November 27, 2023 • 60 mins
How do we account for nature? We can build on it and we can take from it, but what is its intrinsic value — in and of itself?
On this episode: Adam Davis (of Ecosystem Investment Partners), and a cultural transformation happening right now — reshaping the intersection of environmentalism and capitalism. Welcome to the restoration economy.
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Music: Thumbug, Local Artist, Yu Su, SFML
Cover art: Alé Silva
Thanks: Ian Wyatt, Ava Stanley, Aila Takenaka, Alex Janz
Transcript, Citations, etc: https://www.futureecologies.net/listen/fe-5-6-making-a-living
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Introduction Voiceover (00:00):
You are listening to season five of
Future Ecologies.
Adam Davis (00:07):
So I had a really profound experience during the
pandemic, reading the work ofDavid Abram. Spell of the
Sensuous and Becoming Animal. Hetaught me a few things. One of
them is that the same word weuse for the arrangement of
letters, is the word that we usefor magic. It's a spell. We
(00:31):
spell words, and you cast aspell. And the reason that
that's relevant right now isbecause he is a magician. For
him, the magic is in the actualexperience. And he taught me
that in magic, what we think ofas conventional magic, the magic
(00:54):
is not the trick. The magic isthe experience of the trick.
It's the experience that youactually have — the sense of
awe, wonder, even fright,because something happened that
was so unusual. And thatexperience is so profound that
it sort of shocks you out ofyour ordinary way of seeing
things. And if you can bringjust a little bit of that
(01:19):
experience of magic into yourexperience of nature, by just
listening a little more,listening a little longer... and
then seeing the world that'salso making the sound, and then
feeling the air. That experienceis magic. But it's also
(01:42):
participatory. You no longer arean observer of it, you're a
participant in it. David was oneof my most important teachers in
making me understand that thatexperience, that participatory
experience — of not beingseparate from the living world,
but you and the world being onething, not two things — That is
(02:07):
very much the way things werebefore the written word. So
that's David's work, and I wasreally moved by it. But the
thing that he never does, istalk about the magic of numbers.
There's two great systems. Oneis letters. The other is
(02:28):
numbers. Letters, and words havea relationship with magic and
experience and participation.But numbers are the things that
we use to determine what countsand what doesn't.
Mendel Skulski (02:46):
Recorded and produced on the unceded
territories of the Musqueam,Squamish, and Tsleil-waututh
Nations, this is FutureEcologies. I'm Mendel Skulski.
Adam Huggins (02:57):
I'm Adam Huggins. And on today's episode, Making a
Living, we're hearing from AdamDavis.
Adam Davis (03:04):
And I'm a managing partner at a company called
Ecosystem Investment Partners.
I think there is a realpossibility that this could be
the most boring episode you'veever done. After all your great
work on the sacred of nature,the amazing science of nature,
and poetic exploration of thesethings, today, we're going to
(03:27):
talk about permitting and money.It could be a disaster.
Adam Huggins (03:31):
I couldn't be more excited right now.
Mendel Skulski (03:34):
It's been a long time coming.
Adam Davis (03:39):
I really believe that a great motivation for
finding a career that hasmeaning and purpose is doing
work that doesn't. My first realjob in San Francisco was working
on Fisherman's Wharf at a placecalled Sourdough Puffs, where we
deep fried bread, basically,dough in vats of oil. And that
(04:06):
was appalling, appalling work.It was... the cleanup at the end
of the day was just, you know,you felt exactly as greasy as
you would think you would feel.I worked as a cashier in a
cafeteria, actually in theMuseum of Modern Art in San
Francisco, which was a reallyfun job. I was doing some
painting and exploration of artmyself. And so being around the
(04:29):
art every day was great. Thework itself was was nothing. It
was operating a cash register.Then I got a more serious job as
an assistant legal administratorat a building maintenance
company. I worked for a womanwho changed smoked cigarettes
inside — because you could, backin the day. And she was well
(04:52):
meaning, but cynical beyondimagining. She had been through
the corporate world long enoughthat she just knew that it
wasn't going to really make adifference either way. And so I
reported to her for maybe sixmonths in a fluorescent lit
room, reeking of cigarettesmoke, and then quit that one. I
guess I was working at a pictureframing shop when I got fired. I
(05:16):
was planning a two monthmotorcycle trip with my then
girlfriend, now wife. And so Igave them about two months
notice before the trip, and Igot fired the next day. So I was
now out of a job planning onleaving for this trip. And a
friend of mine knew about acomposting company that was just
(05:37):
getting started, called AmericanSoil Products in Berkeley,
California. I got introduced toBob Beatty, who was the
proprietor. Bob started AmericanSoil Products to transform
organic waste into usefullandscape products, and I was
the first employee in August of1985, and immediately fell in
(06:00):
love with it.
At first it was the materialityof it, you know, I one of the
things I loved about art wasliterally the materials and the
tools like the physical feel ofthe oil paint, the linseed oil
that you'd mix with pigment, orthe turpentine that you'd use to
thin it — the canvas itself,stretching the canvas. And so
(06:24):
being out at the compostingyard, with piles and piles of
these different organicmaterials. You know, sandy loam
that came from the excavation ofthe BART tunnels; cocoa bean
holes from Ghirardellichocolate, big, massive piles of
cocoa bean holes that smelledlike cocoa and was wonderful;
(06:46):
cedar bark, piles of cedar bark,like stretchy orange orangutang
fur; and then all kinds ofcompost from yard waste. And we
blended all these together underthe direction of a soil
scientist named Lou, who was thehead of the chemistry department
at Contra Costa College. Weblended these things together,
(07:06):
each of which had been useless.People had actually had to pay
to get rid of them. But if youblended them together, they
became productive and fertile.Our customers came to include
the leading landscape gardenersand landscape architects. People
would come by and want aspecific blend for a rooftop
(07:27):
that was lightweight, orsomething for rhododendrons that
was more acidic, or specializedsoil amendments. We sold to the
Conservatory of Flowers inGolden Gate Park, which is a
spectacular thing. We even soldsome material to Biosphere Two —
that was an experiment inoffworld living. And they wanted
to have a very particular soil,for some reason. We got a call,
(07:50):
I think I was the guy who tookthe call in our funky trailer,
in an abandoned paint factoryyard in an industrial section of
Berkeley... seeing and exploringthe whole notion of what was
waste. What does it mean forsomething to be waste? Realizing
that there's this fine linebetween something that you buy
(08:14):
and pay for, and then somethingthat you have to pay to get rid
of. Organic waste turned out tobe a huge part of the waste
stream in California. And thisis what I started to learn as I
spent time in the compostingbusiness, is that we were
throwing away as a state,something like 50 million tons a
(08:35):
year of stuff, of which 20% or10 million tons was just
branches, leaves and grass.
In our little composting yard inBerkeley, we were doing a few
1000 tonnes a year. And wethought we were fabulous. We
were having so much fun. We weresaving the world. We had organic
(08:58):
gardens at the edge of ourcomposting piles. A couple of
the guys who worked on the sitebegan to keep chickens, and then
we had goats. And then schoolbuses would come by and look at
the organic gardens and see theanimals. It became like a
community gathering place. Itwas really fun. But it was when
(09:19):
I learned that we were actuallythrowing away 10 million tons a
year of this stuff, that Irealized that what we were doing
needed to go to scale if it wasgoing to make a difference. I
had a daughter — my wife and Ihad a daughter — and I really
needed a steady job. I needed acheck that came every two weeks,
(09:40):
and I needed health insurance.And so I ended up working for
Oakland Scavenger Company whichhad just been acquired by Waste
Management where I spent 10years of my life. And talk about
materiality, right? I mean,compost is one thing, but the
waste stream? The American wastestream is astounding in its
(10:04):
variety. The things people aredone with and no longer want,
that they throw away iseverything under the sun. It was
a great, great training groundfor the fundamental question of
where things come from and wherethey go.
I had come from, you know,Berkeley and the hippie
community. And I had lived inIthaca for five years, and
(10:26):
hitchhiked around, and I wassort of part of that tribe. And
we had a definition of garbagethat basically is the set of
previously useful things that wechoose to waste, right? And we
really choose to waste them bythrowing them in a pile and
commingling them. So it's whenyou mush together all these
different things, that that'swhen garbage is created. Because
(10:50):
of course, glass isn't garbage.And paper isn't garbage. And
even branches and leaves aren'tgarbage. But if you mix them all
together, then you created thisthing you can't do anything
with, and that's garbage. Soit's a moral definition. But the
garbage men, mostly men, atWaste Management, Inc. had a
more pragmatic definition, whichis simply the set of things that
(11:14):
costs you more to go get thanit's worth. It costs you more to
deal with it, than the thing isworth. So when you have
something in your hand, call itan aluminum can, there's a
moment of choice, where you cansay, I'm going to do something
with it, or I'm going to throwit away. Now, if there's a
(11:34):
recycling system, it goes intothe recycling system. If there
isn't, it goes in the garbage.It turned out that the economic
definition of garbage carried alot of weight. I had an
opportunity because of all themoney and systems and so on,
that existed in this giantcompany to create structures
(11:56):
where you could make more moneydoing the right thing than the
wrong thing. You could make moremoney by recycling something
than throwing it away. Therewere some tailwinds, which is
that people wanted it, citieswanted it. There were actually
mandates now in law forrecycling. But in order to do
that, there were some structuralproblems. The economics of this
were really challenging, right?The sunk costs in existing
(12:19):
landfills and existing garbagetrucks mean that taking one more
ton of stuff and putting it inthe landfill has very little
additional cost. But at thebeginning, taking that same ton
and putting it into a recyclingsystem meant new containers, new
trucks for recycling, newprocessing centers, and then
something to do with all thematerial that had been
(12:40):
collected. So really challengingto get started against the sunk
cost of the existing system. Andthat I think, is part of what
we're up against with all of ourenvironmental concerns.
Basically, I became a student ofincentives and contract
(13:01):
structures. How do you rewardthe environmental good more than
the environmental bad? So what'sa fair way to allocate costs and
create rewards, so that you'rerewarding the behavior that you
want? And I really got to go toschool on this through many,
many municipal contracts,including some really big ones
(13:21):
like city of Oakland. The lawthat we were operating under the
integrated Waste Management Actbasically had a hierarchy, which
had the first priority is notmaking waste, right, waste
reduction. Then the secondpriority is recycling and
composting. And then the thirdpriority is landfilling or
incinerating what's leftover.But the way the contracts worked
(13:42):
was exactly the inverse. You gotpaid the most and most
predictably to throw thingsaway. Because that was the
existing infrastructure. You gotpaid less and less predictably,
to recycle and compost. Partlybecause people had this notion
that somehow you were makingmoney on the back end of it,
right? You were making money onselling the aluminum cans, so
(14:03):
they shouldn't subsidize therecycling. Although you were
making much less thanlandfilling. And then you got
paid nothing at all for wastereduction. There was no
incentive to not produce waste.Energy and energy efficiency.
It's the same question. Whichis, how do you reward utilities
to produce less energy, to bemore efficient when they get
(14:26):
paid by the kilowatt, right? Butthe same thing was true with
toxics. And the same thing wastrue with water. And the same
thing was true with othermaterial forms.
So along the way, at aconference called the Industrial
Ecology Conference, I happen tosit at a small table, and I was
seated across from a woman whostarted talking about the value
(14:47):
of nature — literally theeconomic value of what nature
does. At first, I didn't reallyunderstand what she was talking
about. But her basic point wasthat in theory, we know that
nature is valuable. But for anindividual landowner — for
someone who owns land — if youcut the tree down it's worth
(15:08):
money. It's worth money aslumber or paper. But if you
leave it standing, it's worthzero. And what she was saying
basically is that's inaccurate.Leaving the tree standing has
value. It's called ecosystemservices. So this was 1997. That
(15:29):
phrase wasn't around in commonparlance, I hadn't heard it. And
it turned out that this womanwas named Gretchen Daily. She
was a conservation biologists atStanford. Because while people
had been talking aboutecological economics, probably
for 25 years in academia, theyhad been talking about it in a
pretty theoretical way.Theoretical exercises to get
(15:52):
people to say what they thoughtthey would pay for a park, or
how you would replace a naturalfunction if somehow it went away
— notions, basically. AndGretchen was saying, it's not
going to do. Things are gettingbad out here on the surface of
the world, and we're going tohave to pay people to leave the
trees standing. We're gonna haveto recognize the financial value
(16:15):
of what nature actually does.And what she really taught me
was very humbling, because Irealized that after having
worked in recycling, andenvironmental economics,
basically applied environmentaleconomics, for 15 years, I had
never really thought about whatthe goal was. I mean it's almost
(16:35):
embarrassing to say, but I justtook it for granted that
recycling was a good in and ofitself, energy efficiency was a
good in and of itself. But ofcourse, those things are a means
to an end, not an end inthemselves. But what is the end?
What is the object of the game?The object of the game is the
(16:57):
healthy living world itself,that provides life support
services for us, right? It's notan abstract idea. It's a very
real material truth. The livingworld provides a stable climate,
resilient living systems, cleanwater, and other fundamentals
(17:18):
that are life support. When werecycle, we rely less on the
four primary extractiveindustries. And there's really
only four. Oil, ag, timber, andmining. Those are the four
places where all this stuffcomes from. If you could pay
people to not cut the tree downin the first place, right? If
(17:40):
nature was valuable in and ofitself, that would create a
price signal that would gothrough the whole system, and
help to more accurately reflectthe value of nature itself. It
was a very abstract idea back in1997. I really became fixated on
it, because there was somethingso fundamentally powerful about
(18:03):
making real the theoreticalunderstanding of the value of
nature — so that people couldactually get paid in real places
for doing real things. For stuffthat we know is valuable. It
just seemed like such anenormous opportunity, and such a
powerful lever inside thesystem, I couldn't think of a
better thing to get involvedwith. But I came home from that
(18:26):
meeting. And I was hanging outwith my wife in the backyard.
And I said, I'm going to createa career doing value of nature
stuff, ecosystem services. Andshe basically, you know, looked
at me very tolerantly and said,that's good.
(18:47):
There are a lot of things in ourlives that are sacred, or
inherently valuable, in such away that applying a price to it,
or a monetary value to it, seemsto cheapen or degrade the thing
itself. And yet, we don'tbristle at art and music being
(19:10):
paid for. There's a market formusic, there's a market for art.
But we would never say that artis only worth money, or music is
only worth money. They are worthmoney, but there's also
something else much differentgoing on. So in nature, natural
systems are valuable. We knowthis. We know that they're
(19:34):
valuable. And this bright linebetween, I would say, spiritual
value and economic value isnecessarily going to make people
uncomfortable. The other part ofit is that the idea of not doing
it, not putting a number on it,simply won't work in the current
(19:57):
moment, and it's deeply sad insome ways that that's true. But
I believe it is really true...that every acre of the world is
already valued for what we canbuild on it or take from it.
There is a known property ownerfor all the land in Canada, and
(20:20):
all the land in the UnitedStates, and most of the land
every place in the world.There's a process called
appraisal, where people can puta dollar figure on that land
based on what it can do for us,without reference to the natural
world — housing, and naturalresources. Building on it and
(20:42):
taking from it. And becausethat's true, we have to fight
back. We have to say that notbuilding on it or taking from it
is also worth money — for peoplewho own it, for people who can
benefit from stewarding it, andrestoring it, and managing it.
Those people have to be able tomake more money, or at least get
(21:04):
something from doing somethingother than wrecking it. And
that's the same economics asrecycling. Appraising land for
water purification, forbiodiversity, for flood
protection, the other functionsthat natural systems provide is
(21:28):
new, just like recycling was newjust 50 years ago. There were no
economics for recycling 50 yearsago. and now it's commonplace.
It was the official policy ofthe United States to drain
wetlands, on purpose, for mostof our history. It wasn't until
really 1970 that we changed ourpolicy to say actually, those
(21:51):
things are really valuable, andwe should stop wrecking them.
But there's still a departmentin our federal government called
the Bureau of Reclamation. Andwhat reclamation means is
draining wetlands, or creatingdams and putting water on dry
land, to reclaim it for economicuse — for people.
Assorted Environmental Protesters (22:10):
[Chanting] No means no!
What do we want? Change? When dowe want it? Now!
This is what democracy lookslike!
Adam Davis (22:20):
The conservation movement is noble, and I believe
in it, and I'm part of it. Imean, I want to protect the
things I love. And the beauty ofthe natural world is so sort of
obvious to me and so importantthat of course, you want to
protect every bit that you can.But the context is that in the
(22:46):
United States, the populationhas doubled since I was born.
There was 180 million people in1960, there's 340 million now.
Vancouver was 600,000 peoplewhen I was born. It's 2.7
million today. This is going oneverywhere. There's 8000 million
of us now. And we're consumingmore per person, not less.
(23:11):
Conservation misses the mark ina few ways. You win temporarily,
but then you lose over time,right? You can protect this
little bit here and this littlebit here, but there's these
enormous forces coming at you.And you can never really fully
hold the line. So it's the rightimpulse. It's a noble impulse.
(23:31):
But it's insufficient to thetask. Conservation because of
where it came from, tends to seethe natural world as like the
backdrop, or the stage set forthe human play. And so what you
do is you make a park, right?You take a piece of nature, and
(23:52):
you put a fence around it, andyou make it safe. It's a
wilderness, right? And thenmeanwhile, the human drama goes
on over here separately. Sothere's actually two groups of
people, the conservationists,and the environmentalists. And
they're quite different.Sometimes it's often as if
they've never met each other.The conservationists are about
(24:13):
taking land out of the economy.And the environmentalists are
about stopping the bad thingsgoing on in the human economy.
But governments who ultimatelymake the rules for all this, are
in an impossible situation. Theycan't really fix it for us just
with policy. Because on the onehand, they have endangered
(24:37):
species protection, they haveclean water laws, they have
clean air laws. And the basicmessage there is "Stop it. Stop
doing bad things. Not so much.Not here, not there. Not now."
Right? But on the other hand,they need job creation, and
economic development, and GDP,and there's growth — real need
for growth, somehow.
(24:57):
So conservation is necessary.It's contributed a ton of good
things to most of our lives,right? I love the parks near
where I live. But as a solutionfor the overall problem that we
face now, with increasingscarcity of the life support
services that nature provides,conservation — just stopping bad
(25:17):
things — is not going to achievewhat we need to achieve.
There are shelves and shelves ofbooks that are, I think, in the
category of "Nature is Amazing".And I love those books. I read
them all the time, And everytime I do, I'm learning
something new about some amazingfacet of the natural world. I
mean, I just read this bookabout eels called the Book of
(25:39):
Eels. Have you read this thing?It's stunning. It's stunning,
what els go through. 100 years,they live up in some stream. And
then they wake up one morning,and they realize it's time, and
they change color, and they godown the stream. And they're go
out into the Atlantic Ocean, andthey swim across the entire
Atlantic Ocean to the SargassoSea, where they disappear into
(26:01):
this cloud of seaweed and matein secret. And then all of a
sudden, baby eels are born, andthey're carried on currents to
rivers all over the world. Andthen they migrate up these
streams, and they can live for100 years, up on the top of
these streams. And it'shappening all over the world,
and almost all the eels comeback to the Sargasso Sea. And we
(26:22):
don't know how or why thisworks. It's amazing. Really,
it's amazing. But everything isamazing, right? And so the other
category of books, is that"Nature's in Big Trouble". The
environmental story is one oftwo things — this amazing thing
is getting wrecked, or the goodenvironmentalists against the
(26:44):
bad producer of goods andservices, right? The bad people
who make oil, the bad people whomine, the bad people who do
these things, this economicactivity, while we, the good and
noble people, try and protectthe amazing flowers and the
amazing orcas. And thisstoryline is so tired, it is no
(27:05):
longer helpful. And I'm notsaying that there aren't any bad
people. There are bad people inthe world. But most people
aren't. Even the people who aremining something. They're not,
like, trying to hurt you or hurtthe natural world. They're
trying to provide the goods andservices that we all use. We're
(27:25):
sitting in a room full ofincredible technology, right?
All this stuff was mined. Whenyou start to really grok where
things come from and where theygo, the simple narrative that
there are bad people who aredamaging the world, while we are
trying to save, doesn't reallyhold water. It doesn't really
work. And plus, even if you wereright, so what? You know, like,
(27:48):
what are we going to do? How arewe going to influence these
enormous systems?
Adam Huggins (27:54):
Yeah, if it held water, it would be a dam.
Sorry...
Adam Davis (27:59):
[Laughing] No, that's great. Levity is helpful.
Thank you. I'm getting verysincere here.
Mendel Skulski (28:04):
I think this is the perfect moment for you to
recapitulate what... what is thebig idea?
Adam Huggins (28:09):
Yeah I was gonna say, let's hear about the stuff
you do now.
Adam Davis (28:18):
So, I came across this definition fairly recently,
and was fascinated to learn thatthe word "bank" comes from the
Italian word Banco, which meanttable. And so back in early days
of commerce, the bank was atable, on which exchanges
(28:40):
occurred. But there turns outthere's a much older word, which
is Old Norse, or Old German, Idon't know how to pronounce it,
but Banki, B A N K I. And thatmeant a curve, like the curve of
a river bank. And we use thatkind of expression today, when
(29:00):
we talk about an airplanebanking into a turn. A river
bank would pile up as sedimentwould accumulate on the inside
curve. So river beds and plains,flood plains, accumulate
material from upstream, whichmakes fertility. So I guess
(29:21):
that's a good source of a wordfor a place where we keep that
which we value.
In the work that we do, wecreate things called mitigation
banks. That's the term of art.And people often think of them
when they first hear of them asfinancial institutions of some
sort. But they're not, they'replaces. They're like parks or
(29:46):
other protected areas. But theyare a store of ecological value
that comes through restoringdegraded landscapes — wetlands,
streams, habitat for endangeredspecies — and then where you
measure what happens.
So if ecosystem services theoryis correct, and what nature does
(30:09):
is valuable, how would we know?How would anyone actually get
paid? The first thing that youneed to be able to do, and I
know some of the listeners aregonna hate this too, is you need
to be able to put a number onit. You gotta do it. And I'm
gonna go to the medicalmetaphor. If you're not feeling
(30:29):
well, and you go to the doctor,the doctor is going to do a
test. And what they're lookingfor is the absence, presence, or
concentration of something,right? Some indicator of
function. So whether it's redblood cells, or cholesterol, or
lipids, or anything else, theywant to know if your health is
(30:53):
being affected by somethingthat's out of range, right? It's
out of the healthy range. Asabove, so below, right? The same
things that happened in yourbody are also happening out in
the bigger world. Now they'rehappening at a much different
scale, and much different pace.So it's much bigger out there
and much slower. Which is one ofthe reasons it took us a long
time to understand this. But youcan actually look at indicators
(31:17):
of functions of natural systems— so the health of a wetland,
the health of the stream. Thereare chemical, physical and
biological things that you canmeasure, and know something
about the system. That's not tosay that we know everything, but
we don't know everything abouthow your liver works either,
right? But we know how to dosome things that are helpful in
(31:38):
a crisis. Like if you were goingto fix it, what would that mean?
What would you be going for, andhow would you know it if you saw
it? In some systems, the livingthings actually are the things
that you would measure. So it'snot the fish in and of itself,
any more than it's the red bloodcell itself. Like, the red blood
(31:59):
cell in your body is great. Butreally, it's the whole
proliferation of them, it's theconcentration of them. Do you
have a sufficient amount of redblood cells? It's the same with
the Delta Smelt in the Delta. Ifthey're going away, it's because
something is fundamentallywrong. And that's why the law
steps in and says "You can'tmake it go extinct. Because
(32:20):
that's an indicator that theentire thing is falling apart."
The term of art is a functionalacre. So you're measuring either
the biodiversity, the waterquality, the flood protection,
the functions that are providedby that acre. And you can tell
(32:42):
that something that's degradeddoesn't have much function. But
something that's been restoredhas more function. You can
measure the uplift, and you cancompare that to natural healthy
systems called "referenceecosystems" or a "reference
system". And that would be oneway of thinking about what
you're trying to do.
So the measurements part of it,the science is part of it. But
the real thing you need ifyou're going to be able to make
(33:04):
money or invest in this stuff isa customer — someone has to want
to buy it. And it turns out,there's really only two types of
customers for nature and whatnature does. The first type of
customer is someone who needscompliance with an environmental
law. If the law says you cannothave a permit that will damage a
(33:26):
natural system, unless yourestore an equivalent amount or
more, than that creates a demandfor restoration. So that's what
happened in the US, after thepassage of the Clean Water Act.
The idea was called No Net Loss.So we're going to allow some
loss, but not net loss. We'renot going to allow the entire
(33:47):
system to be degraded further.But what we can do is say "if
you impact something, you haveto make up for at least that
amount in the same watershed —before you get a permit."
At the beginning, everyone wastrying to do their own
restoration. So every highwaydepartment, every housing
development, every miningproject, every energy project
(34:08):
was going out and hiringconsultants and trying to figure
out how to restore some amountof wetlands or streams that had
a scientifically verifiablerelationship to the thing that
they were impacting. So therewas tons of trial and error,
lots of experiment. But prettyquickly, there were
entrepreneurs who said "we couldprobably do that more
efficiently and effectively thanall these random people doing
(34:30):
it, if we just specialize andfocus on it and get better at
it." And so that's whenmitigation banking was born.
People would bank a bunch ofrestoration. And then they had a
ledger. The credits on thatledger are meaningful things. I
know people have a lot ofreaction now to carbon credits
or other types of credits thatdon't have sufficient evidence
(34:55):
to demonstrate that they reallymake up for the problem. I would
say that at the beginning, thatwas probably also true of
mitigation banks. But over 30years of trial and error and
meaningful improvement in theregulatory policy, the credits
now actually do meaningfullymake up for the impacts that
occur. The reason why I can saythat with confidence is that the
(35:18):
standard that they're held to ishigher than the standard for any
type of other public protection.There's three fundamental parts
of a credit. One of them is thescience part — ecological
success criteria, the measurablestuff we were just talking
about. But then you'll also havelegal and financial assurances
for durability over time. Thiswas one of the big criticisms of
(35:41):
banks, is that you could protectsomething, but what guarantee
did the public have that itwouldn't get messed up later?
So, there are permanentconservation easements or deed
restrictions that mean that landcan never be converted out of
this use of conservation. Butthere's also a financial
endowment for long termmonitoring and maintenance, that
(36:02):
goes into the credit. So thething that's generated off the
land is not just science-basedrestoration, that measures
ecological uplift, but alsolegal and financial assurances
that make sure it's durable overtime.
And actually, people often willsay that mitigation excuses
damage, or it allows damage. Itsomehow makes the damage
(36:26):
possible. And this isfundamentally incorrect, for two
reasons. One is without themitigation, the road would still
be built. The alternative to NoNet Loss is net loss. There
would be damage, if there was norestoration. We know this for a
fact. It's happening everywherearound us. And the alternative
(36:46):
to holding people to a standardand making the mitigate is not
holding them to a standard. It'snot stopping it. Not
realistically. At least when youhave some restoration, you're
making up for some of the damagethat does occur.
But even more so or at least asimportantly, because restoration
(37:07):
is held to a high standard, it'snot cheap. The fact that you
need to buy mitigation meansthat damage is more expensive
than it used to be, right? So itused to be cheap to damage
stuff. Now it's more expensive.So there's real incentive to not
damage or damage as little asyou possibly can. Because of the
existence of requiredmitigation.
(37:30):
As, really, an industry began togrow of companies that did
restoration professionally —they don't do anything else. The
activities they do are realestate, design, permitting, and
construction of restorationprojects. As the industry grew,
then it became obvious thatthose skills — of real estate,
(37:55):
design, permitting, andconstruction — could be used to
solve other problems. Not justcompliance, but actually solve
problems for the second type ofcustomer, which itself is trying
to restore things — government.Matter of fact, the largest
expenditure on environmentalhealth is of course, government
agencies themselves that aretrying to, at a societal level,
(38:16):
make up for the total impacts,the cumulative impacts that
society has created. This is nocriticism of government
agencies, I'm really notslamming these people. But the
resource agencies are staffed,really, with a lot of
environmental scientists andnatural resource scientists. And
for them to be expected to goout and do real estate deals and
(38:39):
construction projects, at thesame time that they're also
regulating — really complicatedfor them. And so the ability to
contract, not just throughgrants that pay people for an
effort to try something, but toactually buy a credit that
represents a finished result.That's the new transition that's
(39:00):
going on. Where the skills andcapacity of the mitigation
banking industry are now beingcontracted by government
agencies that have mandates torestore really big, important
natural systems. And it's beenreally hard to actually get the
job done. The gap betweenplanning and doing is enormous.
(39:23):
There's lots of planning,there's lots of big ideas. But
to actually get projectsfinished on the ground is
extremely hard.
If you can align reward so thatevery unit of restoration that
you do is worth money, thenpeople will do more restoration.
The reason that there's afinancial model is because what
(39:43):
nature does is worth money. Andthe reason that that's true, is
because money is the thing weuse for value. That's what it
is, right? Money is this thing,that you know... it's this
infinitely malleable substancethat we can attach to anything
that we value, including art andmusic, but also, you know, a
(40:06):
piano, or a new car.
Adam Huggins (40:10):
Or a wetland
Adam Davis (40:11):
Or it turns out, a wetland. But because what nature
does has been so systematicallyignored, misunderstood, and
undervalued for so long, it's aradical idea, still, to say that
a wetland is valuable. Peoplethink, well, that's what
nonprofits do. You need a grantfor that, you need philanthropy.
(40:35):
So what is philanthropy? It'speople who made their money
doing traditional economicactivity, and then they give
some away later. But where didthat money actually come from?
It didn't come from the value ofnature. It came from mining,
oil, ag and timber, or biotech,or iPhones, or Facebook, or
(40:57):
something. Some form of economicactivity, that's where the money
came from. Look, it's a noblething to give money away. I
can't criticize people who dothat. It's noble. But I do think
that saying that things that arefunded by philanthropy are
inherently more ethical thanthings that are funded by
investment is incorrect.
(41:24):
When we started EcosystemInvestment Partners in late
2006, there were probablybetween 700,000 mitigation banks
around the US. But generally,they were pretty small and
opportunistic. They werecertainly undercapitalized —
there was no source of capitalin the business at all. So who
was it? It was farmers andranchers that had low wet ground
(41:46):
on a corner of their propertythat they couldn't really farm
or make use of. And so someoneturned them on to mitigation
banking and said "this could beworth money". There were also a
lot of developers who had beenforced to buy mitigation, who
thought they might like to tryand sell some mitigation
instead. So they weren'tecologist or scientists, they
were entrepreneurs. But therewere some successful early
(42:09):
banks, where people withbusiness and real estate skills
tried to, you know, doecological stuff. But there was
no source of capital. Because Ihad come to learn the business
through consulting, I gotinvited to some conferences, and
I had the great good fortune ofmeeting a guy who had had a
successful career in privateequity, which I knew nothing
(42:31):
about. I really didn't know whatprivate equity meant. Turns out,
it means just not public equity.It means not stocks, but other
forms of ownership that areprivate. Anyway, this guy, Fred
Danforth, when I started to tellhim about mitigation banking, he
had already been doing streamrestoration, about four and a
half miles of stream restorationon his own ranch — which is very
(42:54):
expensive and painstaking work.So the whole notion that you
could possibly make money, doingthe same thing that he was
paying a fortune to do, wasintriguing. And he had all this
experience in structuring money— being able to access big pools
of private capital, if you couldmake a fair return. And then we
(43:15):
had another stroke of luck bymeeting my partner today, a guy
named Nick Dilks, who wasworking at the Conservation
Fund, which is one of thelargest land conservation groups
in the US. He had probably donea million acres of conservation
real estate transactions. SoNick really knew land, Fred
really knew how to structuremoney, and I had some experience
(43:38):
with mitigation banking, and hadbeen thinking about incentives
and contracts for a long time.
So we started this thing calledEcosystem Investment Partners.
We raised a pilot round ofcapital, if you will. It was $27
million, which seems like a bignumber. For a private equity
fund, it's a really smallnumber. It's like too small to
actually run a fund. But weraised that amount and invested
(44:01):
it in three projects. At thetime, the average size of a
mitigation bank around the USwas probably 100 acres. So these
were big projects for the time.They were 2000 acres each. One
in Louisiana, one in Virginia,one in Delaware. So we were able
to do well enough on the threeof them together, that in 2012,
(44:24):
we were able to actually go tothe market and raise a full
institutional round of capital,which was $180 million. That was
significant in a bunch of ways.First of all, I think it was the
first time that a private equityfund for ecological restoration
had ever been tried. The secondreason it was really significant
(44:46):
is that the lead investor was apublic pension fund. So it was
the New Mexico EducationRetirement Board.
When a pension fund invests in aprivate equity group, you know
that that investment meets purefiduciary standards. So it's
(45:07):
objective analysis of risk andreward. That's fundamentally
different than sociallyresponsible investment or impact
investment, both of which areimportant. But a lot of times
those words are code for belowmarket rate. right? So you'll
take something below marketrate, because of the
environmental or social good,which is fine. But the problem
(45:29):
is that the big pools of moneyin the world exists in things
like pensions or endowments thatcan't choose because of social
or environmental attributes —because it's not their money!
That's what a fiduciary means.You're investing somebody else's
money. And it turns out, thepeople that they're investing
for are teachers, firefighters,people who are going to retire
(45:51):
maybe 30 years from now. And sowhen you're investing their
money in these public pensions,you have to invest in a way
that's as smart as you can sothat the retirement money will
be there for them. That momentwent up public pension invested
in an ecological restorationinvestment firm meant that these
(46:13):
decades — of trial and error,and improvement in policy,
improvement in science,improvement and practice on the
ground — had led to a placewhere a pure fiduciary could
look at that activity, and say"It makes sense. This is a
reasonable risk adjusteddecision that I'm making. Just
like investing in timberland orfarmland, or mining or other
(46:36):
things." Ecological restorationascended to that place.
Ecological Restoration hadarrived.
So with that $180 million, weinvested in eight major
projects, including some of thelargest privately funded
restoration projects ever donein the US. Tens of miles of
(46:59):
stream restoration inAppalachia, in particular,
Kentucky and West Virginia.17,000 acres of coastal
Louisiana on the land bridgethat separates Lake
Pontchartrain from the waters ofthe open gulf — and actually
filling areas that had subsidedand eroded below sea level back
to create healthy marsh. And23,000 acres in northern
(47:24):
Minnesota, about an hour northof Duluth, in what is actually
the t shirt I'm wearing today,the Sax-Zim bog. In the 1920s,
as people tried to farm thatarea, they had cut ditches. So
we restored over 80 miles ofditches in this remote
landscape. And it worked. Thehydrology began to return, and
(47:48):
water that had taken three hoursto go through the site began to
take three days. And by slowingeverything down, and returning
the natural hydrology, thehealth of the system began to
come back. And we could makemoney doing this stuff, because
of the need for compliance withthe Clean Water Act.
(48:09):
And it is amazing what naturewill do if you just give it a
chance, right? If you just bringback some of the fundamental
conditions to allow health, it'slike restoring blood flow. And
then all of a sudden, thehealing process begins, and the
seed bank that was notfunctioning for 100 years starts
to come back. Those seeds arestill alive underground. It's so
(48:29):
exciting.
But so to answer your questionabout how we do it... the skill
sets that it takes to do thisare sort of unusual, right? I
mean, it definitely involvesmoney — knowing how to organize
and responsibly manage capital.So there's lots and lots of
reporting, but there's also realestate, and in particular,
conservation real estate. Solooking for pieces of land that
(48:54):
aren't necessarily prioritiesfor traditional development, or
traditional ag or timber.There's also really deep
understanding of policy. Youneed to understand environmental
law. And of course, the science.You need to understand both
engineering, as well ashydrology, botany, fisheries,
you know, whatever the issuesare in that particular location.
So we made a pretty consciousdecision early on that we would
(49:17):
never be able to hire all thosepeople in-house, especially if
we were going to work in a bunchof different states. So the
fundamental idea was to hireenough staff that understood the
basics of this stuff, and thenpartner with the local experts —
the best people we could find ineach ecology.
One of the hallmarks that I'mreally proud of is an innovation
(49:41):
which seems obvious inretrospect, but no one was
doing, which is to identify thecontractors that actually do the
physical work, and bring theminto the design conversation.
The design and theimplementation had always been
in separate rooms, and still arefor most projects. So you don't
have the benefit of theexperience of the people who
(50:04):
actually do the work. And so youhave designers designing sort of
theoretical answers, withoutsomeone to say "that's not going
to work," or "maybe if you triedit like this." But in the people
who are actually doing the work,there's tons of knowledge and
tons of experience, but we needto lift up and sort of ennoble
those jobs, which are a hugepart, both of the work but also
(50:27):
should be part of the movement,right? Because there's now
meaningful employment comingfrom ecological restoration. If
you talk to those people, you'llfind that a lot of them worked
in traditional civilengineering-type construction,
roads, bridges, parking lots.And they find so much meaning
(50:47):
and purpose in restoring thenatural places that actually
near where they live, comparedto the type of work that they
did before. In Appalachia, wehave people that used to work in
coal mines that are nowrestoring some of the streams
that were damaged by coal miningactivity. In the Gulf coast of
(51:09):
Louisiana. There are people thatused to work on oil rigs that
are now restoring some of themcoastal marshes that support the
fisheries where they grew upfishing.
The ability to make a livingdoing ecological restoration is
really meaningful for people. Itelevates jobs that are often
considered menial. It givespeople more skills, more
(51:33):
engagement, more involvement,more learning, and seeing
results that they can personallycare about. It's really about
providing specialized trainingfor equipment operators, and
laborers who work in restorationand giving the specialized
skills to work in sensitiveareas. But then also learning
(51:53):
from the people who are seeingthings on the ground every day.
And building better trustbetween the construction folks
and the regulators, who are verydefensive about any activity on
the ground that involves yellowequipment —understandably! The
permitting process to getpermission to damage something
(52:16):
is easier than the permissionprocess to be allowed to restore
something. And you would think,how can that possibly be? But
when you're building a road, oryou're building a pipeline, or
permitting even a mine, you'reoften working in an area that is
somehow zoned or slated for aneconomic development. Whereas
(52:38):
when you're doing restoration,you're going to the sensitive
areas. You're going to the areaswhere the endangered species
want to be. So there's lots ofreasons why regulatory agencies
have had trouble figuring outhow to give permission for
environmental restoration in aresponsible way. It's really a
(52:59):
challenge.
When environmentalism camealong, it was really critical
that we stopped the mostegregious behavior. But now
we're at a point where we havelots of environmental laws, but
things are still going badly. Sowe need to internalize the
externality. We need to makethat damage part of the cost of
(53:22):
doing business. And that's whereI see this going. What we're
doing is in a microcosm of thenatural world — which is
wetlands, under one section oflaw, in the United States.
right. But even that is billionsof dollars of activity. And it's
creating an industry, anecological restoration industry,
that's actually tapping into thelargest pools of private capital
(53:45):
and public capital in the world.So they're now seeing that you
can make a fair rate of returnthrough ecological restoration.
That's important. Because ifecological restoration is
valuable, then they're going towant to do more of it. And the
amount of capital that you haveto work with will not be
limited. It's not limited byagency budgets, or philanthropy.
(54:07):
It's actually the endless poolof capital, which is the
investment capital of the world.But even more important than
that, is that it's a mechanismby which you can measure damage
and require offsets for it. Andthat doesn't have to be limited
to wetlands or streams. Thatcould be a principle that you
begin to apply more broadly,across environmental regulation
(54:30):
and across the economy.
I mean, it's a little bit of afantasy today, to think that the
ecological restoration industrycan provide a model that can be
used for, you know, moresustainable production of all
goods and services. But why not?I mean, what the heck. You know,
the approach that we're takingnow, which is basically fines
(54:52):
and fees, and then, you know,trying to stop people by
punishing them if they stray outof bounds... like, that's good,
we should do that, for sure. Butit's not really getting us where
we need to go. We need to dosomething that sends an economic
signal so that the basic impulseis to do the right thing,
because it's more profitablethan doing the wrong thing. And
(55:14):
if you can get that mechanismright, you don't have to be an
advocate anymore. You don't haveto protest anymore, because the
machine will do it in order tobe profitable. It may seem
fantastic to even think thatthought, but I'm telling you,
we're seeing billions of dollarsof institutional capital come
into ecological restoration, andmake the impacts — that are
(55:39):
happening — less damaging andmore responsible than they were
before. We're seeing it.
That's why I got involved withmoney, because it was obvious
that all the money was in thebad stuff — the things that were
wrecking the world that I love.And so how on earth can you get
the money to line up with whatyou care about? You have to
(56:03):
think about the economics, aboutthe contract structures, about
the regulations, about thedeals. People have to make a
fair return on investment. Theyhave to. It's not a variable.
It's a constant in the equation.And it's a discipline. It
requires a discipline ofthought, which actually has been
(56:28):
a constant challenge for myscattered mind, but also a
really refreshing practice,like, you know, Aikido or
something... like a martial art.Like, you have to just do it
over, and over, and over again,and think about it day after
day. But the discipline ofmaking a return through
something that is really good,is so rewarding, because...
(56:55):
that's where the problem is, andthat's where the solution is.
It's... it's so funny, but it'sin the money somehow.
And so, last thing I'll say, weneed not leave behind the
sacred, the miraculous, thepoetic, the ancient ways of
(57:16):
experiencing the living world,the unique. Those things are the
reason why I do what I do.Someone told me a long time ago,
a mentor in the garbagebusiness. He said, "If you want
to solve a problem, you got togo where the problem is, can't
(57:40):
just be a critic from theoutside." But being next to it
in it near it allowed me tounderstand it, and contribute to
solutions, at least in some way,at some level. And that's how I
feel about money. You know, lastthing I wanted to be was a
(58:00):
business guy. And to actually bea partner in a private equity
fund, are you kidding? Like thatwas not on the radar screen. I
didn't do it to make money. Imake money to do what I do. It's
all the difference in the world,between those two things.
If you go out of business tryingto save the world, then you're
(58:22):
out of business. But if you canmake money through good things,
then the more good you do, themore money you make. And that is
the trick.
Adam Huggins (58:56):
This episode was produced by Mendel Skulski and
myself, Adam Huggins with thevoice of Adam Davis.
Mendel Skulski (59:02):
And with music by Thumbug, Local Artist, Yu Su,
and Sunfish Moon Light.
Special thanks to Ian Wyatt andMood Hut records, to Alé Silva
for the cover art, and to ourinterns, Ava Stanley, Aila
(59:25):
Takenaka, and Alex Janz.
Adam Huggins (59:29):
Future Ecologies is an independent podcast
supported by listeners just likeyou. Join our community for as
little as $1 each month, andyour return on investment will
be early episode releases,exclusive bonus content, access
to our Discord server merch, andbest of all, we get to keep
making the show for you.
Mendel Skulski (59:48):
And keep it ad free for everyone.
Adam Huggins (59:50):
So if you think what we're doing has value, you
can prove it.
Mendel Skulski (59:54):
at futureecologies.net/join
Adam Huggins (59:59):
but money isn't everything. So, please leave us
a rating and review wherever youlisten, and share it widely.
Mendel Skulski (01:00:05):
It really helps.
Adam Huggins (01:00:07):
'til next time.
Mendel Skulski (01:00:08):
'til next time.
Adam Huggins (01:00:09):
Thanks for listening
You are listening to season five of
Future Ecologies.
Adam Davis (00:07):
So I had a really profound experience during the
pandemic, reading the work ofDavid Abram. Spell of the
Sensuous and Becoming Animal. Hetaught me a few things. One of
them is that the same word weuse for the arrangement of
letters, is the word that we usefor magic. It's a spell. We
(00:31):
spell words, and you cast aspell. And the reason that
that's relevant right now isbecause he is a magician. For
him, the magic is in the actualexperience. And he taught me
that in magic, what we think ofas conventional magic, the magic
(00:54):
is not the trick. The magic isthe experience of the trick.
It's the experience that youactually have — the sense of
awe, wonder, even fright,because something happened that
was so unusual. And thatexperience is so profound that
it sort of shocks you out ofyour ordinary way of seeing
things. And if you can bringjust a little bit of that
(01:19):
experience of magic into yourexperience of nature, by just
listening a little more,listening a little longer... and
then seeing the world that'salso making the sound, and then
feeling the air. That experienceis magic. But it's also
(01:42):
participatory. You no longer arean observer of it, you're a
participant in it. David was oneof my most important teachers in
making me understand that thatexperience, that participatory
experience — of not beingseparate from the living world,
but you and the world being onething, not two things — That is
(02:07):
very much the way things werebefore the written word. So
that's David's work, and I wasreally moved by it. But the
thing that he never does, istalk about the magic of numbers.
There's two great systems. Oneis letters. The other is
(02:28):
numbers. Letters, and words havea relationship with magic and
experience and participation.But numbers are the things that
we use to determine what countsand what doesn't.
Mendel Skulski (02:46):
Recorded and produced on the unceded
territories of the Musqueam,Squamish, and Tsleil-waututh
Nations, this is FutureEcologies. I'm Mendel Skulski.
Adam Huggins (02:57):
I'm Adam Huggins. And on today's episode, Making a
Living, we're hearing from AdamDavis.
Adam Davis (03:04):
And I'm a managing partner at a company called
Ecosystem Investment Partners.
I think there is a realpossibility that this could be
the most boring episode you'veever done. After all your great
work on the sacred of nature,the amazing science of nature,
and poetic exploration of thesethings, today, we're going to
(03:27):
talk about permitting and money.It could be a disaster.
Adam Huggins (03:31):
I couldn't be more excited right now.
Mendel Skulski (03:34):
It's been a long time coming.
Adam Davis (03:39):
I really believe that a great motivation for
finding a career that hasmeaning and purpose is doing
work that doesn't. My first realjob in San Francisco was working
on Fisherman's Wharf at a placecalled Sourdough Puffs, where we
deep fried bread, basically,dough in vats of oil. And that
(04:06):
was appalling, appalling work.It was... the cleanup at the end
of the day was just, you know,you felt exactly as greasy as
you would think you would feel.I worked as a cashier in a
cafeteria, actually in theMuseum of Modern Art in San
Francisco, which was a reallyfun job. I was doing some
painting and exploration of artmyself. And so being around the
(04:29):
art every day was great. Thework itself was was nothing. It
was operating a cash register.Then I got a more serious job as
an assistant legal administratorat a building maintenance
company. I worked for a womanwho changed smoked cigarettes
inside — because you could, backin the day. And she was well
(04:52):
meaning, but cynical beyondimagining. She had been through
the corporate world long enoughthat she just knew that it
wasn't going to really make adifference either way. And so I
reported to her for maybe sixmonths in a fluorescent lit
room, reeking of cigarettesmoke, and then quit that one. I
guess I was working at a pictureframing shop when I got fired. I
(05:16):
was planning a two monthmotorcycle trip with my then
girlfriend, now wife. And so Igave them about two months
notice before the trip, and Igot fired the next day. So I was
now out of a job planning onleaving for this trip. And a
friend of mine knew about acomposting company that was just
(05:37):
getting started, called AmericanSoil Products in Berkeley,
California. I got introduced toBob Beatty, who was the
proprietor. Bob started AmericanSoil Products to transform
organic waste into usefullandscape products, and I was
the first employee in August of1985, and immediately fell in
(06:00):
love with it.
At first it was the materialityof it, you know, I one of the
things I loved about art wasliterally the materials and the
tools like the physical feel ofthe oil paint, the linseed oil
that you'd mix with pigment, orthe turpentine that you'd use to
thin it — the canvas itself,stretching the canvas. And so
(06:24):
being out at the compostingyard, with piles and piles of
these different organicmaterials. You know, sandy loam
that came from the excavation ofthe BART tunnels; cocoa bean
holes from Ghirardellichocolate, big, massive piles of
cocoa bean holes that smelledlike cocoa and was wonderful;
(06:46):
cedar bark, piles of cedar bark,like stretchy orange orangutang
fur; and then all kinds ofcompost from yard waste. And we
blended all these together underthe direction of a soil
scientist named Lou, who was thehead of the chemistry department
at Contra Costa College. Weblended these things together,
(07:06):
each of which had been useless.People had actually had to pay
to get rid of them. But if youblended them together, they
became productive and fertile.Our customers came to include
the leading landscape gardenersand landscape architects. People
would come by and want aspecific blend for a rooftop
(07:27):
that was lightweight, orsomething for rhododendrons that
was more acidic, or specializedsoil amendments. We sold to the
Conservatory of Flowers inGolden Gate Park, which is a
spectacular thing. We even soldsome material to Biosphere Two —
that was an experiment inoffworld living. And they wanted
to have a very particular soil,for some reason. We got a call,
(07:50):
I think I was the guy who tookthe call in our funky trailer,
in an abandoned paint factoryyard in an industrial section of
Berkeley... seeing and exploringthe whole notion of what was
waste. What does it mean forsomething to be waste? Realizing
that there's this fine linebetween something that you buy
(08:14):
and pay for, and then somethingthat you have to pay to get rid
of. Organic waste turned out tobe a huge part of the waste
stream in California. And thisis what I started to learn as I
spent time in the compostingbusiness, is that we were
throwing away as a state,something like 50 million tons a
(08:35):
year of stuff, of which 20% or10 million tons was just
branches, leaves and grass.
In our little composting yard inBerkeley, we were doing a few
1000 tonnes a year. And wethought we were fabulous. We
were having so much fun. We weresaving the world. We had organic
(08:58):
gardens at the edge of ourcomposting piles. A couple of
the guys who worked on the sitebegan to keep chickens, and then
we had goats. And then schoolbuses would come by and look at
the organic gardens and see theanimals. It became like a
community gathering place. Itwas really fun. But it was when
(09:19):
I learned that we were actuallythrowing away 10 million tons a
year of this stuff, that Irealized that what we were doing
needed to go to scale if it wasgoing to make a difference. I
had a daughter — my wife and Ihad a daughter — and I really
needed a steady job. I needed acheck that came every two weeks,
(09:40):
and I needed health insurance.And so I ended up working for
Oakland Scavenger Company whichhad just been acquired by Waste
Management where I spent 10years of my life. And talk about
materiality, right? I mean,compost is one thing, but the
waste stream? The American wastestream is astounding in its
(10:04):
variety. The things people aredone with and no longer want,
that they throw away iseverything under the sun. It was
a great, great training groundfor the fundamental question of
where things come from and wherethey go.
I had come from, you know,Berkeley and the hippie
community. And I had lived inIthaca for five years, and
(10:26):
hitchhiked around, and I wassort of part of that tribe. And
we had a definition of garbagethat basically is the set of
previously useful things that wechoose to waste, right? And we
really choose to waste them bythrowing them in a pile and
commingling them. So it's whenyou mush together all these
different things, that that'swhen garbage is created. Because
(10:50):
of course, glass isn't garbage.And paper isn't garbage. And
even branches and leaves aren'tgarbage. But if you mix them all
together, then you created thisthing you can't do anything
with, and that's garbage. Soit's a moral definition. But the
garbage men, mostly men, atWaste Management, Inc. had a
more pragmatic definition, whichis simply the set of things that
(11:14):
costs you more to go get thanit's worth. It costs you more to
deal with it, than the thing isworth. So when you have
something in your hand, call itan aluminum can, there's a
moment of choice, where you cansay, I'm going to do something
with it, or I'm going to throwit away. Now, if there's a
(11:34):
recycling system, it goes intothe recycling system. If there
isn't, it goes in the garbage.It turned out that the economic
definition of garbage carried alot of weight. I had an
opportunity because of all themoney and systems and so on,
that existed in this giantcompany to create structures
(11:56):
where you could make more moneydoing the right thing than the
wrong thing. You could make moremoney by recycling something
than throwing it away. Therewere some tailwinds, which is
that people wanted it, citieswanted it. There were actually
mandates now in law forrecycling. But in order to do
that, there were some structuralproblems. The economics of this
were really challenging, right?The sunk costs in existing
(12:19):
landfills and existing garbagetrucks mean that taking one more
ton of stuff and putting it inthe landfill has very little
additional cost. But at thebeginning, taking that same ton
and putting it into a recyclingsystem meant new containers, new
trucks for recycling, newprocessing centers, and then
something to do with all thematerial that had been
(12:40):
collected. So really challengingto get started against the sunk
cost of the existing system. Andthat I think, is part of what
we're up against with all of ourenvironmental concerns.
Basically, I became a student ofincentives and contract
(13:01):
structures. How do you rewardthe environmental good more than
the environmental bad? So what'sa fair way to allocate costs and
create rewards, so that you'rerewarding the behavior that you
want? And I really got to go toschool on this through many,
many municipal contracts,including some really big ones
(13:21):
like city of Oakland. The lawthat we were operating under the
integrated Waste Management Actbasically had a hierarchy, which
had the first priority is notmaking waste, right, waste
reduction. Then the secondpriority is recycling and
composting. And then the thirdpriority is landfilling or
incinerating what's leftover.But the way the contracts worked
(13:42):
was exactly the inverse. You gotpaid the most and most
predictably to throw thingsaway. Because that was the
existing infrastructure. You gotpaid less and less predictably,
to recycle and compost. Partlybecause people had this notion
that somehow you were makingmoney on the back end of it,
right? You were making money onselling the aluminum cans, so
(14:03):
they shouldn't subsidize therecycling. Although you were
making much less thanlandfilling. And then you got
paid nothing at all for wastereduction. There was no
incentive to not produce waste.Energy and energy efficiency.
It's the same question. Whichis, how do you reward utilities
to produce less energy, to bemore efficient when they get
(14:26):
paid by the kilowatt, right? Butthe same thing was true with
toxics. And the same thing wastrue with water. And the same
thing was true with othermaterial forms.
So along the way, at aconference called the Industrial
Ecology Conference, I happen tosit at a small table, and I was
seated across from a woman whostarted talking about the value
(14:47):
of nature — literally theeconomic value of what nature
does. At first, I didn't reallyunderstand what she was talking
about. But her basic point wasthat in theory, we know that
nature is valuable. But for anindividual landowner — for
someone who owns land — if youcut the tree down it's worth
(15:08):
money. It's worth money aslumber or paper. But if you
leave it standing, it's worthzero. And what she was saying
basically is that's inaccurate.Leaving the tree standing has
value. It's called ecosystemservices. So this was 1997. That
(15:29):
phrase wasn't around in commonparlance, I hadn't heard it. And
it turned out that this womanwas named Gretchen Daily. She
was a conservation biologists atStanford. Because while people
had been talking aboutecological economics, probably
for 25 years in academia, theyhad been talking about it in a
pretty theoretical way.Theoretical exercises to get
(15:52):
people to say what they thoughtthey would pay for a park, or
how you would replace a naturalfunction if somehow it went away
— notions, basically. AndGretchen was saying, it's not
going to do. Things are gettingbad out here on the surface of
the world, and we're going tohave to pay people to leave the
trees standing. We're gonna haveto recognize the financial value
(16:15):
of what nature actually does.And what she really taught me
was very humbling, because Irealized that after having
worked in recycling, andenvironmental economics,
basically applied environmentaleconomics, for 15 years, I had
never really thought about whatthe goal was. I mean it's almost
(16:35):
embarrassing to say, but I justtook it for granted that
recycling was a good in and ofitself, energy efficiency was a
good in and of itself. But ofcourse, those things are a means
to an end, not an end inthemselves. But what is the end?
What is the object of the game?The object of the game is the
(16:57):
healthy living world itself,that provides life support
services for us, right? It's notan abstract idea. It's a very
real material truth. The livingworld provides a stable climate,
resilient living systems, cleanwater, and other fundamentals
(17:18):
that are life support. When werecycle, we rely less on the
four primary extractiveindustries. And there's really
only four. Oil, ag, timber, andmining. Those are the four
places where all this stuffcomes from. If you could pay
people to not cut the tree downin the first place, right? If
(17:40):
nature was valuable in and ofitself, that would create a
price signal that would gothrough the whole system, and
help to more accurately reflectthe value of nature itself. It
was a very abstract idea back in1997. I really became fixated on
it, because there was somethingso fundamentally powerful about
(18:03):
making real the theoreticalunderstanding of the value of
nature — so that people couldactually get paid in real places
for doing real things. For stuffthat we know is valuable. It
just seemed like such anenormous opportunity, and such a
powerful lever inside thesystem, I couldn't think of a
better thing to get involvedwith. But I came home from that
(18:26):
meeting. And I was hanging outwith my wife in the backyard.
And I said, I'm going to createa career doing value of nature
stuff, ecosystem services. Andshe basically, you know, looked
at me very tolerantly and said,that's good.
(18:47):
There are a lot of things in ourlives that are sacred, or
inherently valuable, in such away that applying a price to it,
or a monetary value to it, seemsto cheapen or degrade the thing
itself. And yet, we don'tbristle at art and music being
(19:10):
paid for. There's a market formusic, there's a market for art.
But we would never say that artis only worth money, or music is
only worth money. They are worthmoney, but there's also
something else much differentgoing on. So in nature, natural
systems are valuable. We knowthis. We know that they're
(19:34):
valuable. And this bright linebetween, I would say, spiritual
value and economic value isnecessarily going to make people
uncomfortable. The other part ofit is that the idea of not doing
it, not putting a number on it,simply won't work in the current
(19:57):
moment, and it's deeply sad insome ways that that's true. But
I believe it is really true...that every acre of the world is
already valued for what we canbuild on it or take from it.
There is a known property ownerfor all the land in Canada, and
(20:20):
all the land in the UnitedStates, and most of the land
every place in the world.There's a process called
appraisal, where people can puta dollar figure on that land
based on what it can do for us,without reference to the natural
world — housing, and naturalresources. Building on it and
(20:42):
taking from it. And becausethat's true, we have to fight
back. We have to say that notbuilding on it or taking from it
is also worth money — for peoplewho own it, for people who can
benefit from stewarding it, andrestoring it, and managing it.
Those people have to be able tomake more money, or at least get
(21:04):
something from doing somethingother than wrecking it. And
that's the same economics asrecycling. Appraising land for
water purification, forbiodiversity, for flood
protection, the other functionsthat natural systems provide is
(21:28):
new, just like recycling was newjust 50 years ago. There were no
economics for recycling 50 yearsago. and now it's commonplace.
It was the official policy ofthe United States to drain
wetlands, on purpose, for mostof our history. It wasn't until
really 1970 that we changed ourpolicy to say actually, those
(21:51):
things are really valuable, andwe should stop wrecking them.
But there's still a departmentin our federal government called
the Bureau of Reclamation. Andwhat reclamation means is
draining wetlands, or creatingdams and putting water on dry
land, to reclaim it for economicuse — for people.
Assorted Environmental Protesters (22:10):
[Chanting] No means no!
What do we want? Change? When dowe want it? Now!
This is what democracy lookslike!
Adam Davis (22:20):
The conservation movement is noble, and I believe
in it, and I'm part of it. Imean, I want to protect the
things I love. And the beauty ofthe natural world is so sort of
obvious to me and so importantthat of course, you want to
protect every bit that you can.But the context is that in the
(22:46):
United States, the populationhas doubled since I was born.
There was 180 million people in1960, there's 340 million now.
Vancouver was 600,000 peoplewhen I was born. It's 2.7
million today. This is going oneverywhere. There's 8000 million
of us now. And we're consumingmore per person, not less.
(23:11):
Conservation misses the mark ina few ways. You win temporarily,
but then you lose over time,right? You can protect this
little bit here and this littlebit here, but there's these
enormous forces coming at you.And you can never really fully
hold the line. So it's the rightimpulse. It's a noble impulse.
(23:31):
But it's insufficient to thetask. Conservation because of
where it came from, tends to seethe natural world as like the
backdrop, or the stage set forthe human play. And so what you
do is you make a park, right?You take a piece of nature, and
(23:52):
you put a fence around it, andyou make it safe. It's a
wilderness, right? And thenmeanwhile, the human drama goes
on over here separately. Sothere's actually two groups of
people, the conservationists,and the environmentalists. And
they're quite different.Sometimes it's often as if
they've never met each other.The conservationists are about
(24:13):
taking land out of the economy.And the environmentalists are
about stopping the bad thingsgoing on in the human economy.
But governments who ultimatelymake the rules for all this, are
in an impossible situation. Theycan't really fix it for us just
with policy. Because on the onehand, they have endangered
(24:37):
species protection, they haveclean water laws, they have
clean air laws. And the basicmessage there is "Stop it. Stop
doing bad things. Not so much.Not here, not there. Not now."
Right? But on the other hand,they need job creation, and
economic development, and GDP,and there's growth — real need
for growth, somehow.
(24:57):
So conservation is necessary.It's contributed a ton of good
things to most of our lives,right? I love the parks near
where I live. But as a solutionfor the overall problem that we
face now, with increasingscarcity of the life support
services that nature provides,conservation — just stopping bad
(25:17):
things — is not going to achievewhat we need to achieve.
There are shelves and shelves ofbooks that are, I think, in the
category of "Nature is Amazing".And I love those books. I read
them all the time, And everytime I do, I'm learning
something new about some amazingfacet of the natural world. I
mean, I just read this bookabout eels called the Book of
(25:39):
Eels. Have you read this thing?It's stunning. It's stunning,
what els go through. 100 years,they live up in some stream. And
then they wake up one morning,and they realize it's time, and
they change color, and they godown the stream. And they're go
out into the Atlantic Ocean, andthey swim across the entire
Atlantic Ocean to the SargassoSea, where they disappear into
(26:01):
this cloud of seaweed and matein secret. And then all of a
sudden, baby eels are born, andthey're carried on currents to
rivers all over the world. Andthen they migrate up these
streams, and they can live for100 years, up on the top of
these streams. And it'shappening all over the world,
and almost all the eels comeback to the Sargasso Sea. And we
(26:22):
don't know how or why thisworks. It's amazing. Really,
it's amazing. But everything isamazing, right? And so the other
category of books, is that"Nature's in Big Trouble". The
environmental story is one oftwo things — this amazing thing
is getting wrecked, or the goodenvironmentalists against the
(26:44):
bad producer of goods andservices, right? The bad people
who make oil, the bad people whomine, the bad people who do
these things, this economicactivity, while we, the good and
noble people, try and protectthe amazing flowers and the
amazing orcas. And thisstoryline is so tired, it is no
(27:05):
longer helpful. And I'm notsaying that there aren't any bad
people. There are bad people inthe world. But most people
aren't. Even the people who aremining something. They're not,
like, trying to hurt you or hurtthe natural world. They're
trying to provide the goods andservices that we all use. We're
(27:25):
sitting in a room full ofincredible technology, right?
All this stuff was mined. Whenyou start to really grok where
things come from and where theygo, the simple narrative that
there are bad people who aredamaging the world, while we are
trying to save, doesn't reallyhold water. It doesn't really
work. And plus, even if you wereright, so what? You know, like,
(27:48):
what are we going to do? How arewe going to influence these
enormous systems?
Adam Huggins (27:54):
Yeah, if it held water, it would be a dam.
Sorry...
Adam Davis (27:59):
[Laughing] No, that's great. Levity is helpful.
Thank you. I'm getting verysincere here.
Mendel Skulski (28:04):
I think this is the perfect moment for you to
recapitulate what... what is thebig idea?
Adam Huggins (28:09):
Yeah I was gonna say, let's hear about the stuff
you do now.
Adam Davis (28:18):
So, I came across this definition fairly recently,
and was fascinated to learn thatthe word "bank" comes from the
Italian word Banco, which meanttable. And so back in early days
of commerce, the bank was atable, on which exchanges
(28:40):
occurred. But there turns outthere's a much older word, which
is Old Norse, or Old German, Idon't know how to pronounce it,
but Banki, B A N K I. And thatmeant a curve, like the curve of
a river bank. And we use thatkind of expression today, when
(29:00):
we talk about an airplanebanking into a turn. A river
bank would pile up as sedimentwould accumulate on the inside
curve. So river beds and plains,flood plains, accumulate
material from upstream, whichmakes fertility. So I guess
(29:21):
that's a good source of a wordfor a place where we keep that
which we value.
In the work that we do, wecreate things called mitigation
banks. That's the term of art.And people often think of them
when they first hear of them asfinancial institutions of some
sort. But they're not, they'replaces. They're like parks or
(29:46):
other protected areas. But theyare a store of ecological value
that comes through restoringdegraded landscapes — wetlands,
streams, habitat for endangeredspecies — and then where you
measure what happens.
So if ecosystem services theoryis correct, and what nature does
(30:09):
is valuable, how would we know?How would anyone actually get
paid? The first thing that youneed to be able to do, and I
know some of the listeners aregonna hate this too, is you need
to be able to put a number onit. You gotta do it. And I'm
gonna go to the medicalmetaphor. If you're not feeling
(30:29):
well, and you go to the doctor,the doctor is going to do a
test. And what they're lookingfor is the absence, presence, or
concentration of something,right? Some indicator of
function. So whether it's redblood cells, or cholesterol, or
lipids, or anything else, theywant to know if your health is
(30:53):
being affected by somethingthat's out of range, right? It's
out of the healthy range. Asabove, so below, right? The same
things that happened in yourbody are also happening out in
the bigger world. Now they'rehappening at a much different
scale, and much different pace.So it's much bigger out there
and much slower. Which is one ofthe reasons it took us a long
time to understand this. But youcan actually look at indicators
(31:17):
of functions of natural systems— so the health of a wetland,
the health of the stream. Thereare chemical, physical and
biological things that you canmeasure, and know something
about the system. That's not tosay that we know everything, but
we don't know everything abouthow your liver works either,
right? But we know how to dosome things that are helpful in
(31:38):
a crisis. Like if you were goingto fix it, what would that mean?
What would you be going for, andhow would you know it if you saw
it? In some systems, the livingthings actually are the things
that you would measure. So it'snot the fish in and of itself,
any more than it's the red bloodcell itself. Like, the red blood
(31:59):
cell in your body is great. Butreally, it's the whole
proliferation of them, it's theconcentration of them. Do you
have a sufficient amount of redblood cells? It's the same with
the Delta Smelt in the Delta. Ifthey're going away, it's because
something is fundamentallywrong. And that's why the law
steps in and says "You can'tmake it go extinct. Because
(32:20):
that's an indicator that theentire thing is falling apart."
The term of art is a functionalacre. So you're measuring either
the biodiversity, the waterquality, the flood protection,
the functions that are providedby that acre. And you can tell
(32:42):
that something that's degradeddoesn't have much function. But
something that's been restoredhas more function. You can
measure the uplift, and you cancompare that to natural healthy
systems called "referenceecosystems" or a "reference
system". And that would be oneway of thinking about what
you're trying to do.
So the measurements part of it,the science is part of it. But
the real thing you need ifyou're going to be able to make
(33:04):
money or invest in this stuff isa customer — someone has to want
to buy it. And it turns out,there's really only two types of
customers for nature and whatnature does. The first type of
customer is someone who needscompliance with an environmental
law. If the law says you cannothave a permit that will damage a
(33:26):
natural system, unless yourestore an equivalent amount or
more, than that creates a demandfor restoration. So that's what
happened in the US, after thepassage of the Clean Water Act.
The idea was called No Net Loss.So we're going to allow some
loss, but not net loss. We'renot going to allow the entire
(33:47):
system to be degraded further.But what we can do is say "if
you impact something, you haveto make up for at least that
amount in the same watershed —before you get a permit."
At the beginning, everyone wastrying to do their own
restoration. So every highwaydepartment, every housing
development, every miningproject, every energy project
(34:08):
was going out and hiringconsultants and trying to figure
out how to restore some amountof wetlands or streams that had
a scientifically verifiablerelationship to the thing that
they were impacting. So therewas tons of trial and error,
lots of experiment. But prettyquickly, there were
entrepreneurs who said "we couldprobably do that more
efficiently and effectively thanall these random people doing
(34:30):
it, if we just specialize andfocus on it and get better at
it." And so that's whenmitigation banking was born.
People would bank a bunch ofrestoration. And then they had a
ledger. The credits on thatledger are meaningful things. I
know people have a lot ofreaction now to carbon credits
or other types of credits thatdon't have sufficient evidence
(34:55):
to demonstrate that they reallymake up for the problem. I would
say that at the beginning, thatwas probably also true of
mitigation banks. But over 30years of trial and error and
meaningful improvement in theregulatory policy, the credits
now actually do meaningfullymake up for the impacts that
occur. The reason why I can saythat with confidence is that the
(35:18):
standard that they're held to ishigher than the standard for any
type of other public protection.There's three fundamental parts
of a credit. One of them is thescience part — ecological
success criteria, the measurablestuff we were just talking
about. But then you'll also havelegal and financial assurances
for durability over time. Thiswas one of the big criticisms of
(35:41):
banks, is that you could protectsomething, but what guarantee
did the public have that itwouldn't get messed up later?
So, there are permanentconservation easements or deed
restrictions that mean that landcan never be converted out of
this use of conservation. Butthere's also a financial
endowment for long termmonitoring and maintenance, that
(36:02):
goes into the credit. So thething that's generated off the
land is not just science-basedrestoration, that measures
ecological uplift, but alsolegal and financial assurances
that make sure it's durable overtime.
And actually, people often willsay that mitigation excuses
damage, or it allows damage. Itsomehow makes the damage
(36:26):
possible. And this isfundamentally incorrect, for two
reasons. One is without themitigation, the road would still
be built. The alternative to NoNet Loss is net loss. There
would be damage, if there was norestoration. We know this for a
fact. It's happening everywherearound us. And the alternative
(36:46):
to holding people to a standardand making the mitigate is not
holding them to a standard. It'snot stopping it. Not
realistically. At least when youhave some restoration, you're
making up for some of the damagethat does occur.
But even more so or at least asimportantly, because restoration
(37:07):
is held to a high standard, it'snot cheap. The fact that you
need to buy mitigation meansthat damage is more expensive
than it used to be, right? So itused to be cheap to damage
stuff. Now it's more expensive.So there's real incentive to not
damage or damage as little asyou possibly can. Because of the
existence of requiredmitigation.
(37:30):
As, really, an industry began togrow of companies that did
restoration professionally —they don't do anything else. The
activities they do are realestate, design, permitting, and
construction of restorationprojects. As the industry grew,
then it became obvious thatthose skills — of real estate,
(37:55):
design, permitting, andconstruction — could be used to
solve other problems. Not justcompliance, but actually solve
problems for the second type ofcustomer, which itself is trying
to restore things — government.Matter of fact, the largest
expenditure on environmentalhealth is of course, government
agencies themselves that aretrying to, at a societal level,
(38:16):
make up for the total impacts,the cumulative impacts that
society has created. This is nocriticism of government
agencies, I'm really notslamming these people. But the
resource agencies are staffed,really, with a lot of
environmental scientists andnatural resource scientists. And
for them to be expected to goout and do real estate deals and
(38:39):
construction projects, at thesame time that they're also
regulating — really complicatedfor them. And so the ability to
contract, not just throughgrants that pay people for an
effort to try something, but toactually buy a credit that
represents a finished result.That's the new transition that's
(39:00):
going on. Where the skills andcapacity of the mitigation
banking industry are now beingcontracted by government
agencies that have mandates torestore really big, important
natural systems. And it's beenreally hard to actually get the
job done. The gap betweenplanning and doing is enormous.
(39:23):
There's lots of planning,there's lots of big ideas. But
to actually get projectsfinished on the ground is
extremely hard.
If you can align reward so thatevery unit of restoration that
you do is worth money, thenpeople will do more restoration.
The reason that there's afinancial model is because what
(39:43):
nature does is worth money. Andthe reason that that's true, is
because money is the thing weuse for value. That's what it
is, right? Money is this thing,that you know... it's this
infinitely malleable substancethat we can attach to anything
that we value, including art andmusic, but also, you know, a
(40:06):
piano, or a new car.
Adam Huggins (40:10):
Or a wetland
Adam Davis (40:11):
Or it turns out, a wetland. But because what nature
does has been so systematicallyignored, misunderstood, and
undervalued for so long, it's aradical idea, still, to say that
a wetland is valuable. Peoplethink, well, that's what
nonprofits do. You need a grantfor that, you need philanthropy.
(40:35):
So what is philanthropy? It'speople who made their money
doing traditional economicactivity, and then they give
some away later. But where didthat money actually come from?
It didn't come from the value ofnature. It came from mining,
oil, ag and timber, or biotech,or iPhones, or Facebook, or
(40:57):
something. Some form of economicactivity, that's where the money
came from. Look, it's a noblething to give money away. I
can't criticize people who dothat. It's noble. But I do think
that saying that things that arefunded by philanthropy are
inherently more ethical thanthings that are funded by
investment is incorrect.
(41:24):
When we started EcosystemInvestment Partners in late
2006, there were probablybetween 700,000 mitigation banks
around the US. But generally,they were pretty small and
opportunistic. They werecertainly undercapitalized —
there was no source of capitalin the business at all. So who
was it? It was farmers andranchers that had low wet ground
(41:46):
on a corner of their propertythat they couldn't really farm
or make use of. And so someoneturned them on to mitigation
banking and said "this could beworth money". There were also a
lot of developers who had beenforced to buy mitigation, who
thought they might like to tryand sell some mitigation
instead. So they weren'tecologist or scientists, they
were entrepreneurs. But therewere some successful early
(42:09):
banks, where people withbusiness and real estate skills
tried to, you know, doecological stuff. But there was
no source of capital. Because Ihad come to learn the business
through consulting, I gotinvited to some conferences, and
I had the great good fortune ofmeeting a guy who had had a
successful career in privateequity, which I knew nothing
(42:31):
about. I really didn't know whatprivate equity meant. Turns out,
it means just not public equity.It means not stocks, but other
forms of ownership that areprivate. Anyway, this guy, Fred
Danforth, when I started to tellhim about mitigation banking, he
had already been doing streamrestoration, about four and a
half miles of stream restorationon his own ranch — which is very
(42:54):
expensive and painstaking work.So the whole notion that you
could possibly make money, doingthe same thing that he was
paying a fortune to do, wasintriguing. And he had all this
experience in structuring money— being able to access big pools
of private capital, if you couldmake a fair return. And then we
(43:15):
had another stroke of luck bymeeting my partner today, a guy
named Nick Dilks, who wasworking at the Conservation
Fund, which is one of thelargest land conservation groups
in the US. He had probably donea million acres of conservation
real estate transactions. SoNick really knew land, Fred
really knew how to structuremoney, and I had some experience
(43:38):
with mitigation banking, and hadbeen thinking about incentives
and contracts for a long time.
So we started this thing calledEcosystem Investment Partners.
We raised a pilot round ofcapital, if you will. It was $27
million, which seems like a bignumber. For a private equity
fund, it's a really smallnumber. It's like too small to
actually run a fund. But weraised that amount and invested
(44:01):
it in three projects. At thetime, the average size of a
mitigation bank around the USwas probably 100 acres. So these
were big projects for the time.They were 2000 acres each. One
in Louisiana, one in Virginia,one in Delaware. So we were able
to do well enough on the threeof them together, that in 2012,
(44:24):
we were able to actually go tothe market and raise a full
institutional round of capital,which was $180 million. That was
significant in a bunch of ways.First of all, I think it was the
first time that a private equityfund for ecological restoration
had ever been tried. The secondreason it was really significant
(44:46):
is that the lead investor was apublic pension fund. So it was
the New Mexico EducationRetirement Board.
When a pension fund invests in aprivate equity group, you know
that that investment meets purefiduciary standards. So it's
(45:07):
objective analysis of risk andreward. That's fundamentally
different than sociallyresponsible investment or impact
investment, both of which areimportant. But a lot of times
those words are code for belowmarket rate. right? So you'll
take something below marketrate, because of the
environmental or social good,which is fine. But the problem
(45:29):
is that the big pools of moneyin the world exists in things
like pensions or endowments thatcan't choose because of social
or environmental attributes —because it's not their money!
That's what a fiduciary means.You're investing somebody else's
money. And it turns out, thepeople that they're investing
for are teachers, firefighters,people who are going to retire
(45:51):
maybe 30 years from now. And sowhen you're investing their
money in these public pensions,you have to invest in a way
that's as smart as you can sothat the retirement money will
be there for them. That momentwent up public pension invested
in an ecological restorationinvestment firm meant that these
(46:13):
decades — of trial and error,and improvement in policy,
improvement in science,improvement and practice on the
ground — had led to a placewhere a pure fiduciary could
look at that activity, and say"It makes sense. This is a
reasonable risk adjusteddecision that I'm making. Just
like investing in timberland orfarmland, or mining or other
(46:36):
things." Ecological restorationascended to that place.
Ecological Restoration hadarrived.
So with that $180 million, weinvested in eight major
projects, including some of thelargest privately funded
restoration projects ever donein the US. Tens of miles of
(46:59):
stream restoration inAppalachia, in particular,
Kentucky and West Virginia.17,000 acres of coastal
Louisiana on the land bridgethat separates Lake
Pontchartrain from the waters ofthe open gulf — and actually
filling areas that had subsidedand eroded below sea level back
to create healthy marsh. And23,000 acres in northern
(47:24):
Minnesota, about an hour northof Duluth, in what is actually
the t shirt I'm wearing today,the Sax-Zim bog. In the 1920s,
as people tried to farm thatarea, they had cut ditches. So
we restored over 80 miles ofditches in this remote
landscape. And it worked. Thehydrology began to return, and
(47:48):
water that had taken three hoursto go through the site began to
take three days. And by slowingeverything down, and returning
the natural hydrology, thehealth of the system began to
come back. And we could makemoney doing this stuff, because
of the need for compliance withthe Clean Water Act.
(48:09):
And it is amazing what naturewill do if you just give it a
chance, right? If you just bringback some of the fundamental
conditions to allow health, it'slike restoring blood flow. And
then all of a sudden, thehealing process begins, and the
seed bank that was notfunctioning for 100 years starts
to come back. Those seeds arestill alive underground. It's so
(48:29):
exciting.
But so to answer your questionabout how we do it... the skill
sets that it takes to do thisare sort of unusual, right? I
mean, it definitely involvesmoney — knowing how to organize
and responsibly manage capital.So there's lots and lots of
reporting, but there's also realestate, and in particular,
conservation real estate. Solooking for pieces of land that
(48:54):
aren't necessarily prioritiesfor traditional development, or
traditional ag or timber.There's also really deep
understanding of policy. Youneed to understand environmental
law. And of course, the science.You need to understand both
engineering, as well ashydrology, botany, fisheries,
you know, whatever the issuesare in that particular location.
So we made a pretty consciousdecision early on that we would
(49:17):
never be able to hire all thosepeople in-house, especially if
we were going to work in a bunchof different states. So the
fundamental idea was to hireenough staff that understood the
basics of this stuff, and thenpartner with the local experts —
the best people we could find ineach ecology.
One of the hallmarks that I'mreally proud of is an innovation
(49:41):
which seems obvious inretrospect, but no one was
doing, which is to identify thecontractors that actually do the
physical work, and bring theminto the design conversation.
The design and theimplementation had always been
in separate rooms, and still arefor most projects. So you don't
have the benefit of theexperience of the people who
(50:04):
actually do the work. And so youhave designers designing sort of
theoretical answers, withoutsomeone to say "that's not going
to work," or "maybe if you triedit like this." But in the people
who are actually doing the work,there's tons of knowledge and
tons of experience, but we needto lift up and sort of ennoble
those jobs, which are a hugepart, both of the work but also
(50:27):
should be part of the movement,right? Because there's now
meaningful employment comingfrom ecological restoration. If
you talk to those people, you'llfind that a lot of them worked
in traditional civilengineering-type construction,
roads, bridges, parking lots.And they find so much meaning
(50:47):
and purpose in restoring thenatural places that actually
near where they live, comparedto the type of work that they
did before. In Appalachia, wehave people that used to work in
coal mines that are nowrestoring some of the streams
that were damaged by coal miningactivity. In the Gulf coast of
(51:09):
Louisiana. There are people thatused to work on oil rigs that
are now restoring some of themcoastal marshes that support the
fisheries where they grew upfishing.
The ability to make a livingdoing ecological restoration is
really meaningful for people. Itelevates jobs that are often
considered menial. It givespeople more skills, more
(51:33):
engagement, more involvement,more learning, and seeing
results that they can personallycare about. It's really about
providing specialized trainingfor equipment operators, and
laborers who work in restorationand giving the specialized
skills to work in sensitiveareas. But then also learning
(51:53):
from the people who are seeingthings on the ground every day.
And building better trustbetween the construction folks
and the regulators, who are verydefensive about any activity on
the ground that involves yellowequipment —understandably! The
permitting process to getpermission to damage something
(52:16):
is easier than the permissionprocess to be allowed to restore
something. And you would think,how can that possibly be? But
when you're building a road, oryou're building a pipeline, or
permitting even a mine, you'reoften working in an area that is
somehow zoned or slated for aneconomic development. Whereas
(52:38):
when you're doing restoration,you're going to the sensitive
areas. You're going to the areaswhere the endangered species
want to be. So there's lots ofreasons why regulatory agencies
have had trouble figuring outhow to give permission for
environmental restoration in aresponsible way. It's really a
(52:59):
challenge.
When environmentalism camealong, it was really critical
that we stopped the mostegregious behavior. But now
we're at a point where we havelots of environmental laws, but
things are still going badly. Sowe need to internalize the
externality. We need to makethat damage part of the cost of
(53:22):
doing business. And that's whereI see this going. What we're
doing is in a microcosm of thenatural world — which is
wetlands, under one section oflaw, in the United States.
right. But even that is billionsof dollars of activity. And it's
creating an industry, anecological restoration industry,
that's actually tapping into thelargest pools of private capital
(53:45):
and public capital in the world.So they're now seeing that you
can make a fair rate of returnthrough ecological restoration.
That's important. Because ifecological restoration is
valuable, then they're going towant to do more of it. And the
amount of capital that you haveto work with will not be
limited. It's not limited byagency budgets, or philanthropy.
(54:07):
It's actually the endless poolof capital, which is the
investment capital of the world.But even more important than
that, is that it's a mechanismby which you can measure damage
and require offsets for it. Andthat doesn't have to be limited
to wetlands or streams. Thatcould be a principle that you
begin to apply more broadly,across environmental regulation
(54:30):
and across the economy.
I mean, it's a little bit of afantasy today, to think that the
ecological restoration industrycan provide a model that can be
used for, you know, moresustainable production of all
goods and services. But why not?I mean, what the heck. You know,
the approach that we're takingnow, which is basically fines
(54:52):
and fees, and then, you know,trying to stop people by
punishing them if they stray outof bounds... like, that's good,
we should do that, for sure. Butit's not really getting us where
we need to go. We need to dosomething that sends an economic
signal so that the basic impulseis to do the right thing,
because it's more profitablethan doing the wrong thing. And
(55:14):
if you can get that mechanismright, you don't have to be an
advocate anymore. You don't haveto protest anymore, because the
machine will do it in order tobe profitable. It may seem
fantastic to even think thatthought, but I'm telling you,
we're seeing billions of dollarsof institutional capital come
into ecological restoration, andmake the impacts — that are
(55:39):
happening — less damaging andmore responsible than they were
before. We're seeing it.
That's why I got involved withmoney, because it was obvious
that all the money was in thebad stuff — the things that were
wrecking the world that I love.And so how on earth can you get
the money to line up with whatyou care about? You have to
(56:03):
think about the economics, aboutthe contract structures, about
the regulations, about thedeals. People have to make a
fair return on investment. Theyhave to. It's not a variable.
It's a constant in the equation.And it's a discipline. It
requires a discipline ofthought, which actually has been
(56:28):
a constant challenge for myscattered mind, but also a
really refreshing practice,like, you know, Aikido or
something... like a martial art.Like, you have to just do it
over, and over, and over again,and think about it day after
day. But the discipline ofmaking a return through
something that is really good,is so rewarding, because...
(56:55):
that's where the problem is, andthat's where the solution is.
It's... it's so funny, but it'sin the money somehow.
And so, last thing I'll say, weneed not leave behind the
sacred, the miraculous, thepoetic, the ancient ways of
(57:16):
experiencing the living world,the unique. Those things are the
reason why I do what I do.Someone told me a long time ago,
a mentor in the garbagebusiness. He said, "If you want
to solve a problem, you got togo where the problem is, can't
(57:40):
just be a critic from theoutside." But being next to it
in it near it allowed me tounderstand it, and contribute to
solutions, at least in some way,at some level. And that's how I
feel about money. You know, lastthing I wanted to be was a
(58:00):
business guy. And to actually bea partner in a private equity
fund, are you kidding? Like thatwas not on the radar screen. I
didn't do it to make money. Imake money to do what I do. It's
all the difference in the world,between those two things.
If you go out of business tryingto save the world, then you're
(58:22):
out of business. But if you canmake money through good things,
then the more good you do, themore money you make. And that is
the trick.
Adam Huggins (58:56):
This episode was produced by Mendel Skulski and
myself, Adam Huggins with thevoice of Adam Davis.
Mendel Skulski (59:02):
And with music by Thumbug, Local Artist, Yu Su,
and Sunfish Moon Light.
Special thanks to Ian Wyatt andMood Hut records, to Alé Silva
for the cover art, and to ourinterns, Ava Stanley, Aila
(59:25):
Takenaka, and Alex Janz.
Adam Huggins (59:29):
Future Ecologies is an independent podcast
supported by listeners just likeyou. Join our community for as
little as $1 each month, andyour return on investment will
be early episode releases,exclusive bonus content, access
to our Discord server merch, andbest of all, we get to keep
making the show for you.
Mendel Skulski (59:48):
And keep it ad free for everyone.
Adam Huggins (59:50):
So if you think what we're doing has value, you
can prove it.
Mendel Skulski (59:54):
at futureecologies.net/join
Adam Huggins (59:59):
but money isn't everything. So, please leave us
a rating and review wherever youlisten, and share it widely.
Mendel Skulski (01:00:05):
It really helps.
Adam Huggins (01:00:07):
'til next time.
Mendel Skulski (01:00:08):
'til next time.
Adam Huggins (01:00:09):
Thanks for listening
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