Dr. Amy Ando will present the talk - "Using Portfolio Tools from Finance to Plan
Environmental Investments Under Climate Uncertainty" for the final Fall semester E&E
Forum on Thursday, Nov. 13, 1-2:30 pm in the Toyota Auditorium. Dr. Ando is from
University of Illinois at Urbana-Champaign. Free & open to the public.
Climate change is likely to alter the spatial distributions of species and habitat types but
the nature of such change is uncertain. Thus, climate change makes it difficult to
implement standard conservation planning paradigms. Previous work has suggested some
approaches to cope with such uncertainty but has not harnessed all of the benefits of risk
diversification. We adapt Modern Portfolio Theory (MPT) to optimal spatial targeting of
conservation activity, using wetland habitat conservation in the Prairie Pothole Region
(PPR) as an example. This approach finds the allocations of conservation activity among
sub-regions of the planning area that maximize the expected conservation returns for a
given level of uncertainty or minimize uncertainty for a given expected level of returns.
We find that using MPT instead of simple diversification in the PPR can achieve a value of
the conservation objective per dollar spent that is 15% higher for the same level of risk.
MPT-based portfolios can also have 21% less uncertainty over benefits or 6% greater
expected benefits than the current portfolio of PPR conservation. Total benefits from
conservation investment are higher if returns are defined in terms of benefit–cost ratios
rather than benefits alone. MPT-guided diversification can work to reduce the climate-
change induced uncertainty of future ecosystem-service benefits from many land policy
and investment initiatives, especially when outcomes are negatively correlated between
sub-regions of a planning area.
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