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.

— — —

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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You are listening to season five of

Future Ecologies.

So I had a really profound experience during the

pandemic, reading the work of David Abram. Spell of the

Sensuous and Becoming Animal. He taught me a few things. One of

them is that the same word we use for the arrangement of

letters, is the word that we use for magic. It's a spell. We

spell words, and you cast a spell. And the reason that

that's relevant right now is because he is a magician. For

him, the magic is in the actual experience. And he taught me

that in magic, what we think of as conventional magic, the magic

is not the trick. The magic is the experience of the trick.

It's the experience that you actually have — the sense of

awe, wonder, even fright, because something happened that

was so unusual. And that experience is so profound that

it sort of shocks you out of your ordinary way of seeing

things. And if you can bring just a little bit of that

experience of magic into your experience of nature, by just

listening a little more, listening a little longer... and

then seeing the world that's also making the sound, and then

feeling the air. That experience is magic. But it's also

participatory. You no longer are an observer of it, you're a

participant in it. David was one of my most important teachers in

making me understand that that experience, that participatory

experience — of not being separate from the living world,

but you and the world being one thing, not two things — That is

very much the way things were before the written word. So

that's David's work, and I was really moved by it. But the

thing that he never does, is talk about the magic of numbers.

There's two great systems. One is letters. The other is

numbers. Letters, and words have a relationship with magic and

experience and participation. But numbers are the things that

we use to determine what counts and what doesn't.

Recorded and produced on the unceded

territories of the Musqueam, Squamish, and Tsleil-waututh

Nations, this is Future Ecologies. I'm Mendel Skulski.

I'm Adam Huggins. And on today's episode, Making a

Living, we're hearing from Adam Davis.

And I'm a managing partner at a company called

Ecosystem Investment Partners.

I think there is a real possibility that this could be

the most boring episode you've ever done. After all your great

work on the sacred of nature, the amazing science of nature,

and poetic exploration of these things, today, we're going to

talk about permitting and money. It could be a disaster.

I couldn't be more excited right now.

It's been a long time coming.

I really believe that a great motivation for

finding a career that has meaning and purpose is doing

work that doesn't. My first real job in San Francisco was working

on Fisherman's Wharf at a place called Sourdough Puffs, where we

deep fried bread, basically, dough in vats of oil. And that

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 the Museum of Modern Art in San

Francisco, which was a really fun job. I was doing some

painting and exploration of art myself. And so being around the

art every day was great. The work itself was was nothing. It

was operating a cash register. Then I got a more serious job as

an assistant legal administrator at a building maintenance

company. I worked for a woman who changed smoked cigarettes

inside — because you could, back in the day. And she was well

meaning, but cynical beyond imagining. She had been through

the corporate world long enough that she just knew that it

wasn't going to really make a difference either way. And so I

reported to her for maybe six months in a fluorescent lit

room, reeking of cigarette smoke, and then quit that one. I

guess I was working at a picture framing shop when I got fired. I

was planning a two month motorcycle trip with my then

girlfriend, now wife. And so I gave them about two months

notice before the trip, and I got fired the next day. So I was

now out of a job planning on leaving for this trip. And a

friend of mine knew about a composting company that was just

getting started, called American Soil Products in Berkeley,

California. I got introduced to Bob Beatty, who was the

proprietor. Bob started American Soil Products to transform

organic waste into useful landscape products, and I was

the first employee in August of 1985, and immediately fell in

love with it.

At first it was the materiality of it, you know, I one of the

things I loved about art was literally the materials and the

tools like the physical feel of the oil paint, the linseed oil

that you'd mix with pigment, or the turpentine that you'd use to

thin it — the canvas itself, stretching the canvas. And so

being out at the composting yard, with piles and piles of

these different organic materials. You know, sandy loam

that came from the excavation of the BART tunnels; cocoa bean

holes from Ghirardelli chocolate, big, massive piles of

cocoa bean holes that smelled like cocoa and was wonderful;

cedar bark, piles of cedar bark, like stretchy orange orangutang

fur; and then all kinds of compost from yard waste. And we

blended all these together under the direction of a soil

scientist named Lou, who was the head of the chemistry department

at Contra Costa College. We blended these things together,

each of which had been useless. People had actually had to pay

to get rid of them. But if you blended them together, they

became productive and fertile. Our customers came to include

the leading landscape gardeners and landscape architects. People

would come by and want a specific blend for a rooftop

that was lightweight, or something for rhododendrons that

was more acidic, or specialized soil amendments. We sold to the

Conservatory of Flowers in Golden Gate Park, which is a

spectacular thing. We even sold some material to Biosphere Two —

that was an experiment in offworld living. And they wanted

to have a very particular soil, for some reason. We got a call,

I think I was the guy who took the call in our funky trailer,

in an abandoned paint factory yard in an industrial section of

Berkeley... seeing and exploring the whole notion of what was

waste. What does it mean for something to be waste? Realizing

that there's this fine line between something that you buy

and pay for, and then something that you have to pay to get rid

of. Organic waste turned out to be a huge part of the waste

stream in California. And this is what I started to learn as I

spent time in the composting business, is that we were

throwing away as a state, something like 50 million tons a

year of stuff, of which 20% or 10 million tons was just

branches, leaves and grass.

In our little composting yard in Berkeley, we were doing a few

1000 tonnes a year. And we thought we were fabulous. We

were having so much fun. We were saving the world. We had organic

gardens at the edge of our composting piles. A couple of

the guys who worked on the site began to keep chickens, and then

we had goats. And then school buses would come by and look at

the organic gardens and see the animals. It became like a

community gathering place. It was really fun. But it was when

I learned that we were actually throwing away 10 million tons a

year of this stuff, that I realized that what we were doing

needed to go to scale if it was going to make a difference. I

had a daughter — my wife and I had a daughter — and I really

needed a steady job. I needed a check that came every two weeks,

and I needed health insurance. And so I ended up working for

Oakland Scavenger Company which had just been acquired by Waste

Management where I spent 10 years of my life. And talk about

materiality, right? I mean, compost is one thing, but the

waste stream? The American waste stream is astounding in its

variety. The things people are done with and no longer want,

that they throw away is everything under the sun. It was

a great, great training ground for the fundamental question of

where things come from and where they go.

I had come from, you know, Berkeley and the hippie

community. And I had lived in Ithaca for five years, and

hitchhiked around, and I was sort of part of that tribe. And

we had a definition of garbage that basically is the set of

previously useful things that we choose to waste, right? And we

really choose to waste them by throwing them in a pile and

commingling them. So it's when you mush together all these

different things, that that's when garbage is created. Because

of course, glass isn't garbage. And paper isn't garbage. And

even branches and leaves aren't garbage. But if you mix them all

together, then you created this thing you can't do anything

with, and that's garbage. So it's a moral definition. But the

garbage men, mostly men, at Waste Management, Inc. had a

more pragmatic definition, which is simply the set of things that

costs you more to go get than it's worth. It costs you more to

deal with it, than the thing is worth. So when you have

something in your hand, call it an aluminum can, there's a

moment of choice, where you can say, I'm going to do something

with it, or I'm going to throw it away. Now, if there's a

recycling system, it goes into the recycling system. If there

isn't, it goes in the garbage. It turned out that the economic

definition of garbage carried a lot of weight. I had an

opportunity because of all the money and systems and so on,

that existed in this giant company to create structures

where you could make more money doing the right thing than the

wrong thing. You could make more money by recycling something

than throwing it away. There were some tailwinds, which is

that people wanted it, cities wanted it. There were actually

mandates now in law for recycling. But in order to do

that, there were some structural problems. The economics of this

were really challenging, right? The sunk costs in existing

landfills and existing garbage trucks mean that taking one more

ton of stuff and putting it in the landfill has very little

additional cost. But at the beginning, taking that same ton

and putting it into a recycling system meant new containers, new

trucks for recycling, new processing centers, and then

something to do with all the material that had been

collected. So really challenging to get started against the sunk

cost of the existing system. And that I think, is part of what

we're up against with all of our environmental concerns.

Basically, I became a student of incentives and contract

structures. How do you reward the environmental good more than

the environmental bad? So what's a fair way to allocate costs and

create rewards, so that you're rewarding the behavior that you

want? And I really got to go to school on this through many,

many municipal contracts, including some really big ones

like city of Oakland. The law that we were operating under the

integrated Waste Management Act basically had a hierarchy, which

had the first priority is not making waste, right, waste

reduction. Then the second priority is recycling and

composting. And then the third priority is landfilling or

incinerating what's leftover. But the way the contracts worked

was exactly the inverse. You got paid the most and most

predictably to throw things away. Because that was the

existing infrastructure. You got paid less and less predictably,

to recycle and compost. Partly because people had this notion

that somehow you were making money on the back end of it,

right? You were making money on selling the aluminum cans, so

they shouldn't subsidize the recycling. Although you were

making much less than landfilling. And then you got

paid nothing at all for waste reduction. There was no

incentive to not produce waste. Energy and energy efficiency.

It's the same question. Which is, how do you reward utilities

to produce less energy, to be more efficient when they get

paid by the kilowatt, right? But the same thing was true with

toxics. And the same thing was true with water. And the same

thing was true with other material forms.

So along the way, at a conference called the Industrial

Ecology Conference, I happen to sit at a small table, and I was

seated across from a woman who started talking about the value

of nature — literally the economic value of what nature

does. At first, I didn't really understand what she was talking

about. But her basic point was that in theory, we know that

nature is valuable. But for an individual landowner — for

someone who owns land — if you cut the tree down it's worth

money. It's worth money as lumber or paper. But if you

leave it standing, it's worth zero. And what she was saying

basically is that's inaccurate. Leaving the tree standing has

value. It's called ecosystem services. So this was 1997. That

phrase wasn't around in common parlance, I hadn't heard it. And

it turned out that this woman was named Gretchen Daily. She

was a conservation biologists at Stanford. Because while people

had been talking about ecological economics, probably

for 25 years in academia, they had been talking about it in a

pretty theoretical way. Theoretical exercises to get

people to say what they thought they would pay for a park, or

how you would replace a natural function if somehow it went away

— notions, basically. And Gretchen was saying, it's not

going to do. Things are getting bad out here on the surface of

the world, and we're going to have to pay people to leave the

trees standing. We're gonna have to recognize the financial value

of what nature actually does. And what she really taught me

was very humbling, because I realized that after having

worked in recycling, and environmental economics,

basically applied environmental economics, for 15 years, I had

never really thought about what the goal was. I mean it's almost

embarrassing to say, but I just took it for granted that

recycling was a good in and of itself, energy efficiency was a

good in and of itself. But of course, those things are a means

to an end, not an end in themselves. But what is the end?

What is the object of the game? The object of the game is the

healthy living world itself, that provides life support

services for us, right? It's not an abstract idea. It's a very

real material truth. The living world provides a stable climate,

resilient living systems, clean water, and other fundamentals

that are life support. When we recycle, we rely less on the

four primary extractive industries. And there's really

only four. Oil, ag, timber, and mining. Those are the four

places where all this stuff comes from. If you could pay

people to not cut the tree down in the first place, right? If

nature was valuable in and of itself, that would create a

price signal that would go through the whole system, and

help to more accurately reflect the value of nature itself. It

was a very abstract idea back in 1997. I really became fixated on

it, because there was something so fundamentally powerful about

making real the theoretical understanding of the value of

nature — so that people could actually get paid in real places

for doing real things. For stuff that we know is valuable. It

just seemed like such an enormous opportunity, and such a

powerful lever inside the system, I couldn't think of a

better thing to get involved with. But I came home from that

meeting. And I was hanging out with my wife in the backyard.

And I said, I'm going to create a career doing value of nature

stuff, ecosystem services. And she basically, you know, looked

at me very tolerantly and said, that's good.

There are a lot of things in our lives that are sacred, or

inherently valuable, in such a way that applying a price to it,

or a monetary value to it, seems to cheapen or degrade the thing

itself. And yet, we don't bristle at art and music being

paid for. There's a market for music, there's a market for art.

But we would never say that art is only worth money, or music is

only worth money. They are worth money, but there's also

something else much different going on. So in nature, natural

systems are valuable. We know this. We know that they're

valuable. And this bright line between, I would say, spiritual

value and economic value is necessarily going to make people

uncomfortable. The other part of it is that the idea of not doing

it, not putting a number on it, simply won't work in the current

moment, and it's deeply sad in some ways that that's true. But

I believe it is really true... that every acre of the world is

already valued for what we can build on it or take from it.

There is a known property owner for all the land in Canada, and

all the land in the United States, and most of the land

every place in the world. There's a process called

appraisal, where people can put a dollar figure on that land

based on what it can do for us, without reference to the natural

world — housing, and natural resources. Building on it and

taking from it. And because that's true, we have to fight

back. We have to say that not building on it or taking from it

is also worth money — for people who own it, for people who can

benefit from stewarding it, and restoring it, and managing it.

Those people have to be able to make more money, or at least get

something from doing something other than wrecking it. And

that's the same economics as recycling. Appraising land for

water purification, for biodiversity, for flood

protection, the other functions that natural systems provide is

new, just like recycling was new just 50 years ago. There were no

economics for recycling 50 years ago. and now it's commonplace.

It was the official policy of the United States to drain

wetlands, on purpose, for most of our history. It wasn't until

really 1970 that we changed our policy to say actually, those

things are really valuable, and we should stop wrecking them.

But there's still a department in our federal government called

the Bureau of Reclamation. And what reclamation means is

draining wetlands, or creating dams and putting water on dry

land, to reclaim it for economic use — for people.

Assorted Environmental Protesters: [Chanting] No means no!

What do we want? Change? When do we want it? Now!

This is what democracy looks like!

The conservation movement is noble, and I believe

in it, and I'm part of it. I mean, I want to protect the

things I love. And the beauty of the natural world is so sort of

obvious to me and so important that of course, you want to

protect every bit that you can. But the context is that in the

United States, the population has doubled since I was born.

There was 180 million people in 1960, there's 340 million now.

Vancouver was 600,000 people when I was born. It's 2.7

million today. This is going on everywhere. There's 8000 million

of us now. And we're consuming more per person, not less.

Conservation misses the mark in a few ways. You win temporarily,

but then you lose over time, right? You can protect this

little bit here and this little bit here, but there's these

enormous forces coming at you. And you can never really fully

hold the line. So it's the right impulse. It's a noble impulse.

But it's insufficient to the task. Conservation because of

where it came from, tends to see the natural world as like the

backdrop, or the stage set for the human play. And so what you

do is you make a park, right? You take a piece of nature, and

you put a fence around it, and you make it safe. It's a

wilderness, right? And then meanwhile, the human drama goes

on over here separately. So there'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

taking land out of the economy. And the environmentalists are

about stopping the bad things going on in the human economy.

But governments who ultimately make the rules for all this, are

in an impossible situation. They can't really fix it for us just

with policy. Because on the one hand, they have endangered

species protection, they have clean water laws, they have

clean air laws. And the basic message 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.

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 solution for the overall problem that we

face now, with increasing scarcity of the life support

services that nature provides, conservation — just stopping bad

things — is not going to achieve what we need to achieve.

There are shelves and shelves of books that are, I think, in the

category of "Nature is Amazing". And I love those books. I read

them all the time, And every time I do, I'm learning

something new about some amazing facet of the natural world. I

mean, I just read this book about eels called the Book of

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 go down the stream. And they're go

out into the Atlantic Ocean, and they swim across the entire

Atlantic Ocean to the Sargasso Sea, where they disappear into

this cloud of seaweed and mate in secret. And then all of a

sudden, baby eels are born, and they're carried on currents to

rivers all over the world. And then they migrate up these

streams, and they can live for 100 years, up on the top of

these streams. And it's happening all over the world,

and almost all the eels come back to the Sargasso Sea. And we

don't know how or why this works. It's amazing. Really,

it's amazing. But everything is amazing, right? And so the other

category of books, is that "Nature's in Big Trouble". The

environmental story is one of two things — this amazing thing

is getting wrecked, or the good environmentalists against the

bad producer of goods and services, right? The bad people

who make oil, the bad people who mine, the bad people who do

these things, this economic activity, while we, the good and

noble people, try and protect the amazing flowers and the

amazing orcas. And this storyline is so tired, it is no

longer helpful. And I'm not saying that there aren't any bad

people. There are bad people in the world. But most people

aren't. Even the people who are mining something. They're not,

like, trying to hurt you or hurt the natural world. They're

trying to provide the goods and services that we all use. We're

sitting in a room full of incredible technology, right?

All this stuff was mined. When you start to really grok where

things come from and where they go, the simple narrative that

there are bad people who are damaging the world, while we are

trying to save, doesn't really hold water. It doesn't really

work. And plus, even if you were right, so what? You know, like,

what are we going to do? How are we going to influence these

enormous systems?

Yeah, if it held water, it would be a dam.

Sorry...

[Laughing] No, that's great. Levity is helpful.

Thank you. I'm getting very sincere here.

I think this is the perfect moment for you to

recapitulate what... what is the big idea?

Yeah I was gonna say, let's hear about the stuff

you do now.

So, I came across this definition fairly recently,

and was fascinated to learn that the word "bank" comes from the

Italian word Banco, which meant table. And so back in early days

of commerce, the bank was a table, on which exchanges

occurred. But there turns out there's a much older word, which

is Old Norse, or Old German, I don't know how to pronounce it,

but Banki, B A N K I. And that meant a curve, like the curve of

a river bank. And we use that kind of expression today, when

we talk about an airplane banking into a turn. A river

bank would pile up as sediment would accumulate on the inside

curve. So river beds and plains, flood plains, accumulate

material from upstream, which makes fertility. So I guess

that's a good source of a word for a place where we keep that

which we value.

In the work that we do, we create things called mitigation

banks. That's the term of art. And people often think of them

when they first hear of them as financial institutions of some

sort. But they're not, they're places. They're like parks or

other protected areas. But they are a store of ecological value

that comes through restoring degraded landscapes — wetlands,

streams, habitat for endangered species — and then where you

measure what happens.

So if ecosystem services theory is correct, and what nature does

is valuable, how would we know? How would anyone actually get

paid? The first thing that you need to be able to do, and I

know some of the listeners are gonna hate this too, is you need

to be able to put a number on it. You gotta do it. And I'm

gonna go to the medical metaphor. If you're not feeling

well, and you go to the doctor, the doctor is going to do a

test. And what they're looking for is the absence, presence, or

concentration of something, right? Some indicator of

function. So whether it's red blood cells, or cholesterol, or

lipids, or anything else, they want to know if your health is

being affected by something that's out of range, right? It's

out of the healthy range. As above, so below, right? The same

things that happened in your body are also happening out in

the bigger world. Now they're happening at a much different

scale, and much different pace. So it's much bigger out there

and much slower. Which is one of the reasons it took us a long

time to understand this. But you can actually look at indicators

of functions of natural systems — so the health of a wetland,

the health of the stream. There are chemical, physical and

biological things that you can measure, and know something

about the system. That's not to say that we know everything, but

we don't know everything about how your liver works either,

right? But we know how to do some things that are helpful in

a crisis. Like if you were going to fix it, what would that mean?

What would you be going for, and how would you know it if you saw

it? In some systems, the living things actually are the things

that you would measure. So it's not the fish in and of itself,

any more than it's the red blood cell itself. Like, the red blood

cell in your body is great. But really, it's the whole

proliferation of them, it's the concentration of them. Do you

have a sufficient amount of red blood cells? It's the same with

the Delta Smelt in the Delta. If they're going away, it's because

something is fundamentally wrong. And that's why the law

steps in and says "You can't make it go extinct. Because

that's an indicator that the entire thing is falling apart."

The term of art is a functional acre. So you're measuring either

the biodiversity, the water quality, the flood protection,

the functions that are provided by that acre. And you can tell

that something that's degraded doesn't have much function. But

something that's been restored has more function. You can

measure the uplift, and you can compare that to natural healthy

systems called "reference ecosystems" or a "reference

system". And that would be one way 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 if you're going to be able to make

money or invest in this stuff is a customer — someone has to want

to buy it. And it turns out, there's really only two types of

customers for nature and what nature does. The first type of

customer is someone who needs compliance with an environmental

law. If the law says you cannot have a permit that will damage a

natural system, unless you restore an equivalent amount or

more, than that creates a demand for restoration. So that's what

happened in the US, after the passage 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're not going to allow the entire

system to be degraded further. But what we can do is say "if

you impact something, you have to make up for at least that

amount in the same watershed — before you get a permit."

At the beginning, everyone was trying to do their own

restoration. So every highway department, every housing

development, every mining project, every energy project

was going out and hiring consultants and trying to figure

out how to restore some amount of wetlands or streams that had

a scientifically verifiable relationship to the thing that

they were impacting. So there was tons of trial and error,

lots of experiment. But pretty quickly, there were

entrepreneurs who said "we could probably do that more

efficiently and effectively than all these random people doing

it, if we just specialize and focus on it and get better at

it." And so that's when mitigation banking was born.

People would bank a bunch of restoration. And then they had a

ledger. The credits on that ledger are meaningful things. I

know people have a lot of reaction now to carbon credits

or other types of credits that don't have sufficient evidence

to demonstrate that they really make up for the problem. I would

say that at the beginning, that was probably also true of

mitigation banks. But over 30 years of trial and error and

meaningful improvement in the regulatory policy, the credits

now actually do meaningfully make up for the impacts that

occur. The reason why I can say that with confidence is that the

standard that they're held to is higher than the standard for any

type of other public protection. There's three fundamental parts

of a credit. One of them is the science part — ecological

success criteria, the measurable stuff we were just talking

about. But then you'll also have legal and financial assurances

for durability over time. This was one of the big criticisms of

banks, is that you could protect something, but what guarantee

did the public have that it wouldn't get messed up later?

So, there are permanent conservation easements or deed

restrictions that mean that land can never be converted out of

this use of conservation. But there's also a financial

endowment for long term monitoring and maintenance, that

goes into the credit. So the thing that's generated off the

land is not just science-based restoration, that measures

ecological uplift, but also legal and financial assurances

that make sure it's durable over time.

And actually, people often will say that mitigation excuses

damage, or it allows damage. It somehow makes the damage

possible. And this is fundamentally incorrect, for two

reasons. One is without the mitigation, the road would still

be built. The alternative to No Net Loss is net loss. There

would be damage, if there was no restoration. We know this for a

fact. It's happening everywhere around us. And the alternative

to holding people to a standard and making the mitigate is not

holding them to a standard. It's not stopping it. Not

realistically. At least when you have some restoration, you're

making up for some of the damage that does occur.

But even more so or at least as importantly, because restoration

is held to a high standard, it's not cheap. The fact that you

need to buy mitigation means that damage is more expensive

than it used to be, right? So it used to be cheap to damage

stuff. Now it's more expensive. So there's real incentive to not

damage or damage as little as you possibly can. Because of the

existence of required mitigation.

As, really, an industry began to grow of companies that did

restoration professionally — they don't do anything else. The

activities they do are real estate, design, permitting, and

construction of restoration projects. As the industry grew,

then it became obvious that those skills — of real estate,

design, permitting, and construction — could be used to

solve other problems. Not just compliance, but actually solve

problems for the second type of customer, which itself is trying

to restore things — government. Matter of fact, the largest

expenditure on environmental health is of course, government

agencies themselves that are trying to, at a societal level,

make up for the total impacts, the cumulative impacts that

society has created. This is no criticism of government

agencies, I'm really not slamming these people. But the

resource agencies are staffed, really, with a lot of

environmental scientists and natural resource scientists. And

for them to be expected to go out and do real estate deals and

construction projects, at the same time that they're also

regulating — really complicated for them. And so the ability to

contract, not just through grants that pay people for an

effort to try something, but to actually buy a credit that

represents a finished result. That's the new transition that's

going on. Where the skills and capacity of the mitigation

banking industry are now being contracted by government

agencies that have mandates to restore really big, important

natural systems. And it's been really hard to actually get the

job done. The gap between planning and doing is enormous.

There's lots of planning, there's lots of big ideas. But

to actually get projects finished on the ground is

extremely hard.

If you can align reward so that every unit of restoration that

you do is worth money, then people will do more restoration.

The reason that there's a financial model is because what

nature does is worth money. And the reason that that's true, is

because money is the thing we use for value. That's what it

is, right? Money is this thing, that you know... it's this

infinitely malleable substance that we can attach to anything

that we value, including art and music, but also, you know, a

piano, or a new car.

Or a wetland

Or it turns out, a wetland. But because what nature

does has been so systematically ignored, misunderstood, and

undervalued for so long, it's a radical idea, still, to say that

a wetland is valuable. People think, well, that's what

nonprofits do. You need a grant for that, you need philanthropy.

So what is philanthropy? It's people who made their money

doing traditional economic activity, and then they give

some away later. But where did that money actually come from?

It didn't come from the value of nature. It came from mining,

oil, ag and timber, or biotech, or iPhones, or Facebook, or

something. Some form of economic activity, that's where the money

came from. Look, it's a noble thing to give money away. I

can't criticize people who do that. It's noble. But I do think

that saying that things that are funded by philanthropy are

inherently more ethical than things that are funded by

investment is incorrect.

When we started Ecosystem Investment Partners in late

2006, there were probably between 700,000 mitigation banks

around the US. But generally, they were pretty small and

opportunistic. They were certainly undercapitalized —

there was no source of capital in the business at all. So who

was it? It was farmers and ranchers that had low wet ground

on a corner of their property that they couldn't really farm

or make use of. And so someone turned them on to mitigation

banking and said "this could be worth money". There were also a

lot of developers who had been forced to buy mitigation, who

thought they might like to try and sell some mitigation

instead. So they weren't ecologist or scientists, they

were entrepreneurs. But there were some successful early

banks, where people with business and real estate skills

tried to, you know, do ecological stuff. But there was

no source of capital. Because I had come to learn the business

through consulting, I got invited to some conferences, and

I had the great good fortune of meeting a guy who had had a

successful career in private equity, which I knew nothing

about. I really didn't know what private equity meant. Turns out,

it means just not public equity. It means not stocks, but other

forms of ownership that are private. Anyway, this guy, Fred

Danforth, when I started to tell him about mitigation banking, he

had already been doing stream restoration, about four and a

half miles of stream restoration on his own ranch — which is very

expensive and painstaking work. So the whole notion that you

could possibly make money, doing the same thing that he was

paying a fortune to do, was intriguing. And he had all this

experience in structuring money — being able to access big pools

of private capital, if you could make a fair return. And then we

had another stroke of luck by meeting my partner today, a guy

named Nick Dilks, who was working at the Conservation

Fund, which is one of the largest land conservation groups

in the US. He had probably done a million acres of conservation

real estate transactions. So Nick really knew land, Fred

really knew how to structure money, and I had some experience

with mitigation banking, and had been thinking about incentives

and contracts for a long time.

So we started this thing called Ecosystem Investment Partners.

We raised a pilot round of capital, if you will. It was $27

million, which seems like a big number. For a private equity

fund, it's a really small number. It's like too small to

actually run a fund. But we raised that amount and invested

it in three projects. At the time, the average size of a

mitigation bank around the US was 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 three of them together, that in 2012,

we were able to actually go to the 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 equity fund for ecological restoration

had ever been tried. The second reason it was really significant

is that the lead investor was a public pension fund. So it was

the New Mexico Education Retirement Board.

When a pension fund invests in a private equity group, you know

that that investment meets pure fiduciary standards. So it's

objective analysis of risk and reward. That's fundamentally

different than socially responsible investment or impact

investment, both of which are important. But a lot of times

those words are code for below market rate. right? So you'll

take something below market rate, because of the

environmental or social good, which is fine. But the problem

is that the big pools of money in the world exists in things

like pensions or endowments that can'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, the people that they're investing

for are teachers, firefighters, people who are going to retire

maybe 30 years from now. And so when you're investing their

money in these public pensions, you have to invest in a way

that's as smart as you can so that the retirement money will

be there for them. That moment went up public pension invested

in an ecological restoration investment firm meant that these

decades — of trial and error, and improvement in policy,

improvement in science, improvement and practice on the

ground — had led to a place where a pure fiduciary could

look at that activity, and say "It makes sense. This is a

reasonable risk adjusted decision that I'm making. Just

like investing in timberland or farmland, or mining or other

things." Ecological restoration ascended to that place.

Ecological Restoration had arrived.

So with that $180 million, we invested in eight major

projects, including some of the largest privately funded

restoration projects ever done in the US. Tens of miles of

stream restoration in Appalachia, in particular,

Kentucky and West Virginia. 17,000 acres of coastal

Louisiana on the land bridge that separates Lake

Pontchartrain from the waters of the open gulf — and actually

filling areas that had subsided and eroded below sea level back

to create healthy marsh. And 23,000 acres in northern

Minnesota, about an hour north of Duluth, in what is actually

the t shirt I'm wearing today, the Sax-Zim bog. In the 1920s,

as people tried to farm that area, they had cut ditches. So

we restored over 80 miles of ditches in this remote

landscape. And it worked. The hydrology began to return, and

water that had taken three hours to go through the site began to

take three days. And by slowing everything down, and returning

the natural hydrology, the health of the system began to

come back. And we could make money doing this stuff, because

of the need for compliance with the Clean Water Act.

And it is amazing what nature will do if you just give it a

chance, right? If you just bring back some of the fundamental

conditions to allow health, it's like restoring blood flow. And

then all of a sudden, the healing process begins, and the

seed bank that was not functioning for 100 years starts

to come back. Those seeds are still alive underground. It's so

exciting.

But so to answer your question about how we do it... the skill

sets that it takes to do this are sort of unusual, right? I

mean, it definitely involves money — knowing how to organize

and responsibly manage capital. So there's lots and lots of

reporting, but there's also real estate, and in particular,

conservation real estate. So looking for pieces of land that

aren't necessarily priorities for traditional development, or

traditional ag or timber. There's also really deep

understanding of policy. You need to understand environmental

law. And of course, the science. You need to understand both

engineering, as well as hydrology, botany, fisheries,

you know, whatever the issues are in that particular location.

So we made a pretty conscious decision early on that we would

never be able to hire all those people in-house, especially if

we were going to work in a bunch of different states. So the

fundamental idea was to hire enough staff that understood the

basics of this stuff, and then partner with the local experts —

the best people we could find in each ecology.

One of the hallmarks that I'm really proud of is an innovation

which seems obvious in retrospect, but no one was

doing, which is to identify the contractors that actually do the

physical work, and bring them into the design conversation.

The design and the implementation had always been

in separate rooms, and still are for most projects. So you don't

have the benefit of the experience of the people who

actually do the work. And so you have designers designing sort of

theoretical answers, without someone to say "that's not going

to work," or "maybe if you tried it like this." But in the people

who are actually doing the work, there's tons of knowledge and

tons of experience, but we need to lift up and sort of ennoble

those jobs, which are a huge part, both of the work but also

should be part of the movement, right? Because there's now

meaningful employment coming from ecological restoration. If

you talk to those people, you'll find that a lot of them worked

in traditional civil engineering-type construction,

roads, bridges, parking lots. And they find so much meaning

and purpose in restoring the natural places that actually

near where they live, compared to the type of work that they

did before. In Appalachia, we have people that used to work in

coal mines that are now restoring some of the streams

that were damaged by coal mining activity. In the Gulf coast of

Louisiana. There are people that used to work on oil rigs that

are now restoring some of them coastal marshes that support the

fisheries where they grew up fishing.

The ability to make a living doing ecological restoration is

really meaningful for people. It elevates jobs that are often

considered menial. It gives people more skills, more

engagement, more involvement, more learning, and seeing

results that they can personally care about. It's really about

providing specialized training for equipment operators, and

laborers who work in restoration and giving the specialized

skills to work in sensitive areas. But then also learning

from the people who are seeing things on the ground every day.

And building better trust between the construction folks

and the regulators, who are very defensive about any activity on

the ground that involves yellow equipment —understandably! The

permitting process to get permission to damage something

is easier than the permission process to be allowed to restore

something. And you would think, how can that possibly be? But

when you're building a road, or you're building a pipeline, or

permitting even a mine, you're often working in an area that is

somehow zoned or slated for an economic development. Whereas

when you're doing restoration, you're going to the sensitive

areas. You're going to the areas where the endangered species

want to be. So there's lots of reasons why regulatory agencies

have had trouble figuring out how to give permission for

environmental restoration in a responsible way. It's really a

challenge.

When environmentalism came along, it was really critical

that we stopped the most egregious behavior. But now

we're at a point where we have lots of environmental laws, but

things are still going badly. So we need to internalize the

externality. We need to make that damage part of the cost of

doing business. And that's where I see this going. What we're

doing is in a microcosm of the natural world — which is

wetlands, under one section of law, in the United States.

right. But even that is billions of dollars of activity. And it's

creating an industry, an ecological restoration industry,

that's actually tapping into the largest pools of private capital

and public capital in the world. So they're now seeing that you

can make a fair rate of return through ecological restoration.

That's important. Because if ecological restoration is

valuable, then they're going to want to do more of it. And the

amount of capital that you have to work with will not be

limited. It's not limited by agency budgets, or philanthropy.

It's actually the endless pool of capital, which is the

investment capital of the world. But even more important than

that, is that it's a mechanism by which you can measure damage

and require offsets for it. And that doesn't have to be limited

to wetlands or streams. That could be a principle that you

begin to apply more broadly, across environmental regulation

and across the economy.

I mean, it's a little bit of a fantasy today, to think that the

ecological restoration industry can provide a model that can be

used for, you know, more sustainable production of all

goods and services. But why not? I mean, what the heck. You know,

the approach that we're taking now, which is basically fines

and fees, and then, you know, trying to stop people by

punishing them if they stray out of bounds... like, that's good,

we should do that, for sure. But it's not really getting us where

we need to go. We need to do something that sends an economic

signal so that the basic impulse is to do the right thing,

because it's more profitable than doing the wrong thing. And

if you can get that mechanism right, you don't have to be an

advocate anymore. You don't have to protest anymore, because the

machine will do it in order to be profitable. It may seem

fantastic to even think that thought, but I'm telling you,

we're seeing billions of dollars of institutional capital come

into ecological restoration, and make the impacts — that are

happening — less damaging and more responsible than they were

before. We're seeing it.

That's why I got involved with money, because it was obvious

that all the money was in the bad 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 what you care about? You have to

think about the economics, about the contract structures, about

the regulations, about the deals. People have to make a

fair return on investment. They have to. It's not a variable.

It's a constant in the equation. And it's a discipline. It

requires a discipline of thought, which actually has been

a constant challenge for my scattered 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 of making a return through

something that is really good, is so rewarding, because...

that's where the problem is, and that's where the solution is.

It's... it's so funny, but it's in the money somehow.

And so, last thing I'll say, we need not leave behind the

sacred, the miraculous, the poetic, the ancient ways of

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 garbage business. He said, "If you want

to solve a problem, you got to go where the problem is, can't

just be a critic from the outside." But being next to it

in it near it allowed me to understand it, and contribute to

solutions, at least in some way, at some level. And that's how I

feel about money. You know, last thing I wanted to be was a

business guy. And to actually be a partner in a private equity

fund, are you kidding? Like that was not on the radar screen. I

didn't do it to make money. I make money to do what I do. It's

all the difference in the world, between those two things.

If you go out of business trying to save the world, then you're

out of business. But if you can make money through good things,

then the more good you do, the more money you make. And that is

the trick.

This episode was produced by Mendel Skulski and

myself, Adam Huggins with the voice of Adam Davis.

And with music by Thumbug, Local Artist, Yu Su,

and Sunfish Moon Light.

Special thanks to Ian Wyatt and Mood Hut records, to Alé Silva

for the cover art, and to our interns, Ava Stanley, Aila

Takenaka, and Alex Janz.

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'til next time.

'til next time.

Thanks for listening