Relying on a diverse set of financing mechanisms reduces dependence on specific revenue streams and funders. It also provides flexibility if certain revenue streams are disrupted, such as tourism during the COVID-19 pandemic. Assess the feasibility of priority financing mechanisms within your context and include your findings in a strategic financial plan. This plan should anticipate the resources needed to build your portfolio of revenue streams.
Identifying financing mechanisms
The exact mix of financing mechanisms to obtain long-lasting funding for an MPA depends highly on context. This includes:
Socioeconomic aspects (MPA beneficiaries)
Governance aspects (key actors, stewards)
Ecological aspects (ecosystems and ecosystem services).
Ecosystem services and MPA attributes can benefit different actors, enabling you to identify potential streams of funding. Most often this leads to a long list of potential financing mechanisms.
Three criteria to prioritize financing mechanisms are to identify the:
Financial impact
Ease of implementation
Likelihood of success
For your priority financing mechanisms, you should carry out a funds flow analysis. This contains an assessment of challenges and enabling conditions to generate income streams with a specific financing mechanism.
The analysis leads to an overview of actions to implement the priority financing mechanisms. This should become the backbone of your sustainable financing strategy. Figure 1 shows a sustainable finance framework from Wolfs Company presenting the different steps.
Figure 1. Sustainable finance framework[1]. Source: Wolfs Company, 2021a. Copyright 2021 by Wolfs Company. Reproduced with permission.
What if your context changes (e.g. loss of tourism)?
Many MPAs rely on tourism as a key part of their financing strategy, but for many these income streams dried up during the COVID-19 pandemic. This has changed the context and enabling conditions for MPA financing, and you should reconsider the resilience of tourism-related MPA financing strategies.
As a response to the pandemic (and to improve financial resilience in general), some sites are adapting their strategies to integrate more diverse, flexible and predictable funding sources and mechanisms. Examples include:
Research fees
Selling products online
Crowdfunding
Adoption programmes
Volunteering programmes
Blue carbon projects (mostly for very large areas of mangroves)
Providing services such as research (for instance, MPAs that are trying to strengthen the business models of their research labs by offering water quality tests that are required for environmental permits).
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Overview of financing mechanisms
Table 1 gives an overview of finance mechanisms that contribute to the overall goal of financial stability, classified by funding source. The category of “other mechanisms” contains innovative mechanisms that require more financial, management and technical resources before they will generate income. Implementing innovative financing mechanisms is often a long-term process. Start early, but proceed slowly – make sure the more traditional and accessible financing mechanisms are in place first.
Table 1. Overview of sustainable financing mechanisms for MPAs. This table builds on the BIOFIN Catalogue of Finance Solutions (with major adaptations), and includes inputs from MPAConnect and other MPA managers. Source: Wolfs Company, 2021b. Copyright 2021 by Wolfs Company. Reproduced with permission.
Assess feasibility of financing mechanisms within your specific context
Once you’ve prioritized potential new and existing financing mechanisms for your MPA, the next step is a funds flow analysis. Each financing mechanism can be implemented in several ways and will most likely involve a variety of stakeholders. So you need to analyse how the funds should or could flow from the beneficiary to the MPA.
With this analysis, you can assess how a financing mechanism would potentially and optimally function in your context. The Eco2Fin framework can support this assessment.
After identifying how the funds should flow, the analysis involves an in-depth assessment of the functioning of the socioeconomic and governance context. This analysis focuses on priority finance streams, and hence on a limited number of relevant beneficiaries.
The assessment focuses on obstacles to current and potential financing mechanisms. These obstacles can be administrative, environmental, political, financial, social or legal in nature (Table 2).
Table 2. Obstacles to implementing sustainable financing mechanisms
Your sustainable finance strategy
Once you’ve identified and understood the obstacles to implementing a proposed financing mechanism, you can then design interventions that will overcome these barriers, reconsider the feasibility of the financing mechanism or reprioritize it among other possible financing mechanisms.
For example, if current legislation doesn't allow you to charge entry fees, your intervention could be to engage with lawyers and civil servants to remove legislative barriers (or create new legislation).
You can then put together your sustainable finance plan. This should consist of:
The resources available to your MPA should of course increase over time as financing mechanisms begin to deliver. This means you can invest funds from your initial financing mechanisms to gradually develop more innovative financing mechanisms. This strategy is part of your organizational strengthening to become more sustainable.
Start with the “low hanging fruit” – financing mechanisms that can be easily implemented and sustained, or improved efficiency within existing financing mechanisms. In parallel, slowly start with other more challenging financing mechanisms, gradually increasing effort as your income increases.
In the sustainable finance plan you should lay out the jigsaw of the resources needed versus the resources available. Each financing mechanism requires staff time, so you only start implementing them when you have the resources (time and money) to do so. As a rule of thumb, around 6–10 financing mechanisms should be enough to give you a sustainable finance strategy. However, it’s crucial to be adaptive and anticipate contextual changes.
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