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Optimizing provision of ecosystem services using modern portfolio theory

Author

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  • Alvarez, Sergio
  • Larkin, Sherry L.
  • Ropicki, Andrew

Abstract

Portfolio selection is a flexible tool that can be used to support natural resource decision-making to optimize provision of ecosystem services. The natural resource portfolio literature includes applications in fisheries, forestry, agriculture, spatial planning, invasive pest and disease surveillance, climate change adaptation, and biodiversity conservation, among others. We contribute to this growing literature by proposing a set of essential questions to guide the development and implementation of empirical portfolios for natural resource management that deal with (1) the nature and objectives of the portfolio manager, (2) the definition of assets to be included in the portfolio, (3) the way in which returns and risk are measured and distributed, and (4) the definition of constraints in the programming problem. The approach is illustrated using landings data from the Colombian Pacific, a data limited fishery, to set catch limits in fisheries at the ecosystem level. We also develop a set of constraints in the programming problem to simulate potential policy options regarding resource sustainability and social equity. The resulting efficient catch portfolios can be used to optimize the flow of provisioning ecosystem services from this fishery.

Suggested Citation

  • Alvarez, Sergio & Larkin, Sherry L. & Ropicki, Andrew, 2017. "Optimizing provision of ecosystem services using modern portfolio theory," Ecosystem Services, Elsevier, vol. 27(PA), pages 25-37.
    • Handle: RePEc:eee:ecoser:v:27:y:2017:i:pa:p:25-37
    DOI: 10.1016/j.ecoser.2017.07.016
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    Cited by:

    1. Oleg S. Sukharev, 2020. "Portfolio Theory in Solving the Problem Structural Choice," JRFM, MDPI, vol. 13(9), pages 1-21, September.
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    3. Kolstoe, Sonja H. & Kline, Jeffrey D. & Lohr, Luanne, 2022. "Economic Approaches for Managing Migratory Bird Habitat Across Multi-Owner Landscapes," Western Economics Forum, Western Agricultural Economics Association, vol. 20(01), May.
    4. Frank Figge & Andrea Stevenson Thorpe & Siarhei Manzhynski & Melissa Gutberlet, 2022. "The us in reUSe. Theorizing the how and why of the circular economy," Business Strategy and the Environment, Wiley Blackwell, vol. 31(6), pages 2741-2753, September.
    5. Carmona, Itsaso & Ansuategi, Alberto & Chamorro, José Manuel & Escapa, Marta & Gallastegui, María Carmen & Murillas, Arantza & Prellezo, Raúl, 2020. "Measuring the value of ecosystem-based fishery management using financial portfolio theory," Ecological Economics, Elsevier, vol. 169(C).
    6. Sierra-Altamiranda, Alvaro & Charkhgard, Hadi & Eaton, Mitchell & Martin, Julien & Yurek, Simeon & Udell, Bradley J., 2020. "Spatial conservation planning under uncertainty using modern portfolio theory and Nash bargaining solution," Ecological Modelling, Elsevier, vol. 423(C).
    7. Kashanian, Motahareh & Pishvaee, Mir Saman & Sahebi, Hadi, 2020. "Sustainable biomass portfolio sourcing plan using multi-stage stochastic programming," Energy, Elsevier, vol. 204(C).

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    More about this item

    Keywords

    Optimization; Portfolio selection; Portfolio constraints; Natural resource management; Sustainability; Fisheries policy;
    All these keywords.

    JEL classification:

    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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