Posted on 19 September 2011
Forest bonds could be key to scaling up finance to conserve the world‟s tropical forests, according to WWF, the Global Canopy Programme (GCP) and the Climate Bonds Initiative (CBI). The organizations are calling on governments to take action to close the gap between current financial commitments and the resources needed to protect the world‟s forests.
- Forest bonds could be key to scaling up finance to conserve the world‟s tropical forests, according to WWF, the Global Canopy Programme (GCP) and the Climate Bonds Initiative (CBI). The organizations are calling on governments to take action to close the gap between current financial commitments and the resources needed to protect the world's forests.
Upcoming United Nations climate change talks, set to get underway in Panama in early October and South Africa in December, provide an opportunity to focus on innovative options for financing forest conservation. To end forest loss, forest countries need support from industrialized countries. While public financing is essential, other sources of innovative financing, such as credit support for forest bonds, could be a way to leverage private-sector finance so that the public sector is not alone in efforts to scale up forest finance, according to the groups.
“The alarming rate of forest loss around the globe is releasing billions of tonnes of CO2 and destroying irreplaceable biodiversity. The world needs to increase forest finance by tens of billions of dollars in the current decade just to halve this forest loss,” said Don Kanak, Advisor to WWF's Forest and Climate Initiative, who is also Chairman of Prudential Corporation Asia.
Kanak added “We can't wait until the last tree has fallen to find this large-scale of finance. Forest bonds may be a promising way to close that short-term gap in financing so our forests don‟t slip away while we sort out how we‟re going to fund their long-term conservation.”
“Tropical forests are critical natural capital that provide ecosystem goods and services that underpin the world‟s wealth and human wellbeing, supporting climate, water, energy, food, health and livelihood securities at local to global scales,” said Andrew Mitchell, Executive Director of Global Canopy Programme. “The responsibility to end forest loss and protect these services has to be shared among governments and private sector from industrialized and forested countries. With carbon market negotiations proceeding slowly, forest bonds offer a way to compliment the public funds available by leveraging large-scale private-sector finance to help safeguard vital ecological infrastructure.”
Bonds are a familiar financing mechanism in sectors such as health and energy, and are receiving increased interest as a mechanism to finance mitigation of and adaptation to climate change, including for reducing emissions from deforestation and forest degradation, and conserving, sustainably managing and enhancing forest carbon stocks (collectively referred to as REDD+).
“Forest bonds are a tool for countries, multi-lateral development banks, and private financial institutions to tap into the international bond market that is worth nearly 100 trillion USD,” said Sean Kidney, Chair of the Climate Bonds Initiative, an investor-focused NGO.
Kidney added “Time is short. While REDD+ is an opportunity, investor demand is weak. We think the most fertile ground is to use regional forest retention programs that rely on diversified income streams to support a 'forest' bond. We can use such programs to create jobs and give people better opportunities than felling trees.”
Borrowing allows significant up-front investment to be made in developing the financially viable projects that will enable forest retention. According to WWF, GCP and CBI, under the right conditions, forest bonds could become a useful large-scale financing mechanism in the effort to reduce global forest loss.