Discussion Paper

Private Sector Conservation Investments under the Endangered Species Act: A Guide to Return on Investment Analysis

Summary

A range of programs under the US Endangered Species Act (ESA) aims to increase management flexibility and encourage voluntary conservation. This paper uses a return on investment framework to examine business’ incentives to participate in such programs.

Key Findings

  • Participation in voluntary ESA programs can trigger a range of immediate and longer-term business costs.
  • Proactive, voluntary conservation can be in the private sector’s interest, particularly when it reduces the probability or cost of future compliance obligations.
  • Participation in voluntary ESA programs can reduce business uncertainties and risks and may help avoid regulation-driven delays to new land uses or other investments.
  • Analysis of participation incentives is relevant to NGO and other conservation advocates interested in encouraging more conservation by the private sector.

Abstract

The US Endangered Species Act (ESA) protects imperiled species by prohibiting harm to listed species and their habitat. Over the last 20 years, the US Fish and Wildlife Service and National Marine Fisheries Service have developed programs to increase management flexibility under the ESA and to encourage voluntary conservation actions by the private sector—above and beyond what is required for ESA compliance. These programs include Candidate Conservation Agreements, Safe Harbor Agreements, and a new Prelisting Conservation Policy, among others. Why would private landowners and firms voluntarily engage in proactive conservation efforts? We address that question by exploring the incentives created by ESA programs, using a return on investment (ROI) framework to identify the costs and benefits of participation. The paper is relevant to firms affected by current or potential species listings. It is also relevant to NGO and government conservation advocates interested in encouraging more conservation by the private sector. The analysis sheds light on factors likely to affect participation, programs’ likely effectiveness, ways to better target partnering or cost-share engagements with the private sector, and the design of future programs to achieve conservation goals.