A prevalent financial investment strategy might also be crucial for protecting an endangered frog species in Puerto Rico. A recent study has implemented modern portfolio theory to pinpoint future “investments” in natural resource management. This approach could help managers make informed decisions to conserve the populations of coquí llanero frogs on the island. Known for their distinctive high-pitched chirps, the 17 species of coquí frogs serve as informal symbols of Puerto Rico. The coquí llanero, notably the smallest and most at risk, is confined to just three small freshwater wetlands on the northern coast. This geographic limitation exposes them to significant risks from severe storms, rising sea levels, and other climatic shifts.

Mitch Eaton, the study’s principal investigator and a research ecologist at the Southeast Climate Adaptation Science Center, emphasises these frogs’ vulnerability. “The coquí can only do so much by themselves to avoid climate-related risks. Thus, it’s crucial that we consider ways to manage and alleviate risks within this complex ecosystem.” Modern portfolio theory, a staple in economic strategies used commonly for building stable retirement investment portfolios, forms the basis of this approach. Investors typically create a portfolio of assets that react differently to market fluctuations, including high-risk, high-reward stocks and more stable, low-return bonds. The balance of these assets is tailored to the investor’s risk tolerance.

But what does investment strategy have to do with endangered frogs in Puerto Rico? Like financial investors, natural resource managers also deal with assets and make strategic investments under conditions of uncertainty. These investments involve purchasing land for conservation, restoring habitats, or relocating species to safer areas. The study explores the potential of using modern portfolio theory to identify such investment opportunities to aid the conservation of the coquí.

“Diversification of investments is kind of a magic bullet for stability under future market uncertainty,” says Eaton. He explains that using modern portfolio theory, managers can more effectively manage risk under the unpredictable conditions of future climates. The approach also encourages managers to consider their investments more judiciously, considering realistic variables like budget constraints. Researchers developed models incorporating current protected habitats, projected sea-level rises, and future climate scenarios. They also considered various future funding levels that could be available for investment.

The study conducted two portfolio analyses that weighed cost against risk. One strategy aimed to maximise conservation benefits within the constraints of available budgets. The other strategy, focused on minimising risks, proposed more conservative investments even if they came at a higher cost, such as buying new land parcels specifically for relocating the frogs, which would lead to a lower risk of extinction. This approach showed that merely relying on existing protected areas might not suffice to mitigate future climate risks and that investing in conserving additional habitats could be worthwhile.

Researchers were also surprised to find potential sites for the frogs on the eastern side of Puerto Rico, which expands the geographic options for protecting the coquí llanero. This could increase the species’ footprint and offer more robust protection options. “Ideally, modern portfolio theory acts as a handy tool for managers that gives them a new way of thinking about how to implement management actions over space,” Eaton adds. This means pooling investments to manage risk and achieve maximal benefits effectively.

While this study focused on the coquí llanero, the implications of applying modern portfolio theory extend beyond this particular species. However, it’s crucial to note the limitations: the current application considers only one species when assessing conservation actions and requires more detailed local condition analyses for implementing high-cost investments. Despite these challenges, modern portfolio theory could be adapted for various species, addressing broad resource management needs and preparing for uncertain futures.

More information: Mitchell Eaton et al, Applying portfolio theory to benefit endangered amphibians in coastal wetlands threatened by climate change, high uncertainty, and significant investment risk, Frontiers in Conservation Science. DOI: 10.3389/fcosc.2024.1444626

Journal information: Frontiers in Conservation Science Provided by North Carolina State University