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FOREST RESILIENCE BOND WORL RE OUR S I STITU E BLUE , FOREST CONSERVATION Introduction to the Forest Resilience Bond August 2020
FOREST RESILIENCE BOND
WORL
RE OUR S
I STITU E BLUE , FOREST CONSERVATION
Intr oduction to the Fores t Resilience Bond
August 2020
FOREST RESILIENCE BOND
Summary
► Accelerating pace of wildfires ► Forest restoration is preventative solution, but lacks funding ► Forest Resilience Bonds (FRBs) = proven public-private
partnerships to finance/fund restoration with market-rate returns – Decrease risk of severe wildfire – Environmental & climate benefits
– Support & protect rural communities
► Investors include Rockefeller Foundation, Moore Foundation, Calvert Impact Fund and AAA Insurance
► Proven partnership with USFS – First solution to finance public lands management at scale
► Robust Pipeline of future projects
Page 2
OF ALARM
Heat, drought-parched brush fuel ferocious fire
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CONTIJfUOU,: COVIMOI AT .uatn'I.AL-COM
TRAGEDY 19 fil'9ighters killed I Yarnell residents flee; I lightnin
bk,ze in last-moving wildfire; half of its 500 homes continues to g sparked fire;
other injuries reported may be destroyed rage out of control
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'AN INFERNO LIKE YOU'VE NEVER SEEN'
FOREST RESILIENCE BOND
West’s Biggest Natural Disaster Threat
Page 3
□ □ ■
FOREST RESILIENCE BOND
Western US Forests & Communities at Risk
Low Moderate High
2018 USFS Wildfire Hazard Potential
► 58M acres at high-medium wildfire risk
► $76B-$130B long term annual wildfire health risk
► 65% of CA water supply originates in forested watersheds
► Over $220B property at extreme risk
► CA forests becoming net carbon emitters
Page 4
RESILIENCE BOND
Path to Overgrown Forests
1890 1993
Photo Credit: George E. Gruell, Fires in the Sierra Nevada, 2001
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RESILIENCE BOND
Proven Solution: Forest Restoration
► Mechanical and hand thinning
► Prescribed fire
► Meadow restoration
► Invasive plant removal
► Native aspen regeneration
► Road decommissioning
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FOREST RESILIENCE BOND
Less Fuel for Wildfires
Overgrown Restored
The Finance Problem
8ILIE
$424 million
USFS 2017 Restoration
Budget1
Highest Priority
Projects: $11BTotal Market for Restoration3:
$58B
Assuming an industry average of $1,000/acre,
the need for restoration on USFS land is $58 billion, or
136x current funding
1. USFS Fiscal Year 2017 Budget Overview ($40 million for CFLRP and $384.1 million for hazardous fuel reduction)2. USFS Fiscal Year 2017 Budget Overview (58 million acres at “high or very high risk of severe fire” @ $1,000/acre)
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FOREST RES NCE BOND
FOREST RESILIENCE BOND Page 9
Benefits of Restoration
Shared Resources
Wlld(lre Severity
Community Resilience
FOREST RESILIENCE BOND Page 10
How FRBs Work
~ ' Investors
FOREST RESILIENCE
BOND
• Outbound Cash Flow ... Inbound Cash Flow
ro 0.J
Implementation Partners
·-· c:-■:l Beneficiaries
... Resource Flow
' Fire Sup • and Wi press,on ater Benefits
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Pilot FRB: Yuba Restoration
► North Yuba River Watershed, Tahoe NF, California
► $4M FRB
► Restoration work 2019 – 2022
► Restoring 7,114 acres => protecting 15,000 acres
► Key partnerships: USFS, CA State and Yuba Water Agency
► Market rate investors earn 4%, 1% for PRI lenders
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FOREST RESILIENCE BOND
* CALIFORNIA REPUBLIC
-= R_Cl.,CKEFELLER FOUNDATION
MOORE FOUNDATION
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-$ Calvert . = Impact Capital
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l l FOREST RESILIENCE BOND
- NATIONAL
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FOREST RESILIENCE BOND
Pilot FRB: Structure & Stakeholders
Investors
Service
Loan Agreements
Green = cash flows Orange = contracts
Contract Loan Agreement
Grant Stewardship Agreement Agreement
Page 12
FOREST RESILIENCE BOND Page 13
Pilot FRB: Expected Benefits
► Protect 50k acre-feet of water
► Generate 70k MWh of hydropower
► Avoid 50k metric tons of CO2 emissions
► Create 79 jobs in local rural communities
► $8.8M value to water agency
FOREST RESILIENCE BOND Page 14
- Alonzo “Lon” Henderson, District Ranger, Tahoe National Forest
USFS Testimonial
“Typically, a large restoration project such as Yuba would take over ten years, if ever fully implemented. Instead, we will complete it within three years. This means a healthier, more resilient forest before insects, disease or wildfire negate our planning and before our communities are adversely impacted.”
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Driving Scaled Investment and Impact
► Start with initial FRB of $4M -$10M
► Scale to future FRBs of $100M+ – Same
watershed
– Same stakeholders
– Same contracts
► Cornerstone for sustainable rural development
FOREST RESILIENCE BOND
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Pipeline California FRB Opportunities
Description of Engagement Level
National Forests
Expressed interest in FRB
Lassen, Inyo, San Bernardino
In preliminary conversations
Klamath, LTMBU, Stanislaus, Sierra
Project area defined, beneficiary engagement ongoing
Eldorado, Tahoe (Trapper Project)
Active project in place
Tahoe (Yuba Project)
Trapper Project (30k acres)
Yuba Project (15k acres)
Crystal Basin Project (32k acres)
FOREST RESILIENCE BOND
Page 17
Impact Reporting Aligned with SDGs
8 DECENT WORK ANO ECONOMIC GROWTH
~
6 CLEA WATER ANO SA ITATIO
SUSTAINABLE DEVELOPMENT
G~ ALS
17 PARTNERSHIPS FOR THE GOALS
FOREST RESILIENCE BOND
Key Partnerships Established
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A BLUE 0 FOREST CONSERVATION
Financial Innovation for Sustainable Solutions
WORLD
RESOURCES
INSTITUTE
NATIONAL O U.S. Endowment OREST F O u O AT 10 for Forestry and Communities
natural capital PROJECT
Stanford Water in the West
FOREST RESILIENCE BOND
Current Investors & Backers
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THE
~ =i~ KEFELLER FOUNDATION
GORDON AND BETTY
MOORE FOUNDATION
sprf ng point.
ClimateWorks FOUNDATION
fftl tU)
rt
=i Calvert ¾ Impact Capital"
Insurance
Bella Vista FOUNDATION
WEYERHAEUS ER FAMILY - FOUNDAT ION -
I Brownstein Hyatt Farber Schreck
FOREST RESILIENCE BOND
Page 20
Next Steps + Opportunities
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►Work with COIN (and directly with insurers) to include more insurance investors in future projects/funds
► Partner with insurance companies on joint research projects to better understand, quantify and ultimately help mitigate wildfire risks
► Develop new finance products (not insurance products) to allow for insurers to opt in to supporting wildfire risk reduction
► Federal partners can be hard to work with, especially for the private sector, let us help!
FOREST RESILIENCE BOND
Thank [email protected]
FOREST RESILIENCE BOND
WORLD RESOURC S NSTITUTE
A BLUE 0 FOREST CONSERVATION
