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Director’s Desk: Major New Funding from BMZ/KfW

January 3, 2013
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Conservation Finance, Director's Desk
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Posted by CNF Staff

At year-end 2012 we received a new Euro 7 million grant from the German government through its Ministry of Economic Cooperation and Development (BMZ) and development bank (KfW).  This major new grant will be a source of regular funding for years to come.

The new grant works as follows:  from now until 2030, CNF can draw on the Euro 7 million flexibly.  Most of the fund will support our projects in the parks; but a smaller portion will be spent to support CNF’s costs in the Caucasus to operate the program.  By 2030, the entire amount must be spent (sink to zero)—hence our name for this grant—a “sinking fund”.  Pending its use, the sinking fund will be invested and a portion of the investment earnings can be allocated to increase CNF’s capital base.

In effect, the sinking fund provides CNF with a form of hybrid capital that CNF can gradually spend down.  This is innovative for a German foundation, since under German foundation law endowment capital can essentially never be spent; instead, only earnings on the endowment are available (along with annual contributions) to support programs and operations .  CNF’s new sinking fund operates more like the endowment capital of an American foundation that must be spent down at least 5% every year.

In less than 5 years CNF has more than tripled its funding.  When our endowment earnings are combined with our annual donations, we estimate that we can now support an annual grant program of over Euro 800,000 on a sustainable basis.  That puts us over halfway to our target of investing at least Euro 1.5 million annually in the amazing protected areas of the South Caucasus.

This is our third major grant from the German government in 5 years.  We are deeply grateful for its support.

David Morrison is Executive Director of the Caucasus Nature Fund

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