President Obama Confirms: Use Pay for Success and Expect Net Benefit for the Environment

  December 2, 2015



On November 3, 2015 President Obama released the Presidential Memorandum: Mitigating Impacts on Natural Resources from Development and Encouraging Related Private Investment, directing five Federal Agencies to adopt and share advanced, consistent mitigation policies to achieve net benefits to the environment. It also encourages federal agencies to use pay for success performance contracts.

Environmental Incentives sees this Presidential direction as the sign that our performance-driven conservation approaches are becoming main stream. We use measures of environmental performance to align the incentives for economic and environmental improvement. These performance measures underpin the terms of payment for performance contracts and enable governments, donors and private investors to define their environmental return on investment. Performance measures provide the evidence needed to fuel learning and adaptive management. They also define change necessary to determine net benefit.

Agencies may be wondering: How do we know when we have achieved net benefit? Understanding net benefit requires consistent accounting of both environmental improvement and degradation using consistent terms on both sides of the mitigation ledger. Our water quality and habitat Credit Exchanges do just that. In particular, the Nevada Conservation Credit System supported by the leadership of Governor Sandoval, and the Habitat Exchanges in Colorado, Wyoming and California may be the only approaches that consistently account and transparently report development impacts and conservation benefits.

The memo ensures agencies that, “In non-regulatory circumstances… performance contracts and other Pay for Success approaches offer innovative ways to finance the procurement of measurable environmental benefits that meet high governmental standards by paying only for demonstrated outcomes.” Adoption of pay for success strategies can enable public private partnerships to increase the environmental return on investment from the use of taxpayer dollars, and can solve the demand problem that prevents private capital from supporting environmental gains.

This is exactly what Environmental Incentives, with our project partners from Partners for Western Conservation and Environmental Defense Fund, are developing through our recently awarded Conservation Innovation Grant from USDA. We will define performance contracting strategies that work for the states of Nevada, Colorado, Utah and Idaho, and develop performance contract templates that will be used by Nevada to contract with private landowners to secure sage grouse habitat. The resulting public-private partnership projects will create both on-the-ground habitat and credits ready for sale to compensatory mitigation buyers when they are needed.

This Presidential direction and the tools pioneered by Environmental Incentives and our client partners can pave the way for more performance-driven conservation. Will we see it in the next Farm Bill? Could it be the key to saving the monarch butterfly? Stay tuned.

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