Shifting Finance to Protect Forests:
Focus Report on Goals 8 and 9: Finance for Forests
Updates on all 10 Goals
This report draws on, consolidates, and interprets data from various initiatives by leading think tanks and research organizations engaged in tracking finance related to forests, reducing emissions from deforestation and degradation, and the sectors driving deforestation.
An estimated USD 200 billion is needed for transformation to deforestation-free commodity production. This is 10 times more than current commitments. Addressing deforestation will take unlocking the right combination of finance for differing contexts. The public sector needs to set incentives and the right conditions, but the private sector will be crucial in pushing forward a transition to sustainable land and forest use in the long term.
While tropical forests can provide up to 30 percent of the climate change mitigation needed to meet the principal objective of the Paris Agreement, mitigation finance for forests in deforestation countries accounts for just over one percent of global mitigation-related development funding.
The amount of “green” finance aligned with forest and climate goals – roughly USD 20 billion since 2010 – is marginal compared to the USD 777 billion in “grey” finance for the land sector that influences forests.
Traditional investments in the drivers of deforestation must be redirected toward those in sustainable agriculture and forestry. Only the coordinated and strategic use of finance can enable this transition by targeting the vast existing flows of investment that have an influence on forests. The public sector has a range of tools available to them that can assist in developing an attractive sustainable investment environment for private sector actors to shift existing grey finance into.
Deforestation countries heavily finance sectors that drive deforestation, often without safeguards to protect forests. Cumulative government expenditures in recent years in the agriculture and forestry sectors with an unclear impact on forests in deforestation countries amounted to over USD 110 billion. Indonesia and Brazil alone have invested over USD 276 billion since 2010 in subsidies for four commodities soy, palm oil, beef, and timber. These commodities are estimated to account for 40 percent of global deforestation.
Private investment in agriculture is the largest source of finance in the land use sector and has significant potential to be greened. The UN Food and Agriculture Organization estimates place the total value of private investment (capital stocks) in “business as usual” farming, forestry, and fisheries sectors in deforestation countries at USD 414 billion. Financial institutions can facilitate this by adopting forest-risk policies. Currently, few are mandatory, applied consistently, and monitored independently.
