California experiment: Investing in forest fire prevention
As wildfires rage through western California, a new way to help prevent them is now being tested in nearby Tahoe National Forest, reports CNBC.
The effects of climate change will push the cost of firefighting even higher, as warmer temperatures and dryer weather cause more flare-ups. 2017 was also one of the worst on record for wildfires in California, and it was also the second-hottest year on record for the state, according to the National Oceanic and Atmospheric Administration.
As the current California fires push the issue back into the headlines, calls for forest restoration are getting louder.
The Forest Resilience Bond was developed by the nonprofit investment firm Blue Forest Conservation, a Sacramento, California-based start-up, in partnership with World Resources Institute. It seeks to lower the risk of dangerous and destructive wildfires by shifting the heavy costs of forest restoration from the state’s forest service to private investors.
It is a first-of-its-kind financial tool, designed to help investors fund forest restoration in overgrown, highly combustible areas, which are becoming ever more dangerous due to climate change.
“It is really a public/private partnership where we’ve engaged investors like pension plans, insurance companies, even impact investors like foundations, to help cover the upfront costs of doing this much-needed forest restoration work, with the primary goal of reducing the risk of catastrophic wildfire,” said Zach Knight, co-founder and managing partner of Blue Forest.
The bond deal was finalized late last year, and forest thinning work has been underway in more than 15,000 acres of forestland in the North Yuba River watershed for several months. The restoration should not only reduce the risk of catastrophic wildfires, but also protect water resources, avoid carbon emissions and even create rural jobs.
Here’s how it works: Investors buy into the bond, and the money is drawn as needed for forest restoration work. This includes thinning, strategic backfires and other rehabilitation. In this first case, it was a $4 million bond with money from CSAA Insurance, Maryland-based investment firm Calvert Impact Capital, The Rockefeller Foundation, and the Gordon and Betty Moore Foundation.
“There is overwhelming need for cost-effective climate solutions to help communities dealing with the dual threats of mega-fires and droughts,” said Saadia Madsbjerg, managing director at The Rockefeller Foundation, in a release.
The investors are paid back over five years, with 4% interest, by those who benefit from the work and have contracted with Blue Forest, like the U.S. Forest Service and state agencies. In this case, payments will come from the Yuba Water Agency, whose reservoirs receive water from the forest and the California Department of Forestry and Fire Protection.
“There are about 300,000 acres upstream of our reservoir here that our water comes from, and we care about the quality and quantity of that water from the forest,” said Willie Whittlesey, assistant general manager at the Yuba Water Agency. “The need for funds is immediate. We have the effects of climate change, and we have a longer summer season, or a shorter wet season. We have significant north winds that are an effect of climate change. We need to do something now.”