensure they can grow effectively. If and when these innovations engage Indigenous peoples and communities, it is also critical that Indigenous governance and leadership is embedded in formal structures.
The CIB employs Two-Eyed Seeing as its guiding principle, an approach of inquiry and solutions in which people come together to view the world through an Indigenous lens with one eye (perspective), while the other eye sees through a Western lens. This ensures a balanced approach to conservation impact.
The Two-Eyed Seeing approach defined by Mi’kmaq Elder Albert Marshall is of critical importance, to ensure Indigenous Knowledge is applied to the projects and maintain genuine partnership with Indigenous rightsholders. Additionally, the portfolio of contracts incorporate equitable access, front-line support, and flexibility to achieve maximum impact for biodiversity, ecosystems, and healthy landscapes over diverse communities. A “Two-Eyed Seeing” approach to the governance model can greatly enhance the impact of any impact investing strategy. The governance framework is critical to co-creating a model that is nimble, relevant and impactful in this new space.
There are limits (or levers) to scale.
There are clear limits (or levers) to scaling up, particularly the availability of philanthropy and impact investing capital, capacity of operational partners, and the speed of trust in building and maintaining relationships with current and new partners, particularly Indigenous partners.
There is a need to resource the operations of the core entity and partners involved in a complex impact investing innovations.
The success of the case examples was underpinned by both philanthropy and the strength of the partners engaged in the innovation. However, the scaling of these innovations can be constrained by the resources, sustainability, and stability of the operations of partners, particularly at smaller scales. There is a need to fund operations of the core partners alongside any operational partners at levels that can sustain the innovation. In some cases, this can mean the creation and resourcing of new entities like NatureVest to get conservation financing innovations to large scale.
Further, there is a significant need to dedicate time and resources to steward partnerships with Indigenous communities and organizations. In particular, the experience of Carolinian Canada in Phases 1 and 2 was positive, based on principles of reciprocity and transparency alongside providing resources and flexibility in program delivery.
Scaling Into Phase III
So how are Carolinian Canada and its partners seeking to scale up their Conservation Impact Bond innovation?
Building upon the success of Phase 1 and 2, Phase 3 of the CIB is currently in development, with plans to scale up investment and conservation impact.
Indigenous Stewards and Habitat Growers
Phase 3 will leverage Canada’s largest ecosystem recovery network of Indigenous stewards and Habitat Growers to equitably scale-up high-quality habitat projects using a standards-based approach to achieve outcomes with significant in-kind match. A series of contracts will be formed between one or more First Nations as well as Habitat Growers and the Issuer, supported by outcomes‐based funding agreements. Habitat Growers will be selected using equitable criteria to ensure they are best positioned to deliver on outcomes required. Habitat Partners would include diverse Indigenous, public, and private landowners; local business or social enterprise; community groups; marginal communities that could benefit most from a healthy environment; and habitat partners that manage agreements with many landowners. Using a Two-Eyed Seeing approach, the portfolio of contracts will be designed for equitable access, front-line support, and flexibility to achieve maximum impact for biodiversity, ecosystems, and healthy landscapes over diverse communities.
Outcome Payers and Impact Investors
Outcome Payers agree to pay for complete delivery of healthy landscape improvements after outcomes are proven to be achieved. The first contract will be between one or more Outcome Payers and the Issuer of the CIB, supported by outcomes‐based funding agreements. The Evaluation Framework developed by Carolinian and partners will be used to identify 1–2 parent outcomes, alongside a comprehensive set of five evaluation pillars with associated metrics. The agreements will outline the target outcomes that will be proven by a 3rd party evaluator, the criteria for outcome funding and timing of when funding payments will be made.
Impact investors provide the up-front capital that is needed to execute and accelerate the landscape improvements and are paid back with interest at the end of the Carolinian CIB contract period. It should be noted that investors bear the risk that the habitat work will be completed effectively in order to deliver the outcomes. For this reason, an investor’s due diligence efforts will seek to ensure the organizations performing the habitat work have the capacity and capabilities to achieve the outcomes. Investors will be paid back their capital and interest only if outcomes are achieved and return on investment is linked to the outcomes. There is a potential for a ‘tiered’ payouts system.
Structure
In the next phase, the financial structure will likely be a simple promissory note executed through an investment agreement outlining the terms of the CIB, including the criteria and timing of capital repayments and interest payments. The agreement will specify the pre-established outcome metrics and targets, and key stakeholders to deliver the healthy landscape portfolio for achieving the outcomes and the 3rd party evaluation plan to validate the outcomes have been achieved. Further, a formal governance body, similar to a Project Board of a social impact bond, will provide oversight over the next phase of this initiative with formalized Indigenous leadership and representation. The governance structure will be formalized in the investment agreements.
Impact Framework
The CIB leadership team includes and works closely with Indigenous partners, the Ivey Business School, landowners, and other partners to establish a robust Two-Eyed Seeing impact measurement framework.
Western science evaluation design tends to focus narrowly on numerical data. The following framework seeks to go beyond the quantitative and balance qualitative priorities with five key evaluation pillars:
- Connecting Healthy Habitat (Ecology focus)
- Connecting Knowledge (Sociocultural/Education focus)
- Connecting Opportunities (Economic focus)
- Connecting our Hearts & Minds (Sociocultural/Wellbeing focus)
- Connecting our Bodies (Sociocultural/Wellbeing focus)
Prototype Design and Innovation in Phase 3
Phase 3 will build on the initial successes of Phase 1 and 2 by increasing investment and outcomes payer funding, attracting more impact investors as well as the potential addition of retail investors who share our conservation goals. The partners will seek to engage new businesses, agencies, and donors to actively contribute based on successful outcomes, thereby fostering collaborative partnerships, and amplifying positive impacts. Governance structures will be refined to enhance operational efficiency significantly and facilitate scalability to meet growing demands.
Reflecting on the accomplishments of the previous issuances, it is evident that the program excels in strategic planning, adaptability, and addressing challenging issues. There have been continued changes to the bond model during each phase, particularly moving from Phase I to Phase II. As partners prepare for Phase III, there will be further adjustments to the model.
Conclusions
Based on the the research and collective work, we can draw the following summary conclusions:
- The conservation finance and outcomes finance marketplace provide a strong case for the potential of this project in Phase III. Further, there are many cases that provide insights and pathway to greater scale.
- Although there are some limits to scale, the strength and potential of current and prospective partners, funders, and investors provide a strong foundation for potential success of the Phase 3 bond.
What’s Next
Over the fall, Carolinian Canada and collaborators including SVX will advance efforts to scale up and capitalize Phase 3 of the Conservation Impact Bond with the right combination of partners, outcomes payers and investors. Fortunately, seed capital has already been secured and it is expected that the project will have a first close in the fall towards a final close of Phase 3 of the Conservation Impact Bond in March 2025. To learn more about how you can support or partner on this project, please get in touch with jo.reynolds@carolinian.org.
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