Bridging the gap between finance and conservation biology: How derivatives can help in conservation

Abstract

Increase in human activities owing to the rise in consumption demand is increasing the risk of biodiversity loss. To address this concern, several conservation activities are being undertaken, including those that find their basis in finance. This paper highlights the role of finance towards biodiversity conservation, which is illustrated by taking into consideration one of the tools commonly used in financial risk management, namely, derivatives. The paper infers that derivatives can be directly applied to biodiversity conservation. In addition, it also highlights the possibility of specific derivatives such as energy and weather derivatives to indirectly contribute to conservation. Despite the challenges involved, such as pricing of biodiversity elements and assessment of loss, the possibility of applying derivatives to minimize the risk of biodiversity loss exists.