Running on debt: Financing land protection with loans
Abstract New land protection is expensive, and many conservation NGOs rely on loans to help fund land acquisition in the short term. Conservation loans are offered by a range of philanthropic organizations that often allow much more flexible terms than traditional loans. Thus, conservation loans may...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Wiley
2022-09-01
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| Series: | Conservation Science and Practice |
| Subjects: | |
| Online Access: | https://doi.org/10.1111/csp2.12763 |
| _version_ | 1817995780978376704 |
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| author | Rachel Fovargue Joseph E. Fargione Sarah Roth Paul R. Armsworth |
| author_facet | Rachel Fovargue Joseph E. Fargione Sarah Roth Paul R. Armsworth |
| author_sort | Rachel Fovargue |
| collection | DOAJ |
| description | Abstract New land protection is expensive, and many conservation NGOs rely on loans to help fund land acquisition in the short term. Conservation loans are offered by a range of philanthropic organizations that often allow much more flexible terms than traditional loans. Thus, conservation loans may behave differently from other types of loan. There are costs and benefits to relying on loan financing to fund land protection that organizations need to consider, but few data are available to inform such evaluations. Here, we focus on estimating the financial cost of these loans, by analyzing loans used to support land protection projects that were provided through an internal revolving fund at a large U.S. conservation NGO. We estimate loan financing cost through accrued interest and test deal‐level characteristics for their ability to explain or predict loan interest. We find that loan performance can be highly uncertain and costs can be substantial in relation to the total purchase price. An improved ability to estimate the overall cost of conservation loans upfront may determine just which conservation projects are prioritized for investment and avoid costly misallocations of conservation resources. |
| first_indexed | 2024-04-14T02:10:59Z |
| format | Article |
| id | doaj.art-009fd0b61579419c9259a17e817153e2 |
| institution | Directory Open Access Journal |
| issn | 2578-4854 |
| language | English |
| last_indexed | 2024-04-14T02:10:59Z |
| publishDate | 2022-09-01 |
| publisher | Wiley |
| record_format | Article |
| series | Conservation Science and Practice |
| spelling | doaj.art-009fd0b61579419c9259a17e817153e22022-12-22T02:18:24ZengWileyConservation Science and Practice2578-48542022-09-0149n/an/a10.1111/csp2.12763Running on debt: Financing land protection with loansRachel Fovargue0Joseph E. Fargione1Sarah Roth2Paul R. Armsworth3University of Tennessee Knoxville Tennessee USAThe Nature Conservancy Minneapolis Minnesota USAUniversity of Tennessee Knoxville Tennessee USAUniversity of Tennessee Knoxville Tennessee USAAbstract New land protection is expensive, and many conservation NGOs rely on loans to help fund land acquisition in the short term. Conservation loans are offered by a range of philanthropic organizations that often allow much more flexible terms than traditional loans. Thus, conservation loans may behave differently from other types of loan. There are costs and benefits to relying on loan financing to fund land protection that organizations need to consider, but few data are available to inform such evaluations. Here, we focus on estimating the financial cost of these loans, by analyzing loans used to support land protection projects that were provided through an internal revolving fund at a large U.S. conservation NGO. We estimate loan financing cost through accrued interest and test deal‐level characteristics for their ability to explain or predict loan interest. We find that loan performance can be highly uncertain and costs can be substantial in relation to the total purchase price. An improved ability to estimate the overall cost of conservation loans upfront may determine just which conservation projects are prioritized for investment and avoid costly misallocations of conservation resources.https://doi.org/10.1111/csp2.12763conservation planningenvironmental non‐profitfinanceNGOopportunity costrevolving loans |
| spellingShingle | Rachel Fovargue Joseph E. Fargione Sarah Roth Paul R. Armsworth Running on debt: Financing land protection with loans Conservation Science and Practice conservation planning environmental non‐profit finance NGO opportunity cost revolving loans |
| title | Running on debt: Financing land protection with loans |
| title_full | Running on debt: Financing land protection with loans |
| title_fullStr | Running on debt: Financing land protection with loans |
| title_full_unstemmed | Running on debt: Financing land protection with loans |
| title_short | Running on debt: Financing land protection with loans |
| title_sort | running on debt financing land protection with loans |
| topic | conservation planning environmental non‐profit finance NGO opportunity cost revolving loans |
| url | https://doi.org/10.1111/csp2.12763 |
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