When portfolio theory can help environmental investment planning to reduce climate risk to future environmental outcomes - and when it cannot

Conservation Letters
By: , and 

Links

Abstract

Variability among climate change scenarios produces great uncertainty in what is the best allocation of resources among investments to protect environmental goods in the future. Previous research shows Modern Portfolio Theory (MPT) can help optimize environmental investment targeting to reduce outcome risk with minimal loss of expected level of environmental benefits, but no work has yet identified the types of cases for which MPT is most useful. This paper assembles data on 26 different conservation cases in three distinct ecological settings and develops new metrics to evaluate how well MPT can reduce uncertainty in future outcomes of a set of environmental investments. We find MPT is broadly but not universally useful and works best when multiple investments have negatively correlated outcomes across climate scenarios, a second-best investment has expected value almost as good as the value in the best investment; or multiple investments have little uncertainty in ecological outcomes.

Additional publication details

Publication type Article
Publication Subtype Journal Article
Title When portfolio theory can help environmental investment planning to reduce climate risk to future environmental outcomes - and when it cannot
Series title Conservation Letters
DOI 10.1111/conl.12596
Volume 11
Issue 6
Year Published 2020
Language English
Publisher Wiley
Contributing office(s) Patuxent Wildlife Research Center
Description e12596, 10 p.
Google Analytic Metrics Metrics page
Additional metadata about this publication, not found in other parts of the page is in this table