A growing number of financial institutions are adopting policies that avoid financing projects associated with illegal or irresponsible logging. This is crucial—the flow of capital to forestry and land use activities in the tropics has been, and will continue to be, one of the most decisive factors in determining the fate of the planet's remaining tropical forests.
Responsible investments in the timber sector
When undergoing a due diligence process for forest investments, the easiest way to reduce risk is to ensure that the forest in question is Forest Stewardship Council (FSC)-certified.
FSC certification guarantees that an independent party has assessed the operations against principles that deal with risks such as basic legal compliance, indigenous communities, and high conservation value forests.
Many banks have provide preferential lending for forest managers or forest product companies that already have, or are in progress towards, FSC certification.Making FSC work for you
The FSC certification scheme provides quality assurance for responsible forestry. It is regarded by WWF and other major environmental and social NGOs as currently the most credible forest certification scheme.The downloadable document Forest Financing Risk Criteria and Corresponding FSC Principles and Criteria provides a table showing how FSC Principles and Criteria sit within the 6 risk criteria which financial investors need to consider in their due diligence.
There is a need for financial institutions to offer more innovative or sophisticated financing facilities that capture the risks and opportunities of responsible forestry, without the risk to their reputation, while stimulating the wider uptake of forest certification.
Other gains from responsible forestry for financial institutions
There is growing recognition of the financial value of forests’ ecological services such as carbon sequestration, led by REDD (Reduced Emissions from Deforestation and Degradation) and other forest carbon projects.This is bringing new opportunities for both investors and forestry enterprises committed to transition to responsible forest management.
Global Forest & Trade Network and financial institutions
The Global Forest & Trade Network (GFTN)—a WWF-led partnership which links companies, communities, NGOs, and entrepreneurs to create a new market for environmentally responsible forest products, provides financial institutions with a useful framework to identify those clients or activities that adhere to environmental and social conditions.
FSC logo painted on sustainable harvested logs. Uzachi forest, Oaxaca, Mexico
USAID/RAFT logos
This resource is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of WWF and do not necessarily reflect the views of USAID or the United States Government. This resource is also funded through SIDA.
