The company actually started in 1969, when a mathematics professor named John Wamsley purchased a dilapidated dairy farm in the Adelaide hills of South Australia, with the modest goal of restoring native flora and fauna. Because nonnative predators such as cats and foxes and pests like rabbits are largely responsible for Australia’s 23 mammalian extinctions in the past 200 years, Wamsley eradicated them from the property. He then reintroduced woilies, bilbies, numbats and other native critters, which thrived. Rechristened the Warrawong Sanctuary, Wamsley’s project grew into a profitable tourist attraction. His vision for what he could accomplish grew as well.

Wamsley developed a market-based business plan to protect every representative habitat in Australia and to save threatened and endangered species. By 2002, with money raised from investors, Earth Sanctuaries had successfully reintroduced 25 mammal species to their former habitats and had fenced and eradicated feral, nonnative fauna from more than 10,000 hectares. The accomplishment, offering benefits to both investors and environmentalists, fundamentally changed the way that both conservationists and government thought about endangered species protection.

Shortly after going public, however, Earth Sanctuaries’ share price tumbled from a listing price of AU$2.50 to a low of less than 20 cents. In 2003, the company was forced to reorganize, focusing on smaller properties closer to population centers. By late 2005, the founders had left and the business merged with another, larger company.

Policymakers and investors should understand why Earth Sanctuaries was forced to reorganize. The primary problem was that it did not own the rights to its greatest asset–the endangered species–so the market could not capitalize that value into the share price. Endangered species are what drew visitors to the properties; they took guided walks and spent money on gifts, food and lodging. In any other business, asset growth (in this case, increases in species population) would be capitalized into the market valuation of the company. But in many countries, it is illegal to trade in endangered species. Earth Sanctuaries’ market value went south from 2000 to 2005 because it could not control a crucial component of its most valuable resources–the right to sell them.

Eco-Equity
Many believe laws should remain so, including the head of one environmental group who, in criticizing Earth Sanctuaries, claimed that species are "far more likely to be conserved if they haven’t got a value to be flogged off somewhere." But perhaps we do need a different approach. Since passage of the U.S. Endangered Species Act in 1973, almost 1,000 species have been listed as endangered, but only eight have officially recovered; seven went extinct. Putting a price on animals does, at first glance, seem like a recipe for disaster. Indeed, it does spell disaster for species that no one owns. Yet when natural capital is owned, it attains a higher value and spurs greater efforts to protect it.

Such is the case in New Zealand’s fisheries, where a system of tradable fishing quotas assigns ownership to a percentage of a total commercial catch. Therefore, when fish populations increase, so does the annual tonnage that accrues to each quota. These quotas are among the largest assets owned by New Zealand’s fishing companies, the value of which is determined by the expected future health of the fishery. Any short-term gains from over-harvesting are offset by a long-term devaluation of the quota value.

Both conservationists and investors, whether looking to save the environment or to put money into eco-friendly businesses, would do well to remember that who owns what makes all the difference.

Michael De Alessi is director of natural resource policy for the Los Angeles-based Reason Foundation.