Forest Declaration Assessment: Emerging forest finance instruments

In the last few years, emerging forest finance instruments from both public and private initiatives have hit the scene, with the potential to contribute to global forest objectives. The Glasgow Leaders’ Declaration on Forests and Land Use set the ambitious goal of ending and reversing forest loss by 2030. Delivering on these goals requires, among other things, increasing the commitment and disbursement of new green finance for forests, using innovative approaches to increase private sector engagement and create new forest funding streams.

The role of innovative financing approaches

Innovative financial instruments are being designed to blend financing from different sources, reduce risks for investors, crowd in private finance, and improve access to financing for Indigenous Peoples and local communities (IP and LCs). At the same time, a number of forest country governments have developed dedicated finance mechanisms.

This paper provides a summary of several emerging forest finance instruments, highlighting the financing barriers they can help to tackle, and any lessons learned from real-world use cases. Instruments covered include:

• Bonds
• Forest funds
• Debt reduction instruments
• New market mechanisms
• Indigenous Peoples and community-led funds

The paper concludes with six core principles for forest financing. Under each, recommendations are made for how emerging forest finance instruments – such as those above – can and should be linked to broader economic, policy, and regulatory levers. Achieving the 2030 forest goals requires an all-hands-on-deck approach, with deeper collaboration and coordination between public and private funders at global and local levels, and financial instruments that are better tailored to their target landscape.

The six principles for forest financing:

1. Align fiscal policies and incentives with forest and sustainable development goals.
2. Ramp up forest financing from industrialized to developing countries that is accessible, affordable, and long-term.
3. Attract new and additional private finance by lowering risks of conservation with blended finance instruments.
4. Prioritize building capacities and channeling funds to mechanisms that are directly funding local actors, especially IPs and LCs.
5. Reform sovereign debt to create fiscal space for conservation.
6. Link financial instruments to emerging measures to reduce the import of deforestation-linked commodities.

Read the full report at ForestDeclarationAssessment.org.