Where Have All the Trees Gone? Trying to Save the World's Forests Through Sustainable Finance

"We won't succeed in tackling climate change unless we deal with deforestation." -- Caroline Spelman, UK environment secretary, International Forest Day conference, Durban, South Africa, December 4, 2011[1]

If you've ever had one of the larger packs of Crayola crayons, you might remember a color called "Forest Green." Crayola might consider making a special version of this color for Brazilian kids, perhaps Forest Brown or maybe Burnt Forest. Because the color of large sections of their famous Amazon forest is anything but green. "In places," according to a recent article in The Economist, "the acid subsoil shows through, sand and bone-pale."[2]

SHORT-TERM GAIN, LONG-TERM PAIN: MAKING MONEY CLEARING FORESTS

But keeping not only Brazil's, but the world's forests green is a tall order, particularly when it's often more financially rewarding for forest people to cut down their forested land to, for example, make room for plantations for palm trees to harvest palm oil, an ubiquitous ingredient found in half of all consumer goods, from body lotion to packaged foods to biofuel to lipstick. (Environmental groups like the Rainforest Action Network have launched campaigns to educate consumers about the dangers of forest destruction and palm oil in particular.)[3][4]

The idea of making it more lucrative to preserve forests than to cut them down was high on the agenda at Forest Day 5, which happened on Sunday on the sidelines of the 17th United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties in Durban, South Africa (COP17). Such financial incentives drive the UN's REDD+ program, which expands on the 2008 Reduce Emissions from Deforestation and Forest Degradation (REDD) program to not only combat deforestation, but also include conservation, sustainable management and the close involvement of indigenous forest people and forest-dependent communities in the campaign to preserve forest ecosystems.[5]

SAVING FORESTS REQUIRES A PUBLIC-PRIVATE SUSTAINABLE INVESTMENT SCHEME

The UN goal of halving the world's rate of deforestation by 2030 requires an annual investment of between USD 17-40 billion. But the total annual value of the ecosystem services that forests provide -- from biodiversity and access to ingredients to make life-saving drugs, from carbon storage to poverty reduction -- is USD 2-4 trillion. Considering that, USD 40 billion is a great investment, to say the least. And only with the involvement of the private sector can such an investment happen.

According to a guest commentary on Mongabay.com by Don Kanak, former chair of WWF's Forest Climate Initiative and chairman of Prudential Corporation Asia, and Andrew W. Mitchell, founder and director of the Global Canopy Programme in Oxford, it appears that at the Durban talks, an "a la carte approach, where no source is ruled out, is emerging, leaving the door open to private sector finance for the first time...REDD+, a novel mechanism to halt deforestation, is once more likely to be the biggest winner."[6]

The current annual voluntary carbon market is between USD 30-100 million. Developed nations have committed a USD 4.5-billion REDD+ investment through 2015. But the USD 17-40 billion annual amount is much greater than what governments can provide. This is where sustainable investment from the private sector comes in, and according to reports coming out of Durban, the idea of creating sustainable finance investment vehicles like "forest bonds" -- which some say could raise tens of billions of dollars in the next few years -- is making headway.[7]

TAKING THE LONG VIEW: FOREST FINANCE FACILITY

Kanak and Mitchell note one interesting solution: the creation of a global Forest Finance Facility (FFF), which would have "the authority to enter into long-term commitments to pay for performance (verified reductions in deforestation)." They believe that advanced pledges from developed nations could raise at least USD 3 billion for the FFF towards the USD 100 billion Green Climate Fund and by redirecting some of the USD 4.5 billion of public funds already pledged to REDD+. They also believe that the FFF could attract forest bonds and other private, sustainable investment instruments that have the power to leverage public funding.

"Better than a carbon market, [the FFF] could make long-term commitments to guarantee to purchase forest carbon credits at an agreed floor price, subject to REDD+ projects meeting objective criteria, including strong environmental and social safeguards," write Kanak and Mitchell. "Profits from potential credit sales in a future compliance market could repay investors, renew the fund and reward forest communities."[9]

Managing both short- and long-term goals, particularly on a policy level, is critical. At Durban, Kevin Grose, the coordinator of the Communications and Knowledge Management Services programme (CKMS) of the UNFCCC, "emphasized the synergies between the Rio conventions, identifying the key role of national policy and need for assistance in developing countries to explore both short-term and long-term benefits," according to a report by the International Institute for Sustainable Development (IISD). Grose also presented the Finance Portal for Climate Change, a portal on the UNFCCC website to track quick-start financing.[9]

THE BOOMERANG EFFECT: KILLING FORESTS, KILLING OURSELVES

There are only a few more weeks left in 2011, which the United Nations General Assembly declared as the International Year of the Forests. It would be a great success if the delegates at Durban are able to agree on a framework to establish long-term financial commitments from both the public and private sectors to support the goal of halving deforestation by 2020.

The growing swath of Brazil's most heavily deforested area runs through the wood-, coffee- and cocoa-exporting state of Rondonia; the state of Mato Grosso, which is the location of 65 percent of the Pantanal, the world's largest wetland and home to almost 1,000 animal species; and the rubber- and mahogany- producing state of Para, which borders the Atlantic Ocean. The shape of this area has been described by The Economist as an arc. But actually it is rather shaped like a boomerang, which is a much more apt metaphor: Killing the world's forests is an activity that will surely come back to bite us. Indeed, it already has.

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