New report: Understanding Forest Bonds

Oxford, UK - Today, as new Climate Bonds Standards are released in London, and four days before stalled UN climate talks resume in Durban, South Africa, The Global Canopy Programme (GCP) has released Understanding Forest Bonds, a practical guide to using forest bonds to raise large-scale, up-front finance for tropical forests.

Forest conservation is vital in the fight against climate change and is now at the heart of the UN climate change negotiation process. But GCP, a tropical forest think-tank, is concerned that international mechanisms designed to save forests are developing far too slowly.

Following a joint workshop earlier this year, WWF, GCP and the Climate Bonds Initiative (CBI) called on participating governments to focus on bonds as an innovative mechanism to use the limited public funds available to leverage much larger amounts of private-sector finance for tropical forests.

Bonds already play this role effectively in diverse sectors, including energy and water. But despite increasing interest in their potential, a key workshop conclusion was that the international forest community still lacks the practical understanding of forest bonds required to make them a reality.

Matthew Cranford, a research associate at GCP and the guide’s lead author, explained: “Understanding Forest Bonds aims to speed progress by bridging the communication gap between policymakers and the investment community.
“It explains how different types of bond could help raise the tens of billions of dollars required to slow forest loss across different tropical regions, and why the private sector would invest.

“Existing mechanisms, such as ecosystem service markets and green fiscal reform, are key to protecting forests in the long term – but they will take time to implement at scale. Either by issuing forest bonds or creating the right regulatory environment to support their issue, governments could begin tapping into global capital markets immediately to deliver finance to forests at the scale and with the urgency required.”

Andrew Mitchell, Executive Director of Global Canopy Programme, said: “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. Transition to a forest-friendly economy must begin immediately but will require a level of funding far beyond what can be achieved without harnessing private sector finance. That is precisely where forest bonds can help.”

The GCP will be convening a dialogue on forest bonds on 4 December as part of Forest Day, an event at the UN Climate Conference in Durban.

RELATED PROJECT: Understanding Forest Bonds