Theme 3: Assessing progress on forest finance

The forest finance theme provides an overview of forest finance and forest goals; updates on available data and recent policies to channel finance to the forest sector; and an assessment of the role of public and private finance, and carbon markets for forest finance.

Achieving international forest goals requires substantial investment in protecting and restoring forests. Under the Paris Agreement, parties committed to making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development (Art.2.1.c). The Forest Declaration Assessment Partners estimate that it will cost up to USD 460 billion per year to reduce deforestation and implement restoration and sustainable forest management at a sufficient scale to protect and restore forests globally. This funding must be mobilized through both public and private sources - this report assesses the extent to which global public and private finance is currently aligned with forest goals.

Stopping deforestation not only requires more finance earmarked for forest protection and restoration (referred to as “green” finance in this report), but also a shift away from investments in potentially harmful activities (referred to as “gray” finance). Estimates suggest that every year, between USD 378 to USD 635 billion in public gray finance is being provided by governments in the form of agricultural subsidies - activities that are potentially harmful to forests.

How do we assess progress?

This chapter assesses the extent to which global public and private finance is aligned with forest goals. We assess the following indicators of progress:

  • Green 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 IPs and LCs.
  • Gray finance provided by the public or private sector that has no stated objective to positively impact forests, but has potential to negatively impact them – we focus primarily on government subsidies for the agriculture and forestry sectors.
  • Policies for redirecting gray finance away from forest-risk activities: in the public sector, how regulation is helping to “green” gray finance flows; in the private sector, how companies are using internal policies to safeguard their investments.
  • Innovative finance mechanisms that are helping to establish new channels for forest finance, including market and non-market mechanisms.