Forest Trends’ Public-Private Finance Initiative works with public and private sector partners to create innovative mechanisms that increase financial flows to forest conservation and low-deforestation agriculture in tropical forest countries.
Tropical forests store carbon, protect watersheds, and provide havens for biodiversity, but they are under pressure from competing land uses, such as agriculture. It is possible to transform agriculture to more sustainable models, but the costs cannot all be met by the public sector. The Public-Private Finance Initiative works to address this issue in three ways:
- Innovative FinanceWe see the potential to use public sector money to reduce risks for the private sector in investing in forest conservation and farming models that conserve and restore forests and degraded lands. For example, in Brazil, we are working with the World Bank to design “forest bonds.” These are bonds, issued to the mainstream debt markets, where the proceeds are allocated towards forest protection in the Brazilian Amazon. This might mean providing low-cost loans to farmers to help them preserve a certain percentage of their land as forest and, in doing so, help them comply with the Brazilian Forest Code.
- Integrated FinanceWe see a great opportunity to link forest conservation to sustainable commodity markets and supply chains via mechanisms such as certification and income from sale of REDD+ credits. For example, in Peru and Brazil, we are working with local entrepreneurs, project developers, and international asset managers to explore ways of including small farmers in coffee and cocoa supply chains. Methods to do so include linkages with European specialty commodity markets, guarantees from development finance institutions, and income from project and jurisdictional REDD+ credits.
- Efficient FinanceIt is often cheaper for small farmers to expand into nearby forest rather than increase the productivity of the land they already own. In addition, smallholders often find it difficult to access low-cost loans for their work from state banks. We are helping farmers to more easily access international climate finance that would allow them to improve the productivity of their farming operations. For example, we are working in the State of Mato Grosso, Brazil with the Forests, Farms, and Finance Initiative to develop a zero-deforestation certification scheme and accompanying high-level finance mechanisms that will reward farmers for conserving forests and increasing yields on existing land.