Identify the most effective policy tools and financial mechanisms to mobilize and scale up investment in forests.

 

Annual forest finance reached US$ 84 billion in 2023, far short of the US$ 300 billion needed by 2030. The gap is compounded by harmful subsidies and trillions in high-risk investments that continue to drive deforestation.

Although forests and the ecosystem services they provide have a critical role for climate and biodiversity, there is a lack of reliable and comprehensive data, particularly on private finance and public domestic finance, to quantify the actual financial flows directed to forests. This report analyses current forest finance flows using available data, benchmarks them against the levels needed to meet international targets by 2030 and 2050 and underscores the vital role forests play. As the 30th United Nations Climate Change Conference (COP 30) approaches, the report serves as a call to action, urging governments, business and finance to intensify efforts to close the forest investment gap by elevating the issue on political agendas, implementing targeted policies and corporate strategies and boosting capital flows to forests. 

This section summarizes the main findings and core messages of the report and presents broad recommendations for action. These recommendations remain high-level, as further analysis is needed to identify the most effective policy tools and financial mechanisms to mobilize and scale up investment in forests.

Global annual financial flows to forests amounted to approximately US$ 84 billion in 2023. Forest finance is public-driven and insufficient.

 Public finance, both domestic and international, is the primary source of forest funding, accounting for 91 per cent (US$ 77 billion) of global forest finance flows.

• In 2023, of the US$ 75 billion of domestic government forest spending, the vast majority was invested by and in advanced economies. - In 2023, US$ 12.9 billion was invested by tropical forest countries. 

• In 2023, public international finance for forests totalled US$ 2.9 billion, with 67 per cent to the forestry sector. The main donors were the World Bank (IDA and IBRD), Germany, the United Kingdom and Norway, while the leading recipients included the Democratic Republic of Congo, Peru and Brazil, all tropical forest countries. - In 2023, approximately US$ 362 million of public international forest finance targeted projects involving Indigenous Peoples and local communities, with a smaller share likely going to initiatives led directly by these groups. This represents 20 per cent of the IP&LC Forest Tenure Pledge which allocates US$ 1.7 billion between 2021 and 2025 (FTFG 2024). 

Private finance flows to forests were estimated at US$ 7.5 billion, roughly 9 per cent of global forest finance flows. 

• Private finance flows to forests were mostly channelled through certified commodity value chains (US $ 2.9 billion), impact investing (US$ 1.7 billion) and forest carbon markets (US $ 1.3 billion). 

Potentially environmental harmful subsidies in agriculture, a key driver of deforestation, amounted to approximately US$ 406 billion. 

This indicates that for every US$ 0.20 invested in forest-based nature-based solutions, US$ 1 is spent on subsidies that exacerbate deforestation. 

• Policy measures that encourage agricultural expansion into forests contribute to an estimated annual loss of 2.2 million hectares of forest, equivalent to 14 per cent of total and 37 per cent of annual agriculture-driven deforestation. 

• Private investment in companies with high deforestation risk (US$ 8.9 trillion) is more than 100 times greater than current investment in forest-based nature-based solutions (US$ 84 billion).

Annual investment in forests must increase to US$ 300 billion by 2030 and US$ 498 billion by 2050. 

• Forest protection is a highly cost-effective approach, requiring just US$ 32 billion of the additional annual finance needed by 2030, likely an underestimate, as not all ecosystem service values are captured, while accounting for 80 per cent of the total land area required. 

• Reforestation could attract up to US$ 96 billion annually by 2030, but would cover only 10 per cent of the needed land due to forest degradation and high per-hectare, transaction, and opportunity costs. 

• Investment requirements for agroforestry (including silvopastoral and silvoarable systems) reflect its growth potential, with annual additional needs reaching US$ 87 billion by 2030. 

Both public and private financial flows to forests must increase significantly to close the gap between current funding levels and the investment required to meet the Rio targets.

Drawing on findings from this report, advancing towards the Glasgow Leaders’ Declaration onForests and Land Use requires an integrated strategy that addresses multiple interconnected challenges. The following recommendations are organized around four core pillars: 

A. Advancing government leadership to mobilize forest finance C. Promoting inclusive and equitable forest finance B. Increasing forest finance to address climate change, biodiversity decline, and land degradation D. Redirecting capital away from deforestation-related activities

Government regulation, legislation and economic incentives are critical to effectively mobilize and de-risk private sector investment in forests. Governments are essential in drawing private investment to forests by establishing robust policy frameworks, legal frameworks, and incentives that reduce risks and build investor trust. By securing land rights, enforcing sustainable regulations, and providing financial support, they lessen the uncertainties and in turn stimulate private actors to scale up investments in forest projects and sustainable (deforestation-free) agriculture. It starts by governments seeing investing in forests as a key priority, followed by a vision for governments to rally business leaders and investors to scale up the deployment of capital that has a positive impact on forests.

  

Aligning diverse sources of finance with forest-related development goals is essential to maximize impact. Government spending, often drawn from multiple sectors, remains a key source of forest finance. Closely linking public expenditure to national forest objectives helps identify resource gaps, optimize budgets, attract external funding, and create cross-sectoral financing opportunities. Embedding forest financing into broader national strategies, such as integrated sustainable development plans, ensures forest priorities are reflected in wider policy and investment frameworks.

Prioritizing forest protection is essential due to its cost-effectiveness and superior biodiversity benefits, while restoration complements these efforts by addressing degradation and carbon removal. Public funding is key for forest protection due to the valuable public goods it provides, while restoration and agroforestry create opportunities for private investment. Through regulation and incentives, private capital can be mobilized effectively, supported by targeted public investment in reforestation when necessary. This balanced approach is crucial to ensuring the long-term conservation and restoration of forest ecosystems.

 Accelerating financial innovation through government leadership is essential to scaling up capital flows for forest conservation and sustainable management. Traditional funding mechanisms alone are insufficient to meet the increasing capital demands of sustainable forest management; however, a strategic combination of diverse financial instruments can unlock the necessary resources. Instruments such as sovereign green bonds, debt for nature swaps/debt-for-forests swaps, blended finance, high-integrity carbon markets, including compliance, voluntary, and Article 6 markets under the Paris Agreement, biodiversity credits and offsets can help attract both country-to-country and private investments while diversifying sources of forest financing. These mechanisms can help lower risks, expand impact, and ensure forest initiatives are adequately funded, resilient, and aligned with broader environmental objectives. Emerging initiatives, such as Brazil’s Tropical Forest Forever Fund (TFFF), have the potential to demonstrate that new types of mechanisms can provide predictable and long-term financing for forests.

Mobilizing private sector capital for forest finance in tropical countries is key to meeting corporate net-zero commitments while supporting climate mitigation and biodiversity. By aligning financial flows with corporate sustainability commitments, private investors can play a pivotal role in narrowing the forest finance gap, driving innovation, and scaling up solutions to safeguard critical forest ecosystems. Adopting sustainability disclosure standards for reporting impacts, risks, and opportunities is also an effective tool to advance on corporate commitments.

Certified commodity finance supports forests, but broader action is needed to address deforestation. Certification can help address deforestation risks but must be complemented by broader measures. Actions taken by traders, input companies, consumer goods companies and retailers along the agri-food value chain fallen short of achieving critical targets. Costing out and execute plans for those companies that have made commitments for example by providing risk capital to deforestation-free and conversion-free (DCF) finance schemes, in setting carbon emissions or making contractual agreements with farmers and intermediaries are essential to move beyond the limited amount of US$ 2.9 billion per year to date. Companies, from producers and traders to consumer goods firms, retailers, and financiers, need to recognize that achieving 'zero deforestation' commitments comes with real costs. Whether these costs are internalized by companies across the agri-food value chain or be paid by the final consumer, there needs to be a broad and fundamental shift in how the global food system operates. Supporting smallholders, improving standards and enforcement, and integrating tools like traceability systems and sustainability labels are essential. A coordinated approach is needed to drive meaningful, long-term change in high-risk regions. 

Prioritizing impact investing in forest finance is essential to closing the capital gap for sustainable forest management. By funding projects with measurable environmental and social outcomes, impact investments align financial returns with global climate and development goals. Embedding impact investing as a strategic focus is crucial for mobilizing private capital and advancing international forest commitments. Connecting the relatively small impact investing market with capital markets, e.g. through fund-of-fund approaches, listing of bonds on stock exchanges as well as pooling debt from different forest impact investing transactions into bonds, are ways to enable institutional investors including pension funds, insurance companies and sovereign wealth funds to increase their exposure to the forest impact investing domain. 

Strengthening high-integrity carbon markets is essential to unlock reliable revenue streams that incentivize private sector investment, as well as valorizing other ecosystem services. By monetizing carbon sequestration and emission reductions, through rigorous standards and transparent verification, these markets ensure the environmental and social integrity and credibility of carbon credits, and fair pricing. This fosters investor trust and drives scalable financing for forest conservation, aligning economic incentives with climate and biodiversity goals. Payment of ecosystem services (PES), biodiversity credits and other means to monetize the economic value of forest ecosystems, can help strengthen the government and business case for forest protection, restoration and sustainable use. Expanding the use of blended finance through stronger government and donor engagement is critical for synergizing public, private, and philanthropic capital to mitigate investment risks and optimize risk-adjusted returns. This mechanism is key to mobilizing private sector funding that might otherwize be deterred by financial, environmental, or social uncertainties. By leveraging public resources to cover early-stage risks or provide collateral support, blended finance creates incentives for greater private investment in initiatives that protect forests, restore degraded landscapes, and promote sustainable land use.

Increasing international funding and ensure targeted donor support reaches tropical countries and their women and Indigenous Peoples and Local Communities (IPs and LCs). These groups are vital to forest protection but often lack access to key enabling conditions such as recognition of land tenure rights, access to finance, institutional capacity, and participation in Free, Prior and Informed Consent (FPIC) processes, among others. Increasing targeted international support through direct engagement channels can empower and strengthen community-led conservation, preserve traditional knowledge, and build local capacity to address deforestation and climate change. Complementarily, integrating a gender perspective into forest finance enhances equity and governance by addressing entrenched gender barriers, ensuring equitable access to resources, promoting inclusive participation, valuing the diverse knowledge and skills of all genders, improving women’s livelihoods and economic empowerment, and creating sustainable opportunities for women in the forest sector. 

Implementing safeguards that guarantee transparency, fairness, equity, and environmental integrity to ensure effective forest financing from both public and private sources. Without them, investments risk harming communities, losing trust, and failing to protect forests. These measures build confidence among investors and stakeholders, promoting sustainable and successful outcomes.

Mobilizing capital for forest protection is essential, however, tackling large-scale financial flows that drive deforestation and unsustainable land use it is even more critical. Key commodities significantly contribute to forest loss, with substantial private financing supporting companies linked to deforestation. Harmful agricultural subsidies also encourage land conversion. While there is a gradual move toward less damaging forms of support, harmful financial flows continue to undermine conservation efforts. Redirecting and reducing these flows through effective policy and regulation is crucial to achieving climate and biodiversity goals.