Green Wealth How to Turn Useless Land Into Moneymaking Assets Kevin F. Noon, PhD and Judith A. Ward, ASLA

ISBN: 0-7570-0282-X Length: 344 Pages Size: 6 X 9-inch Format: Quality Paperback Category: Real Estate / Environment Price: $18.95 US Availability: In Print Click below for: Synopsis • Contents Introduction • Reviews

Synopsis

Real estate may be hot, but the truth is that only a fraction of this country's land is useable. What happens to the land that is not fit for development? Until a few years ago, the value of such property would have remained flat, with little prospect of appreciating. Today, however, the Federal government has created a huge incentive to turn this land into moneymaking assets. This is the focus of Green Wealth. Written by two leading experts, this book is the first to explain how newly enacted laws can benefit those who invest in environmentally reconstituted land development.

As construction on valuable acreage has burgeoned over the last few decades, many environmentally sensitive properties and their resourceshave been destroyed. Laws enacted to protect the land and resources have been difficult to implement. As a viable solution, the Feds, along with many state governments, now allow for the creation of individual environmental "banks." These banks are established by converting useless property into one of several types of environmentally protected land. Environmental credits are then issued to the landowners--credits that can be sold to developers who seek to build on previously protected properties. As building continues in one place, new environmentally sound acreage is created in another.

By creating new wetlands, endangered species reserves, waterstorage reservoirs, carbon dioxide exchange forests, and a host of other environmental banks, you can now perform an environmentally responsible service and make a highly profitable investment at the same time.

Kevin F. Noon, PhD, received his doctorate from Texas A&M University, specializing in wetlands. For twenty-five years, he has been involved in land development and wetland mitigation policy development.Currently, he is chairman and cofounder of Critical Habitats, Inc., a land development and consulting company that specializes in environmental banking.

Judith A. Ward, ASLA, received her master's degree in landscape architecture from the University of Michigan. A professional landscape architect with over twenty years of experience, Ms.Ward is now president and cofounder of Critical Habitats, Inc.

Contents

Acknowledgments, ix
Introduction, 1
PART ONE: The Business of Environmental Banking
1. Environmental Banking Basics, 11
2. The Environmental Banking Industry, 31
3. The History of Modern Day Environmental Banking, 67

PART TWO: What’s It all About?
4. The Overall Process, 91
5. Build Your Bank Business and Team, 109

PART THREE: The Fundamental Tasks
6. Complete the Feasibility Appraisal, 129
7. Complete the Environmental Bank Certification Process, 151
8. Create the Bank, 169

PART FOUR: Moving Ahead
9. Calculate Costs, 185
10. Realize Profits, 203
Conclusion, 221

Glossary, 227
Annotated Business Plan Outline, 235
Comprehensive Prospectus and Bank Instrument Outlines, 247
Resources, 253
References, 261
About the Authors, 267
Index, 269

Introduction

During three decades of guiding land owners, land developers, not for profits, and investors through the environmental permitting labyrinths, we have never witnessed the marriage of business principles with environmental stewardship in order to preserve the quality of the environment--while providing significant financial opportunities--until now.

Environmental banking is a form of environmental protection that is also a business opportunity for the private sector.

The extraordinary power of the profit motive that creates success in our economy is being applied to protect our natural resources; the money-making “incentive” component of the environmental banking concept is extremely powerful. By creating environmental banks, proponents now have the opportunity to profit by doing something good for the environment. If someone makes a profit doing something good for the environment, you can feel confident that the effort will be successful. Everybody wins: The quantity of banked credit satisfies the resource or pollution off-set demand for the area being served, at prices that are equitable to both the environmental bank debtor and banker because an environmental bank's credit sales revenues will always exceed the costs of producing the credits.

The environmental banking concept is simple. Environmental banking is the creation and sale of a natural resource commodity or a pollution reduction. An environmental bank is a project that creates some type of marketable improvement in environmental quality. Traditionally, when polluters destroyed natural areas or polluted our air or water, environmental regulations required compensation for the damage. The responsible government agencies found it difficult to force developers or polluters to offset their impacts. Environmental bankers have been introduced as third parties to offset the adverse impacts to natural resources and sell the assets that they create to the customers at a lower cost than they would have to pay to complete the offsets themselves.

What confuses some people is the industry’s common use of the word “bank” or “banking.” When people think of banks, they think of financial institutions that deal with money. Within this industry--and this book--a bank is a legal corporate body that owns improved environmental assets instead of cash. Natural resource assets can be created, stored, and sold to customers in much the same way a financial bank would collect, store, and trade wealth. Banking, the verb form of the word, refers to all aspects of the business that pertain to the process of creating assets, and certifying, operating, and profiting from the act of creating a bank that produces a net gain in the quantity and quality of our natural resources or reduces the affects of pollution. This book describes how to create “entrepreneurial environmental banks.” An entrepreneurial bank (also referred to as a “for-profit bank” or “private sector commercial bank”) is developed to make compensation available for sale on the open market.

Here is an example of what is likely to be an incentive for most. The national average wetland asset or credit sale price is $60,000. We estimate, in Chapter 9, that the national average cost to create a wetland credit is $30,000. This number is based on almost 60 years of combined personal experience with creating environmental assets for various customers. Use our average sale price of $60,000 and determine the net profit from selling each credit by subtracting an average credit creation price of $30,000. You do the math: Calculate the net return from selling 200 credits (the total credits in an average size bank)--$6 million, you’re impressed. It should be easy to understand why news of the opportunity and financial success is spreading--and why interest in the environmental banking industry is evolving quickly.

Although the incentive-based, market-driven initiative is the most innovative and appealing component of environmental banking and although this book emphasizes the business or profit-making aspects of the entrepreneurial banking concept, banking is really about fulfilling a much more valuable need--to coexist with our natural environments. Environmental banking is about managing our activities to preserve the quality of our environment; it is about providing opportunity to offset impacts that will result in a net gain of environmental quality; it is about replacing lost resources that we require in order to coexist and still prosper on this planet.

With public appreciation of environmental quality (resource protection and pollution reduction) on the rise, you can make a positive contribution by increasing our nation's valuable natural resources. The benefits of improved environmental resource conditions, provided by banked assets such as improved air and water quality, are essential to everyone's physiological and psychological health and well being. A considerable amount of the success that you will feel from creating environmental banks will come from knowing that you are doing something good for the environment.

Many other nations are recognizing and applying the benefits of the environmental banking concept even though most of our reference examples throughout this book are from the United States. According to the Ecosystem Marketplace (2006) “The use of markets and market-like mechanisms to conserve and pay for ecosystem services is therefore no small movement; it is a large and growing global trend. And it is a trend that is no longer solely important to environmentalists, it is becoming of essential interest to small local communities, government regulators, businesses, and financiers around the globe.”

Therefore, environmental banking is “Green Wealth” because (i) it’s an incentive-based, free-enterprise business approach to environmental resource management that results in economic gain for the bank owner and (ii) the environmental benefits of banking are far greater than those derived from implementing existing management methods. Environmental banking is “Green Wealth” because the business combines green economic incentives with green environmental gain in order to achieve the national goal of increasing environmental quality. This fundamental concept is driving, and will continue to drive, the success of environmental banking.

Because environmental banking is so profitable, many entrepreneurs and others want to know how to create the banks and the businesses. But because banking is complex, there are few with enough experience to ask the correct questions, let alone assume the risks, complete the tasks, and create the business. The good news: it’s all doable. And in this book we tell you how.

WHAT’S IN THIS BOOK?
Green Wealth is the first comprehensive guide that describes these unique business opportunities. Written by successful environmental bankers, Green Wealth provides complete instructions for creating profitable environmental banks. It provides an overview of banking opportunities, an understanding of banking business principles, and a recognition of the significance of private-sector environmental banking. This book will satisfy your curiosity about the business and foster your active participation in entrepreneurial, for-profit environmental banking.

Our concern for the condition and fate of our natural resources began in the late 1970's, when the Federal agencies began quantifying the truly astronomical loss of air quality, water quality, wetlands and other critical habitats since Europeans arrived and began developing this country. We became environmental consultants to make a difference, to identify approaches to protecting the environment while accommodating the effects of inevitable population growth. We solved wetland permit and restoration issues for clients on over 500 development projects, including marinas, airport expansions, highways, industrial parks, residential areas, mining operations, and military installations. Over the years awareness of the banking concept had grown nationwide, and we began working with some clients who had the opportunity to create banks, and then started creating our own.

Our combined years of experience with, and understanding of, political processes, environmental policy development, banking regulations, private land rights, dynamics of the free enterprise system, and creating environmental banks have gone into the advice you’ll find here. We compiled the common components of several existing environmental banking businesses in order to create the how-to banking model. We show you how to complete the entire banking business process--from feasibility analysis through bank certification and business logistics (including team building, managing, and negotiating), to construction management and credit sales. We describe what needs to be done to complete each task, where to find necessary information, and how to avoid pitfalls.

Green Wealth is divided into ten chapters within four parts. Each chapter builds on the previous one in order to bring you closer to creating an environmental bank and a banking business. We have tried to keep in mind your potential interests, the various opportunities that are available, and the key strategies to help you achieve your goals.

Part I: The Business of Environmental Banking, is designed to introduce different types of banking opportunities, the basic structure of a successful environmental banking project, and the historical evolution of the banking concept. In Chapter 1, we introduce the banking business opportunities that may interest you including existing markets: Wetland and endangered species banking; and in new emerging markets: Carbon banking, energy banking, water banking, water quality banking, and land development rights banking. We described the language of environmental banking and the eight components common to the seven types of banking and to any application of the environmental banking concept. If you know the basics of the banking concept, then you will be able to form your own business in the existing and emerging markets, as well as identify opportunities to create environmental banking markets and banking businesses that no one has thought of yet.

In Chapter 2 we describe the seven types of existing and emerging environmental banking opportunities in detail. We describe the specifics of eight components and how they differ from one banking opportunity to the other. We also describe the government’s responses to each environmental problem that is the impetuous for each type of banking opportunity. Then we describe how banking addresses the different resource management issues, we provide banking examples, and describe the status and trends for each type of banking opportunity.

Chapter 3 describes a comprehensive picture of the banking industry as it evolved over time to become a primary solution to the regulation and protection of different types of natural resources. If you can anticipate the evolution and application of the environmental banking concept as a means of achieving sustainability, you will be in an advantageous position to profit from its opportunities.

The chapters in Part II: What’s It All About? describe the overall process of creating a bank and a banking business and the essentials of a successful business team. Part II also explains the basic banking knowledge every team member must understand and appreciate. Specifically, Chapter 4 describes requirements for completing each of 14 tasks of the banking business process. The time and resources necessary to complete the tasks (with a figure showing the banking process timeline schedule), and the importance of sequencing certain tasks, are highlights of this chapter. Chapter 5 describes the fundamental aspects of the environmental banking business team and the five essential types of team members. We also include a discussion of the essential elements of an environmental banking business, and since environmental banking is a new industry, the model strategic business plan we provide should be useful.

Part III: The Fundamental Tasks, describes the foundational processes that are necessary to establish and create a bank project--the feasibility study, the certification process, and the bank creation process. These are the most complicated and the most important of the 14 tasks described in Chapter 4. Chapter 6 details the most critical procedures--the regulatory, stakeholder, ecological, physiological, and economic feasibility analyses. The complete feasibility study allows you to determine if what you propose as a banking business can be completed, therefore, each step is described, and case-study examples show how the procedures were applied in real project situations. Any unacceptable results of a feasibility study will allow you to redefine your project and a successful outcomes of a feasibility study will provide you with the confidence level needed to complete the project.

Chapter 7 is a discussion of the environmental bank certification process tasks which include discussions of how the regulatory bank review team process works, how to work most affectively with the regulatory representatives, and how to get your bank certified quickly. We describe what information is important to them, what their requests for information are based on, and how you can formulate the best responses. We also describe the basics that you must know--why environmental banking works, the benefits of banking, and how to respond to the common misunderstandings--in order to effectively negotiate with others while achieving regulatory certification.

Chapter 8 tells you what it takes to create an environmental bank including the components of an Implementation Plan, Technical Drawings and Specifications, and what it takes to implement a construction process. This chapter allows you to understand the creation process enough to control it to a successful and cost-effective completion. A detailed discussion of how wetland banks are constructed shows you how the concepts of the chapter are applied to a specific banking situation.

Part IV: Moving Ahead, is about crossing the finish line. Once you determine that your project is feasible, you gain certification, and you create the bank, it’s time to sell the credits. Chapter 9 discusses the best way to estimate how many credits you can expect to create in a given bank project. Then we discuss how much it will cost to create each bank credit according to a variety of costs including property purchase, certification, administration and management, and construction. In Chapter 10 we describe how to estimate the credit demand and pace of credit sale in the market, your share of the credit market, the credit sale price, and the potential profits. A comprehensive and aggressively proactive credit-sale marketing strategy is described and is the final component of a successful banking business.

We hope that this book clearly identifies opportunities for you to get involved in environmental banking. In our Conclusions chapter we expresses to you why the banking concept is flourishing now, why it will continue to flourish in the future, what we believe are the underlying reasons why environmental banking will be successful, and should you choose participate, you will be successful.

A GREENER FUTURE CAN BE OURS
We have the opportunity to create thousands of banks within the seven types of banking that we describe in this book. We encourage you to discover new environmental banking business opportunities, especially if you are not satisfied with creating a business in any of the seven markets we describe. As you read through the chapters examine your own experiences, resources, and knowledge to discover other land development or resource production situations that can be the basis for your own banking business. The discovery of other such markets is limited only by your imagination. Make sure the eight common characteristics necessary for any banking business opportunity (described in Chapter 1) apply to your potential banking opportunity. Then apply the procedures explained in rest of the book to create your bank.

Keep in mind this basic scenario for environmental banking: Population growth creates demand for land development and resource production. Land development and production impacts natural resources. Where there is natural resource impact or production of pollution, there is demand for new and innovative ways to manage the conflict between man and nature. Environmental banking is the primary resource management tool being used to resolve those conflicts. Where there is demand for credits, there is opportunity to create environmental banks and sell credits. We feel that a green future will be ours.

The value of this book is that it offers you the means to be the financial beneficiary of environmental stewardship and that the information in Green Wealth provides the foundation you will need to develop banking businesses. What are the fundamental characteristics of any environmental banking opportunity? What are the different existing applications of the banking concept? And what are the different opportunities for you to create environmental banks? The answers to these questions will form the foundation of your understanding of environmental banking. They are the subject of Chapter One.

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