Does more uncertainty incentivize risk diversification in conservation?

Conservation investments must balance risk and return as the benefits and costs of conservation are becoming increasingly difficult to predict. This article investigates whether a more uncertain world will strengthen the case for conservation investments strategies that diversify risk. We consider two ways the world could be more uncertain: (1) a more uncertain future climate that increases uncertainty in conservation benefits and (2) broader market uncertainties affecting conservation costs. We use concepts from expected utility theory to highlight that, as there is more risk to diversify, the incentive and ability to diversify risk depend on relative changes in expected payoffs at each site and covariances across sites as uncertainty increases. We then illustrate our findings using an application to land protection investments in southern Appalachia. In this biodiversity hotspot, we find risk diversification is most cost‐effective when conservation agencies face multiple uncertainties, and market uncertainty creates greater incentives to diversify risk than climate uncertainty.