Unfortunately I was out of town the last few weeks and didn’t get to post this. This is the other side of the Forest Resilience Bond Blue Forest story.
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FWIW I have been working on various grants including Keystones. Here are some of my concerns about them, but some are similar to these efforts. The USG seems to be making a case that some things are too important or urgent or expensive to be left to the federal government, employees, and traditional procurement methods. And yet that case has not been made openly with all of us.
- Public/private partnerships. I think they need to be watched carefully from the standpoints of transparency, accountability, and efficiency (a term we probably all disagree about the exact nature of, but it’s worth discussing)
- What I call the stratigraphy.. how many layers between the people doing the work and the federal funding? Clearly the more layers, the easier it is to avoid transparency and accountability. One obvious and irritating example is the difficulty Dave and I have had getting from the Press Offices of the Forest Service and USDA the amount of funding obligated.. a good place to start. And the more layers, the more overhead.
- The relation of large foundations who tend to also fund the NGOs involved. We don’t know exactly how these foundations influence federal land management. Maybe it’s just the question of “why are these foundations relatively suddenly interested in forests?” They might say, if asked, something like “conservation” or “natural climate solutions”. Maybe I’m just being territorial, but it makes me a bit uncomfortable when I’m on calls with Keystone-involved NGOs who care what, say, the Doris Duke Foundation thinks. Did someone elect them? Is there a foundation equivalent of “crony capitalism”?
Given that, all the folks I have met who are involved in all this (NGO’s, Blue Forest) have the best intentions and do good work, and this is not to criticize them, but rather to question the relatively new structures and entities that are involved with the Forest Service. And I had the same questions about the Public Lands Rule (and the SEC proposal), but I am thinking that both of those are on their way out for now. That seemed to be getting corporations into the environment and onto our federal lands to do “conservation.” But the very same corporations could have then, and could do, today any restoration work they want to do, and get a tax write-off. As I said at the time, and some BLM folks said “we can already do this, what’s this really about?”
Anyway, many thanks to the folks at Blue Forest for giving their side of the story! This answers the same questions as I asked Andy in this post. The quotes below are from Andy’s post.
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What is a Forest Resilience Bond?
The Forest Resilience Bond is a conservation finance model, specifically designed to add new revenue streams to fund forest restoration and to finance upfront project costs. The use of the word “bond” in “Forest Resilience Bond” refers to the fact that Forest Resilience Bonds raise money from investors in the form of debt. However, it is not a municipal bond.
It’s a public-private partnership that uses private capital to ease cash flow constraints. And it puts benefit evaluation models to work bringing in new money, so that multiple groups (beneficiaries) share the costs of forest restoration.
For projects being completed on National Forest land, we work with the USDA Forest Service, who selects an organization to be the implementation partner and manage the work on the ground.
Then, working with beneficiaries, we evaluate the downstream benefits of these projects—like decreased fire risk and increased water volume, among others—and use this information to establish an economic, social, and environmental case for funding. Beneficiaries can be anyone who benefits from the work taking place – organizations like water and electric utilities, or in the example cited in the article Washington State Department of Natural Resources, Chelan County PUD, and Chelan County. Beneficiary contribution amounts are based on the economic value of the calculated benefits they would receive by the restoration occurring.
The FRB is then brought to private investors, like foundations and institutional asset managers, who provide capital to finance the project work. This means critical financing is available to implementation partners up-front for restoration projects, compared to typical grants, which can take months to reimburse contractors after work is completed.
The investors receive a small return, ranging from 0.5%-4%, and the restoration work gets done, protecting our communities and forests from catastrophic wildfire for future generations.
What do the people financing get out of it?
FRB investors are mission-aligned private foundations, family offices, impact investment funds, and insurance companies, who value both financial return and environmental impact.
Some of them prefer to remain private, but some public examples include The Rockefeller Foundation, ImpactAssets, and CSAA Insurance Group.
These specific investors are motivated by social and environmental impact as well as financial return, so they are willing to accept an interest rate in the low single digits between 0.5% and 4%.
“Blue Forest persuaded the California legislature to allow Blue Forest to issue forest bonds with the investor’s interest earnings exempt from state tax, just like a California municipal bond issued by a city.”
Blue Forest has not engaged state or federal legislatures, nor do we use any bonding authority at the municipal, state, or federal level. The FRB is not a tax-exempt product, though many of our investors are tax-exempt organizations.
“Blue Forest, which skims administrative expenses and can get rich as there is no meaningful oversight of its staff salaries, and the implementation coordinator who gets more overhead rake-off for passing through the dollars to Bubba. Oh, Bubba makes minimum wage (if lucky) to rake the forest.”
Blue Forest is a registered 501c3 non-profit organization with publicly available Form 990s that showcase our highest-paid employees’ salaries. Our external board oversees the management of our organization, including executive compensation.
We take a holistic approach to forest restoration, including considerations for ensuring local contractors are paid a fair wage in a timely manner. On-the-ground restoration work is only one part of the solution to the wildfire crisis, therefore we are also working to build up and maintain the necessary workforce and infrastructure to support the holistic restoration economy.
Blue Forest and the USDA Forest Service pride themselves on partnering with outstanding implementation partners who are working to push the entire forestry industry to increase pay, provide stable year-round employment, and hire locally to support sustainable economic growth. The implementation partners Blue Forest is currently engaged with, both for live FRBs as well as ones in development, range from small local grassroots organizations, to large national organizations, and counties; however, at the minimum, all must follow prevailing wage requirements to receive government grant funding. Workforce development and empowerment is a key pillar of many of these organization. For example, Lomakatsi Restoration Project, the implementation partner on the Rogue Valley I FRB, has four education and training programs working with youth, and provides salaries that are higher than the federal wages for the same roles, and above the state’s minimum wage.
“Blue Forest then enters into contracts with “beneficiaries” who agree to borrow money from the Blue Forest Fund to pay for forest restoration work that the beneficiaries would like to see happen. The key attribute required of a beneficiary is having cash-flow sufficient to pay back the Fund’s money plus interest. Blue Forest has persuaded electrical utilities (their cash flow comes from selling power to customers) and insurance companies (cash flow comes from homeowner premium payments) to agree to pay back the Fund the borrowed money.”
Beneficiaries do not borrow money from Blue Forest, but rather pay into the FRB amounts equivalent to the benefits they will receive based on the restoration work occurring. For example, a water utility would pay the amount equivalent to the value of the increased acre-feet of water they have been estimated to receive from the restoration work financing through the FRB. The financial contribution from the beneficiaries covers the interest rate for the implementation partners to receive a 0% loan from the FRB for the implementation work, as well as allow for investors into the FRB to receive a concessional (below market) interest rate of return. The implementation partners are the only entities “borrowing” money from Blue Forest through the FRB.
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Blue Forest folks were helpful, so if we have more