Posted on 24 May 2022
Voluntary corporate investments will play a role, among other financial instruments, in protecting tropical forests, but we need guidance that can increase the integrity and legitimacy of these projects and investments, write WWF’s Global Forest Lead Fran Price and Global Climate & Energy Lead Manuel Pulgar-Vidal.
With our planet witnessing record-breaking greenhouse gas concentrations and the loss of over 43 million hectares of tropical and subtropical forests in recent years, it’s clear we need to do more to fix our broken relationship with nature. Protecting tropical forests is an important part of global efforts to tackle our planet’s climate and biodiversity crises, but resources focused on such efforts are woefully inadequate. There is an estimated gap of $700 billion/year between current funding and the financing needed to protect nature and biodiversity. Nature-based solutions, such as those which protect or restore tropical forests, currently receive just 3% of climate finance.
While carbon credits are often not the right mechanism for protecting tropical forests, they are already playing a role in financing projects and are increasingly used by companies to demonstrate their climate action commitments. Unfortunately, some forest projects behind these credits are low-quality, small-scale and poorly governed and will not deliver the urgent, transformative action we need to protect our forests and address the climate crisis. As demand continues to surge, we must raise the bar to ensure these lower quality credits don’t flood the market.
Today, eight organizations, including WWF, published guidance on high-quality tropical forest carbon credits to improve the integrity, quality and impact of such credits. The Tropical Forest Credit Integrity Guide for Companies, which results from an extensive consultation process over the last 6 months, sets out guidance for companies considering purchasing such credits in the voluntary carbon market.
The topic of carbon markets, and specifically carbon credits associated with land-based activities, is not without controversy. For years, there have been vast differences of opinions on this complex topic, including on the role of markets, the scale of interventions on the ground, and how companies can “count” their investments. The Guide takes on some of these issues, laying out a vision for how to improve “supply side” quality and integrity broadly, and how project-based REDD+ can integrate into broader-scaled jurisdictional programs – the first ever agreement among these environmental NGOs on this topic.
This Guide does not elaborate on other key questions, such as when it’s appropriate for companies to purchase carbon credits (as compared to other climate investments); how credits should be reported on, who can claim the carbon benefits, and which claims are appropriate. For WWF views on these issues, see "Reimagining how credits fit into voluntary climate strategies" and “Beyond Science-Based Targets: A Blueprint for Corporate Action on Climate and Nature."
Critically, the Guide strongly argues for the market to move from generating credits from localized projects – which tend to face higher environmental risks – to investments in transformational programmes that target the drivers of deforestation over an entire jurisdiction. Companies might also consider investing in ‘fully nested’ projects, that is, those which are aligned strategically and accounting-wise into jurisdictional programmes. This aligns with scales envisioned in Article 5 of the Paris Agreement, and would mark a major step forward for tropical forest protection and reducing leakage risks.
The Guide provides a number of recommendations. Among these are that companies prioritize support for programmes and projects that protect standing forests, use credible accreditation programmes and standards, and include strong protections for the rights of Indigenous Peoples and local communities.
With a growing number of companies taking action on climate change, WWF expects that the finance to protect and restore tropical forests will continue to grow dramatically. That financing is welcome and urgently needed, as preserving our forest carbon sinks and restoring our forests is critical to future climate stability. It is important that finance is channelled to high-quality, high-integrity projects and programmes. We believe that this Guide will help steer corporate investments in that direction.