Optimal portfolio design to reduce climate-related conservation uncertainty in the Prairie Pothole Region

Abstract

Climate change is likely to alter the spatial distributions of species and habitat types but the nature of such change is uncertain. Thus, climate change makes it difficult to implement standard conservation planning paradigms. Previous work has suggested some approaches to cope with such uncertainty but has not harnessed all of the benefits of risk diversification. We adapt Modern Portfolio Theory (MPT) to optimal spatial targeting of conservation activity, using wetland habitat conservation in the Prairie Pothole Region (PPR) as an example. This approach finds the allocations of conservation activity among subregions of the planning area that maximize the expected conservation returns for a given level of uncertainty or minimize uncertainty for a given expected level of returns. We find that using MPT instead of simple diversification in the PPR can achieve a value of the conservation objective per dollar spent that is 15% higher for the same level of risk. MPT-based portfolios can also have 21% less uncertainty over benefits or 6% greater expected benefits than the current portfolio of PPR conservation. Total benefits from conservation investment are higher if returns are defined in terms of benefit-cost ratios rather than benefits alone. MPT-guided diversification can work to reduce the climate-change-induced uncertainty of future ecosystem-service benefits from many land policy and investment initiatives, especially when outcomes are negatively correlated between subregions of a planning area.

Fig. 1.

States and subregions in the US Prairie Pothole Region. The US part of the Prairie Pothole Region (PPR) extends through significant portions of Montana, North Dakota, South Dakota, Minnesota, and Iowa. It is shown here divided into three subregions.

Fig. 2.

Results of benefits-only portfolio selections for two sets of probabilities. The solid areas show how 6 million acres of protected or restored habitat are allocated between the three subregions in the indicated portfolios. Points A and D maximize the average expected value of CCI for the “no change likely” and “uniform” probabilities, respectively. Points G and H show the expected outcomes and SDs for simple diversification (i.e., splitting conservation evenly between the three subregions) for no change likely and uniform probabilities, respectively.

Fig. 3.

Results of benefit–cost portfolio selections for two sets of probabilities. The solid areas show how 6 million acres of protected or restored habitat are allocated between the three subregions in the indicated portfolios. Points A and D maximize the average expected value of B/C for the “no change likely” and “uniform” probabilities, respectively. Points H and I show actual current Fish and Wildlife Service conservation weights in the PPR for no change likely and uniform probabilities, respectively.