Forest finance: Theme 3 Assessment

Published: October 24, 2022

Achieving international forest goals requires substantial public and private investments to address the drivers of deforestation, and to manage and restore forests sustainably. Improving the environmental impact of our industrial and agricultural systems requires profound changes to economic and legal systems. Without both enforcement and compensation mechanisms, forests will continue to be worth more to users cleared than standing – especially in the short term.

Reaching forest goals requires more finance to be earmarked for forest activities, and existing finance to be shifted away from harmful activities towards sustainable actions.


Finance for forests is not on track to meet global goals to halt and reverse deforestation by 2030. It will cost up to USD 460 billion per year to protect, restore, and enhance forests on a global scale. Currently, domestic and international mitigation finance for forests averages USD 2.3 billion per year – less than 1 percent of the necessary total. For comparison, total finance for climate, from both public and private sources, reached USD 632 billion in 2019-20.

Funding for forests will need to increase by up to 200 times to meet 2030 goals. This funding does not need to come just from philanthropic donations or public sector development assistance—a wide range of financial mechanisms can support forest goals if they are properly designed, including domestic budgets and fiscal policies, private investments, blended and de-risked finance, grants or loans, readiness and capacity building support, and results-based payments.

Finance pledges made in 2021 demonstrate a substantial increase in ambition to meet 2030 forest goals. If they are fully delivered, they would quadruple annual finance for forests from 2021-25 to USD 9.5 billion. Yet, funding would still need to increase by up to 50 times to meet investment needs. One year on from these pledges, it is not yet possible to directly assess their progress because most have yet to publicly disclose on their implementation efforts. However, available data does not yet show an increase in funding corresponding to pledges made at COP26 in November 2021.

IPs and LCs, who are the most effective stewards and guardians of their forest territories, receive far less funding than their estimated finance needs for securing tenure rights and preserving forest ecosystems. Only 1.4 percent of total public climate finance in 2019-20 was targeted toward IPs and LC’s needs, and only 3 percent of the financial need for transformational tenure reform is being met annually.

Private sector actors—companies, financial institutions, and philanthropies—have not yet leveraged their significant power to steer development and commodity production onto a sustainable trajectory in line with forest goals. Most financial institutions still fail to have any deforestation safeguards for their investments. Almost two thirds of the 150 major financial players most exposed to deforestation do not yet have a single deforestation policy covering their forest-risk investments, leaving USD 2.6 trillion in investments in high deforestation-risk commodities without appropriate safeguards.


Despite the price tag for protecting and restoring forests on a global scale—up to USD 460 billion per year—this is an investment that we cannot afford not to make. Achieving the 2030 forest goals is essential for ensuring a livable world in line with the Paris Agreement. Governments, financial institutions, companies, and philanthropies must step up to increase and align their spending and investments with forest maintenance and restoration goals.

The Forest Declaration Assessment Partners call on governments, companies, and financial institutions to utilize all tools at hand to substantially increase their investments in forests, while also shifting finance away from harmful activities.

The Assessment Partners urge those who make forest finance commitments—including endorsers of the Glasgow Leaders’ Declaration—to collaborate with impacted communities to design their pledges, and to pair these pledges with transparent and timebound interim milestones and public reporting on disbursements, effectiveness of funding, and alignment of finance flows with forest goals. Commitment makers should detail what share of the pledged finance is additional versus preexisting planned funding and should clarify how, when, and where this finance will be spent. Evaluation mechanisms must be put in place to enable donors and communities to assess the impacts of disbursed finance and allow for needed adjustments. Inclusive and transparent processes are essential to understand how pledged finance compares to needs and can help guide and improve the impact of future investments, as well as help hold actors to account on their commitments. The management and governance of finance for forests must be developed in partnership with local implementing organizations to ensure that disbursed finance achieves its objectives.

All financial actors, including governments, financial institutions, companies, and philanthropies, must make every effort to support the involvement of IPs and LCs in forest and finance decision-making. Public and private actors must facilitate the flow of finance to IPs and LCs to better enable them to carry out forest-protection and conservation activities. Governments, multilateral institutions, and private foundations should prioritize the establishment of new and direct finance mechanisms for these activities and should codesign these mechanisms with IP and LC groups. Increased coordination and cooperation between donors, NGOs, and IPs and LCs can help to build trust and guide the most appropriate interventions. Public and private financiers must also reduce administrative and technical burdens and provide capacity building for IP and LC groups to receive and manage funds directly. Where intermediaries are necessary, organizations trusted by IPs and LCs should be prioritized. 

Public sector actors must take concrete and far-reaching steps to implement and expand their finance commitments and align fiscal and financial policies with forest goals, including:

  • Incorporate forest risks and impacts into public budgeting frameworks. Governments must assess the potential impact of public financial and fiscal decisions on forests and direct finance toward activities that present the least risk and most benefits to forests. Safeguard measures must be put in place when needed.
  • Seize every opportunity to redirect harmful agricultural subsidies and other incentives (domestic and international) that drive deforestation and forest degradation. Governments should work to identify which subsidies lead to adverse forest impacts and, to the maximum extent possible while ensuring just and equitable outcomes, redirect and repurpose these subsidies, either by making financial support conditional upon achieving environmental objectives, or by channeling finance directly into deforestation-free incentive programs.
  • Employ blended financing tools to leverage private sector finance for the protection of forests. Implement policies and instruments which can help to de-risk private investments to create an enabling environment for private finance. 

Financial institutions and companies across sectors must recognize and act on the inherent business risks presented by deforestation and forest degradation and put in place measures and policies to combat this risk, including:

  • Develop a full understanding of the company’s or institution’s exposure and contribution to climate- and forest-related risks and impacts (in the short, medium, and long term).  
  • Incorporate processes for assessing climate- and forest-related risks into existing risk management processes. This includes processes for identifying, managing, and mitigating risks.
  • Move from voluntary to mandatory disclosure of forest-related risks and progress against pledges to increase transparency and allow investors to reconsider their capital allocation decisions.
  • Implement standards and policies that actively promote green investments and lending to forest conservation-oriented land sector businesses. 
  • Prioritize investments that are aligned with and synergetic with forest goals, applying the mitigation hierarchy to all investment decisions. Limit the volume of private finance flowing to activities that have a detrimental impact on forests.

Where private sector actors choose to invest in nature conservation and restoration, they must ensure that they are supporting high-quality and high-integrity interventions in line with the mitigation hierarchy and science-based targets. This could include market-based options, such as participation in carbon markets with forest- and land-based credits, or non-market-based options such as support for implementation of jurisdictional or landscape scale sustainability activities. Actions to achieve this goal include:

  • Invest in landscape finance for forest protection activities that holistically address the major drivers of deforestation, conversion and land degradation, both market and non-market based. One such example is support of multi-stakeholder platforms that can promote constituency building, strategic planning, mapping, and project development.
  • When using forest-based carbon credits to meet one’s internal climate mitigation targets, use forest-based carbon credits to compensate for residual emissions only after first prioritizing emissions reductions within the actor’s internal operations. In addition, consider investing in forest-based carbon credits as part of strategies to achieve societal decarbonization beyond companies’ own value chains.
  • In making purchasing decisions, prioritize 1) crediting standards that meet essential social and environmental integrity criteria, 2) high-quality credits from jurisdictional REDD+ programs 3) projects that are nested within high-quality jurisdictional REDD+ programs, and 4) credits from other high-quality projects and programs that reduce threats to standing tropical forests.
  • Develop, scale up, and adopt governance frameworks which establish rules for public and private use of, and claims about, carbon credits.

Only eight years remain to achieve the twin global goals of halting and reversing deforestation by 2030. Despite encouraging signs, not a single global indicator is on track to meet these 2030 goals of of stopping forest loss and degradation and restoring 350 million hectares of forest landscape.

The 2022 Forest Declaration Assessment sheds a stark light on the state of global forest commitments but offers hope that achieving the 2030 forest goals is possible. The Assessment is presented as series of four reports on Overarching forest goals (Theme 1), Sustainable production and development (Theme 2), Finance for forests (Theme 3), and Forest governance (Theme 4) -- all summarized in an Executive Summary.

Further Resources

Forest finance: Theme 3 Assessment
Finance for forests: Theme 3 report
Finance for forests: Theme 3 report