Global overview of public and private forest finance.

 

The need to scale up forest finance is clear, but limited data—especially on private and domestic public funding—hinders a full understanding of global forest finance. The State of Finance for Forests offers a 2023 global overview of public and private forest finance, supporting efforts to reduce deforestation and advance climate, biodiversity, and restoration goals. It examines potentially harmful subsidies and projects investment needs for 2030 and 2050, highlighting the finance gap.

The global objective to halt and reverse deforestation by 2030, set out in the Leaders’ Declarationon Forests and Land Use (2021) at the UN Climate Conference in Glasgow (COP26) and established by the REDD+ Framework (2009), New York Declaration on Forests (2014), Paris Agreement (2015) and the Kunming-Montreal Global Biodiversity Framework (2022) , demands a rapid increase in forest financing. However, current levels of investment in forests are far below what is needed. Forests face growing threats from climate stressors and rising product demand, even as deforestation slows. Forests cover 30 per cent of the Earth’s land area and are critical to climate stability, biodiversity, and human well-being. Around a quarter of the global population, including an estimated one billion women, depends directly on forests for their livelihoods and wellbeing. Forests are home to roughly 80 per cent of terrestrial species. Despite providing essential ecosystem services, forests continue to disappear at alarming rates. Between 2015 and 2020, roughly 10 million hectares of forest were lost each year, with agriculture as the primary driver of deforestation. Deforestation increased by 4 per cent from 2021 to 2022, reaching 6.6 million hectares, 21 per cent above the 5.4-Mha limit set for 2022 to stay on track to eliminate deforestation by 2030. 

There is growing recognition of the need to significantly scale up forest financeto meet global targets. However, a persistent lack of reliable and comprehensive data, particularly on private finance and public domestic finance, hampers informed decision-making. Existing assessments tend to focus on international public finance, with gaps in the full picture of forest finance (see Table 1.1). Given that private finance to forests is poorly documented, an effort has been made to estimate its scale by examining key private forest-related finance channels and asset classes: certified commodity supply chains, impact investing, carbon markets, biodiversity credits and offsets, private philanthropy for forests and private investment leveraged by public finance. While data availability is a major challenge, this analysis has taken a pragmatic approach to work with what data exists and to be transparent about limitations on methods and assumptions made. Where quantitative data is lacking, qualitative material is included to provide context and relevant detail. Table 1.1 summarizes the scope and findings of key forest finance studies. Due to methodological differences and year of analysis, these studies are not fully comparable. The State of Finance for Forests is presented as the most comprehensive study of finance flows from public and private sources for 2023, with investment needs and the forest finance gap estimated.

  

There is not a commonly agreed definition of forest finance. The Forest Declaration Assessment considers forest “green finance” as finance “provided by the public or private sector that aligns with objectives for the conservation, protection, restoration, or sustainable use of forests – including REDD+ finance, and finance for Indigenous Peoples (IPs) and Local Communities (LCs)”, including direct investments, capacity building, technology development and transfer, resultsbased finance or support for the development of forest strategies and green economy pathways, action plans, policies, and measures. REDD+ finance refers more narrowly to financing emission reductions or removals from deforestation and forest degradation, conservation, sustainable forestmanagement, and the enhancement of forest carbon stocks in developing countries (UNFCCC n.d.). These finance flows address readiness, implementation and results-based finance phases, including results-based payments and forest carbon markets. The State of Finance for Forests provides a global estimate of current finance flows (public and private, domestic and international) for 2023. These flows also support broader climate, biodiversity and restoration objectives, including the conservation, protection and sustainable management of forests, as well as policy initiatives that enhance forest resilience and protection. In addition, the report offers projections of the investment required to achieve global forest goals by 2030 and 2050, highlighting the finance gap as the difference between current funding and the resources needed.