26 Sep 2018
Funding the Earth’s Natural Infrastructure
A Virginia nature preserve caps a long career in conservation financeby April WhiteTopics:
Photo by Jennifer Heffner
Just south of Washington, DC, on the banks of the Potomac River, sits the Crow’s Nest, a rural 6,000-acre peninsula named for a three-masted schooner, The Crow, which anchored on its shores in the 1700s. Today, much of this land is covered with same towering hardwood forests that grew there during the Civil War era. Those trees are still home to bald eagles, dozens of species of migratory songbirds, and one of the largest blue heron nesting sites in the Chesapeake, with more than 400 blue heron couples in residence.
Pat Coady (MBA 1966) hopes that people can say the same thing about the land centuries from now. As cofounder of the Northern Virginia Conservation Trust, Coady has helped to conserve almost 4,000 acres of the peninsula, creating the Crow’s Nest Natural Area Preserve, a popular destination for hikers, kayakers, and birdwatchers. “It is about protecting nature and making it accessible for future generations,” he says.
For Coady, a DC resident who traces his interest in environmental protection to childhood summers spent exploring the wilderness of Upper Michigan, the Crow’s Nest preserve is the most personal accomplishment in a long career in conservation finance across the world that has benefited everything from lemurs in Madagascar to sage grouse habitats of Wyoming, forests in New England to water quality on the Rappahannock River. Such efforts have also a spurred significant innovation in financing tools for the sector, which in turn creates investment opportunities with environmental benefits.
With decades of experience in investment banking with Dillon Read in New York City—but little experience with environmental work—Cody joined the World Bank as its U.S. executive director in 1989. At the time, the organization, too, had little interest in environmental issues, a stance that had sparked protests at its annual meetings. This led the U.S. Congress to use its influence by demanding that the World Bank set environmental standards as a condition of the nation’s capital contributions to the bank.
Quickly, the World Bank grew a 100-plus-employee environmental department. At the end of his term, Coady was appointed to lead the U.S. delegation for the creation and implementation of the Global Environmental Facility, to finance projects in biodiversity, climate change, and food security among many other related issues. What began as a $1 billion pilot program in 1991 has now provided more than $18 billion in grants worldwide.
“Things have changed dramatically since then,” says Coady, who, after four years at the World Bank, went on to work with the biodiversity investment fund Verde Ventures, a unit of Conservation International, and is now senior director of financing land conservation at the investment bank Seale & Associates. “We’re finally seeing a real interest in environmental issues by family offices, private equity funds, and institutional investors,” he notes. One of Coady’s current projects, in Houston, makes the appeal obvious: Environmentalists have long known that the city has water run-off issues, but there had never been any political will to solve the problem.
“Hurricane Harvey showed everyone that we just can’t be on the sidelines anymore,” Coady observes. He is currently working with a nonprofit land trust called the Katy Prairie Conservancy, in collaboration with the Houston Flood Control District, local governments, and area developers on what he calls a sponge credit. The credit would allow, for instance, a town to mitigate the environmental impact of new construction by requiring investment in the Katy Prairie Conservancy’s goal of preserving and restoring prairie lands west of the city. The prairie land absorbs large amounts of water, providing natural water management for the city.
Coady’s sponge credit is a new idea for Houston and it’s been his principal focus over the last decade. “My personal effort has been to seek out innovation in the environmental finance arena. Too often, if you want to conserve any type of land, you have to have substantial funding to accomplish protected status and provide for long-term stewardship. The need for funding is huge,” he explains. Since 2014, Coady has worked with groups like Credit Suisse to convene an invitation-only conference of investors in order to identify investable, repeatable, scalable and, therefore, financeable projects.
Next up for Coady is an effort—with a working name of Pat’s Garage—to shepherd the most promising of these bright ideas through to implementation. Fast emerging is the whole idea of extracting ecological values from land and water and crafting Green Bonds for the capital markets. Close to home, Harvard Forest’s has an initiative to preserve 70 percent of New England’s forest lands. “There’s so much more we can do,” he says.
Class of MBA 1966, Section G