THE SOLUTION

To ensure that Bhutan remains economically and environmentally sustainable during these changing times, WWF and the Government of Bhutan committed to create an innovative funding approach called ‘Bhutan for Life’. Funding generated through this initiative will be used to maintain and manage the country’s protected area system for all time.

Bhutan for Life is ‘Project Finance for Permanence (PFP)’ mechanism to provide sustained flow of fund to effectively manage Bhutan’s protected areas and biological corridors. BFL will aim to mobilize, in a single agreement, all governmental, financial and other commitments, needed to develop Bhutan’s protected area system and maintain it forever.

Key components of Bhutan for Life - Asia’s First Project Finance for Permanence (PFP)

Project Finance for Permanence is a means of designing and launching protection at the landscape scale relying on rigorous project selection and management.

It is based on a Wall Street model of project finance for organizing and financing complex, expensive and well-defined projects. The aim of PFP is to help establish the conditions required to secure the ecological, financial, organizational, political and social sustainability.

The PFP approach begins with the development of—and agreement on—a conservation plan that has a set of targeted goals and milestones, as well as a rigorous financial plan to achieve them.

Next, a “multi-party, single closing” approach is employed that ensures the security of the investment. Here, a group of donors commit funds towards BFL but all funds are held and not distributed until 1) the total fundraising commitment goal has been reached; and 2) all key legal and financial conditions that have been agreed upon in advance are met. This serves to leverage funding, by providing funders with an up-front guarantee that their support will be put to best use.

Then when all of the conditions are met, these donated funds will be placed in a transition fund that will make annual payments, starting high and declining to zero over a projected period of 14 years. At the same time, the Government of Bhutan will increase its funding by approximately 5 – 7 percent annually over this 14-year term. After that, Bhutan is responsible for fully funding all protected areas on its own.

The potential sources for the internal funding have been identified as (1) green tax levied on the import of vehicles, (2) payment for ecosystem services from hydropower, and (3) revenue from eco-tourism in the Protected Areas.

 

 

What is PFP?

Step 1: A PFP initiative begins with the developement of ambitious and charismatic conservation goals, followed by the developement of a comprehensive conservation plan to achieve the goals. For PFPs related to protected areas, the plan may include creating new protected areas to fill gaps in the system, buying vehicles for forest patrol, blazing hiking trails and teaching communities how to create eco-enterprises in or near protected areas.

Step 2: A rigorous financial plan for funding the conservation plan is created, so as to ensure its lasting success.

Step 3: Donors commit funds to bring the plan to life. But their funds are held back until the total fundraising goal is reached and all key legal and financial conditions that have been agreed upon in advance are met. This provides donors with an up-front guarantee that their support will be put to best use.

Step 4: Everyone involved comes together to sign one agreement. At this closing, their donations are put into a fund, the governance of which is defined by them.

Step 5: Money within the fund is distributed over a set period of time and in accordance with the agreed financial plan.

Step 6: The government in the country where the conservation areas are located increases its spending until it fully assumes the costs of conservation.

Although funding is key, the negotiation and closing of a PFP deal presents an extraordinary opportunity to create new policies for long-term conservation and the institutions needed to permanently protect natural resources.