Impact investors: Achieve higher risk-adjusted returns and more environmental benefits by funding bioregional projects
Break free of mindsets that limit your opportunities for impact
By Eduardo Esparza, founder of the Blue Dot Project
Impact investors often focus their funding in asset classes and geographies where they’ve been successful in the past.
But for those who invest in regeneration, that approach may leave money on the table. And it may achieve less environmental and social impact.
In this article, I propose a different way to achieve broader environmental benefits with less financial risk: I suggest you consider investing in bioregions rather than asset classes.
Bioregions are natural geographic areas with similar climate, ecosystems, floral, fauna, watersheds, and other geographic features. They often cross political boundaries such as state and national borders.
Why it matters
When you invest within and across bioregions, you may be able to achieve greater benefits than you can through your tried-and-true geographies and asset classes.
By aligning investments with bioregions, impact investors can often hedge against their risks, increase their returns, and achieve outsized environmental benefits.
Is this how you think today?
If you invest mainly by asset class now, you might look for opportunities in energy infrastructure, clean water, waste disposal, technology, agriculture, housing, real estate, or the like. You are probably wary of investments in asset classes where you have little experience.
If you invest mainly in preferred geographies, you may narrow your range to cities, states, provinces, or countries where you know the territory and you’ve succeeded in the past.
But the world is changing fast, and the task of regeneration is big and urgent. Do you want to keep thinking in ways that are becoming less effective each year?
How bioregional investment changes the game
Bioregionalism is a framework that categorizes Earth’s geographic regions by their natural characteristics.
Bioregions vary widely in their suitability for raising specific food crops or grazing specific kinds of livestock. One bioregion may have abundant rainfall and groundwater, while another is arid and subject to drought.
When you align your investments with bioregions, you can help increase local resilience by working within the natural characteristics of ecosystems. You stop growing corn and soybeans in rainforests. And you stop growing almonds—which need a lot of water—in arid regions.
You start your evaluation process by identifying bioregions where you want to produce a powerful impact. You study your target bioregions to understand their physical and ecological characteristics. You learn where they are healthy and where they are degraded.
Look for degraded land you can regenerate
Rather than investing in bioregions that are healthy, you seek areas that are degraded. But not irreversibly so.
Degraded land costs less to acquire, so you can earn a higher return on investment by regenerating degraded land. After a few years of restoring soil fertility and biodiversity, the land will be worth much more than you pay for it.
Four reasons to invest in bioregions
By investing in bioregions, you can achieve these benefits:
Risk hedging. Complementary projects within a bioregion can increase financial returns by making the entire bioregion healthier and more prosperous.
Ecosystem regeneration. When you invest to regenerate a bioregion, you help restore and enhance many of its natural systems.
Long-term value creation. A healthy bioregion can thrive for hundreds or thousands of years.
Strategic leverage. Each smart investment you make in a bioregion can compound the benefits of all the investments you make in the bioregion. When you learn how to invest in one bioregion, you can apply what you’ve learned in other similar bioregions.
How can you hedge your risks by investing across and within bioregions?
All bioregions are interconnected ecosystems. But many are relatively self-contained. A drought or a loss of biodiversity in one bioregion may not affect water availability, biodiversity, or prosperity in nearby bioregions. So you can hedge your risks by investing across multiple bioregions.
When you invest in complementary projects within a bioregion you can also increase your financial returns by making the entire bioregion healthier and more prosperous.
Create virtuous cycles of benefits
Here are more examples of how bioregional investing multiplies and amplifies its positive effects:
Regenerative agriculture improves soil health and increases water retention. These benefits reduce irrigation needs and food production costs.
Effective waste management can generate renewable energy that powers local buildings and businesses. Energy that’s produced locally builds more resilient communities.
Local food-production systems create jobs and reduce food insecurity.
Affordable housing ensures a stable workforce for regenerative businesses that are labor intensive, such as agriculture and eco-tourism.
Similar bioregions may offer widely different investment opportunities
Climate change may affect similar bioregions differently. Some areas may become more suitable for producing food or generating renewable energy. Others may become less so.
Some bioregions are more degraded than others, and some have stronger government protections against further degradation.
Non-ecological factors are also important to consider.
For example, higher population density is likely to increase land prices. But it also provides regenerative farmers with more cost-effective access to their customers.
Government regulation, social structures, and human cultures can make some bioregions much more attractive to investors than others.
So evaluate and weigh the tradeoffs.
Where has bioregional investing been done successfully?
Bioregionalism has roots that go back to the 1970s or earlier. The field expanded in the early 2000s, and growth accelerated in the 2010s and 2020s, driven by global awareness of climate change and depletion or degradation of Earth’s natural resources.
Today initiatives and bioregional investment funds are active in Europe and the United Kingdom, Latin American, the United States, and Canada.
At least two relatively new initiatives are global in scope. The BioFi Project proposes a network of Bioregional Financing Facilities around the world [Downloadable PDF. 2024. 167 pages. No charge.] One Earth is building a global network of people empowered to protect the planet through a variety of projects.
You may discover you have a lot to learn
Unless you’ve studied geography and ecology in depth, you may have to beef up your understanding of geography and ecosystems.
But the benefits of investing in bioregions are likely to offset the time and effort you’ll spend in learning. The insights you acquire about geography and ecosystems are likely to make you a better investor overall.
In summary, bioregional analysis is worthwhile because it offers a new perspective on investment risks and opportunities. It encourages you to think beyond investing in individual, disjointed parcels of land.
Would you like more information on how to invest in bioregions? If so, please share a comment below. If more than a few people are interested, I’ll write another article that goes into more depth.