Project Brief: download a PDF copy here (2.2 MB).
Importance
Responsible tourism is a proven source of economic development and biodiversity protection in developing countries. Well-planned development supports important environmental and social objectives while providing attractive financial returns to investors. However, habitat degradation, community displacement, and other negative impacts have also occurred as a result of conventional tourism. To address the lack of information and access to capital needed to reduce these negative impacts, we created an investment firm called Coastal EcoVentures.
What is Coastal EcoVentures?
Coastal EcoVentures is a specialty investment firm that finances responsible tourism and conservation in Mexico. We provide debt capital and advisory services to small- and medium-sized enterprises that show promise in meeting environmental and social goals but cannot secure financing from traditional sources.
To select responsible investments, we apply a proprietary scorecard, the EcoValuator, which measures and quantifies a development’s environmental and social impacts. By selecting responsible investments, we will develop a portfolio of qualified tourism projects that contribute to an increase in protected areas and land conservation, equitable economic growth of local communities, and the increased use of renewable energy. To finance these projects, Coastal EcoVentures will raise funds from patient capital sources with sustainable development goals, such as socially responsible investors, foundations, and development agencies.
Responsible Tourism in Mexico
The responsible tourism market is growing three times faster than the tourism industry as a whole, and is set to become 25% of the world’s travel market within a decade. In Mexico, responsible tourism is expected to grow 30% annually, and strong government support ensures the continued growth of the industry. Although the economic downturn has reduced growth, new investment opportunities have emerged, such as the retrofitting of distressed assets.
Strong consumer demand for tourism is expected to continue and ambitious plans for development can be found throughout Mexico. Most activity is undertaken by small developers, many of whom lack investment capital to develop responsibly. Through management and analytical expertise, along with access to low-cost capital, Coastal EcoVentures fulfills this need and promotes responsible tourism investment.
Focus Area:
Bahias de Huatulco, located in the state of Oaxaca, is the latest of five government-funded (FONATUR) sites to be master planned. Huatulco is anticipated to grow substantially in the next 10 years and is being designed as an eco-friendly destination. Coastal EcoVentures also has relationships with developers and conservation organizations in the states of Guerrero and the Yucatán.
Investment Portfolio
We will provide debt financing for capital investments that directly benefit the environment and local communities. To promote responsible development practices, we will provide technical assistance to the projects receiving our funds. To qualify for funding, tourism projects must demonstrate superior environmental and community benefits, as measured by our EcoValuator scorecard. As a condition of investment, Coastal EcoVentures will be actively involved in major decisions that influence the sustainability of a project. Investment decisions ultimately will be driven by conventional financial valuation methods and due diligence.
EcoValuator Tourism Investment Scorecard
Coastal EcoVentures created a proprietary assessment methodology, called the EcoValuator, which provides a rigorous, quantitative way to assess the environmental and social performance of a project. The methodology includes over 60 indicators of environmental, social and governance (ESG) performance:
•Energy: energy demand (W/m2)
•Conservation: land area conserved or restored (ha)
•Biodiversity: presence of vulnerable species (#)
•Employment: workforce from local community (%)
•Local Benefits: local retention of profits (%)
•Education: investment in educational programs ($)
•Legal Compliance: with local and int’l regulations
•Sustainability Management Plan: quality (scale 1-10)
A full list of indicators is available upon request.
Each project’s performance is measured against benchmarks of industry-leading practices, ensuring ambitious but attainable standards for project performance. Scorecard results are then incorporated into project valuations and investment decisions. To ensure universal applicability, the EcoValuator is aligned with the recently introduced Global Sustainable Tourism Criteria, the consensus on best practices in tourism. As a result, the EcoValuator provides a coherent snapshot of the environmental and social factors that are material to responsible investment decisions. The diagram below shows an overview of the process, with an example performance indicator and benchmark from each of the main sections.
Sources of Investment Funding
Investment capital will be raised from mission-driven organizations and individuals providing low-cost capital in support of sustainable development goals. This capital is characterized by loans ranging between $100,000 and $5 million with below-market interest rates, grace periods for repayment, and other flexible terms.
Development agencies are particularly active in this field, accounting for 66% of funding, or close to $10 billion. They have several programs to incentivize private sector investment in tourism. Coastal EcoVentures has had preliminary discussions about investment relationships with the Inter-American Development Bank and the Overseas Private Investment Corporation. Other prospective financing sources include the World Bank, the Global Environment Facility, and the United Nations Development Program. An increasing number of foundations also finance responsible tourism development.
Our-Market-Strategy
We are building partnerships with diverse decision-makers—NGOs, government agencies, private companies—and we also will provide advisory services at a reduced cost. These relationships will help build our network and credibility while increasing market traction for the EcoValuator. In the process, we will raise the necessary capital from low-cost providers and identify responsible projects in need of investment and technical assistance, enabling us to spread responsible development practices by means of a debt investment fund.
Partnerships
We will build on the network we already have engaged in Latin America and elsewhere:
Coastal EcoVentures is part of the United Nations Environment Programme (UNEP) Steering Committee for Sustainable Tourism Performance Indicators. This Committee seeks to create a globally relevant set of indicators for assessing the responsibility of tourism enterprises.
We will be joining the newly formed Sustainable Investment and Finance in Tourism (SIFT) Network, an important new collaboration of investors and project developers brought together by UNEP and the World Bank. The network aims to improve investment practices in tourism.
As part of our advisory services, we are stewarding a funding proposal for investment by the Verde Ventures investment fund, in what would be its first ecotourism investment in Mexico.
We are developing a partnership with the Mesoamerican Tourism Reef Initiative (MARTI), a Conservation International initiative with links to investors, developers, and the Mexican government.
We are providing research and advisory services to Playa Viva, a sustainable resort and residential community near the city of Zihuatanejo, Mexico.
Measuring Success
Although financial targets guide our decisions, ultimately we will judge our success by our contribution to responsible development goals. With the use of the EcoValuator, we will monitor our positive impacts on the environment and communities. In particular, we will track the following metrics achieved by the projects we invest in:
•Land area under managed conservation (hectares)
•Biodiversity protection (# of vulnerable species)
•Climate change benefits of energy technologies (tons of CO2)
•Employment of local community members (# employees)
•Client revenue going to local economy ($)
Management Team
The Coastal EcoVentures team brings over 25 years of experience in tourism development, consulting, financial analysis, asset management, and corporate environmental management. The five founders are graduates of the Bren School of Environmental Science and Management in Santa Barbara, California.
Coastal EcoVentures is supported by an Advisory Board composed of senior professionals providing expertise in real estate development, investment management, sustainable tourism, and quantitative assessment. Overseeing our Investment Fund will be an Investment Committee composed of experts from the finance, resort development, and legal industries.
Next Steps
Starting in January 2010, we will have full-time presence in Huatulco, in the state of Oaxaca. As part of our “business launch”, we are planning an environmental education publicity event, in cooperation with several international NGOs. You can follow our progress and support the growth of responsible investment practices in tourism by joining our Team or Network:
Join our team - equity ownership potential
•Advisory Board—help guide the business
•Investment Committee—guide investment choices for the Fund
•Angel Investors—help provide start-up capital
Join our network - sign up for our online newsletter
•Fund Investors—modest financial returns with environmental and social benefits
•Developers—access to competitive capital and partnerships for new projects
•Consumers—responsible travel opportunities
To join our network and to stay informed of Coastal EcoVentures’ news, projects and events, please send an email to info@coastalecoventures.com.
