Investment needs and the forest finance gap.

 

To stop and reverse deforestation, annual forest finance needs to increase from US$ 84 billion to US$ 300 billion by 2030 and nearly US$ 500 billion by 2050. This chapter outlines these investment requirements and the US$ 216 billion annual finance gap. 

This report estimates forest investment needs to reach climate, biodiversity and land degradation targets under the Rio Conventions which are relevant to the Glasgow Leaders’ Declaration on Forests and Land Use. The Declaration, which commits countries to “halt and reverse forest loss and land degradation by 2030”, calls for strengthened action on forest conservation, restoration, protection and sustainable management and emphasizes the need for increased finance and alignment of financial flows. This analysis assumes that the objective of halting and reversing forest loss and degradation is consistent with Rio targets of limiting global warming to below 1.5°C, halting biodiversity loss (including protecting 30 per cent of land and sea) and achieving land degradation neutrality by 2030. The analysis includes investment needs in six forest related nature-based solutions (NbS): avoided deforestation, reforestation, agroforestry (silvoarable and silvopastoral systems), protected forest areas and avoided forest peatland conversion. The estimates include the investment needed in those interventions and do not cover investment in enabling conditions (e.g. governance, law enforcement) or other forest-related activities not included in the model58, likely leading to underestimation. Still, they represent a substantial portion of the finance needed to deliver on the Glasgow goal.

The modeling relies on the ‘Model of Agricultural Production and its Impact on the Environment’ (MAgPIE), a global land use allocation model which explores land competition dynamics in the context of carbon policy, as well as on off-model analysis. Using policy input assumptions, MAgPIE estimates the least cost way in which the land use sector can meet demand for agricultural products while respecting planetary boundaries (e.g. food, climate, biodiversity and water security) and ensuring human wellbeing. Outputs from the model include cost of action and land use change.

Achieving global climate, biodiversity and land degradation targets requires a significant expansion of the area under nature-based solutions (NbS) and a scaling of forest-related investment. The area under protection and other types of NbS needs to expand by an additional 1 billion hectares by 2030 and 1.8 billion hectares by 2050. Annual investment in forests needs to reach an estimated US$ 300 billion by 2030 and US$ 498 billion by 2050. By comparison, current forest finance flows in 2023 reached US$ 84 billion (see Chapter 2). Figure 3.1 depicts the annual finance needed for six forest nature-based solutions (NbS) by 2030 and 2050 and the additional land area this finance will allow to protect or reforest.

Investment in forest protection is critical. Protection and avoided conversion of forests are highly cost-effective NbS. Modeling suggests that roughly 80 per cent (792 Mha) of the total land area required to meet forest goals by 2030 should be allocated to forest protection. This finding would be further strengthened if the value of all ecosystem services provided by forests were included in the modeling. Investment needs for forest protection are estimated at roughly US$ 32 billion. Of this total, around US$ 18.5 billion is required to cover the operational costs of managing formal protected forest areas. The remaining US$ 13 billion and US$ 0.6 billion are needed for avoided deforestation and avoided forest peatland conversion, respectively - which represent the opportunity costs of preventing forest loss and degradation in areas that are not under formal protection.