Mindy L. Mallory | USGS Science

USGS2018

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

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.

Conservation Letters↗

USGS2016

Fine‐resolution conservation planning with limited climate‐change information

Climate‐change induced uncertainties in future spatial patterns of conservation‐related outcomes make it difficult to implement standard conservation‐planning paradigms. A recent study translates Markowitz's risk‐diversification strategy from finance to conservation settings, enabling conservation agents to use this diversification strategy for allocating conservation and restoration investments across space to minimize the risk associated with such uncertainty. However, this method is information intensive and requires a large number of forecasts of ecological outcomes associated with possible climate‐change scenarios for carrying out fine‐resolution conservation planning. We developed a technique for iterative, spatial portfolio analysis that can be used to allocate scarce conservation resources across a desired level of subregions in a planning landscape in the absence of a sufficient number of ecological forecasts. We applied our technique to the Prairie Pothole Region in central North America. A lack of sufficient future climate information prevented attainment of the most efficient risk‐return conservation outcomes in the Prairie Pothole Region. The difference in expected conservation returns between conservation planning with limited climate‐change information and full climate‐change information was as large as 30% for the Prairie Pothole Region even when the most efficient iterative approach was used. However, our iterative approach allowed finer resolution portfolio allocation with limited climate‐change forecasts such that the best possible risk‐return combinations were obtained. With our most efficient iterative approach, the expected loss in conservation outcomes owing to limited climate‐change information could be reduced by 17% relative to other iterative approaches.

Conservation Biology↗