The Fiscal Impact of Biodiversity Loss and a Pathway for Conservation Finance

Abstract
The 2023 Global Biodiversity Framework seeks to leverage private finance to achieve conservation goals. This requires conservation investments to generate returns for private investors. Here, we investigate one mechanism by examining how changes in natural assets impact municipal bond yields and create opportunities for investors. We estimate how the sudden loss of bats that provide pest control services is priced into rural counties’ bonds. Bat population losses reduce agricultural land tax revenues, driving up bond spreads in affected counties by 11.5 basis points, a 27% increase. From this result, if conservation investors purchase bonds with a principal value of $1 million and restore bats, the expected spread reduction increases bond prices by $14,124. This payoff can potentially cover conservation costs without new government actions.