Magazine article Stanford Social Innovation Review

Prairie Portfolio

Magazine article Stanford Social Innovation Review

Prairie Portfolio

Article excerpt

ENVIRONMENT

Conservation groups have always faced difficult decisions in prioritizing which natural areas to protect. The traditional way has been to place the greatest importance on the rarest, most pristine, or unique places. But in recent years, consideration of costs vs. benefits has entered the discussion.

Now economists Amy Ando and Mindy Mallory of the University of Illinois have introduced modern portfolio theory (MPT) - a tool familiar to the financial industry - to the world of biology and conservation. MPT is a well-established method of diversifying investments to maximize returns, given a certain level of risk.

Currently, conservation groups use sophisticated optimization tools to figure out which areas to protect. But in the face of uncertainty, such as the possible outcomes of climate change, those tools don't work very well, Ando says.

Ando and Mallory applied MPT to the Prairie Pothole Region, a 64-million-acre expanse of wetlands habitat in the north-central United States that is a breeding ground for more than 200 species of migratory birds. The US Fish and Wildlife Service and organizations such as Ducks Unlimited have purchased land in the region to protect it for waterfowl nesting. And a lot of research has been done to look at how that habitat could be affected by climate change.

The availability of this information made the Prairie Pothole Region a good test case for applying MPT. The best waterfowl habitat, for example, would shift east under certain climate change scenarios. Improvement in one area would mean worse conditions in another. …

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