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.