Source: UNEP
Context:
The United Nations Environment Programme (UNEP) has released the State of Finance for Forests (SFF) 2025 Report, warning that global investments in forests must triple by 2030 to meet international climate, biodiversity, and land restoration goals. The report provides a comprehensive overview of global and country-level trends, highlighting both the progress made and the persistent gaps in forest finance.
Key Global Findings:
- Severe Underfunding of Forests
- Only US$ 8 billion was invested globally in 2023 (91% public, 9% private).
- An estimated US$ 24 billion per year is needed by 2030 to meet climate and biodiversity targets.
- Dominance of Public Finance
- Governments contributed US$ 7.3 billion, mainly China and the U.S.
- Tropical forest nations contributed only 17% of their domestic spending, showing regional disparities.
- Low Private Sector Participation
- Private forest finance amounted to US$ 0.7 billion, mainly through certified commodities (39%) and impact investing (23%).
- High-risk tropical commodities, causing 97% of deforestation, received minimal sustainable funding.
- Environmentally Harmful Flows Persist
- Agriculture subsidies harmful to the environment reached US$ 500 billion.
- Banks financed US$ 5.5 trillion to firms with deforestation risk—far exceeding green investments.
- Need for Nature-Based Solutions
- To meet Rio Convention targets, 1 billion hectares must be restored by 2030.
- Estimated financing requirement: US$ 30 billion/year for forest protection & avoided deforestation, US$ 20 billion/year for reforestation.
India-Specific Insights
- Public Finance Dominates
- India relies heavily on government schemes like CAMPA, Green India Mission, and National Afforestation Programme, with minimal private participation.
- Low Private Investment
- Engagement in carbon markets and biodiversity credits is negligible, highlighting untapped potential for green investors.
- High Domestic Commitment
- India spends over 30 times more domestically on forest protection than it receives in international aid.
- Shift Toward Nature-Based Solutions
- Initiatives like LiFE (Lifestyle for Environment), Green Credit Programme (2023), and REDD+ pilots align with global calls for climate-resilient investments.
- Inclusive and Community-Led Approach
- Increased focus on Joint Forest Management (JFM) and tribal livelihood projects.
- Emphasis on gender-inclusive and community-driven governance.
Positive Developments in Forest Finance
- Integration with Climate Goals: Forest finance is increasingly linked with climate and biodiversity agendas (REDD+, UN-REDD, concessional ODA grants).
- Innovative Asset Classes: Growth of carbon markets and biodiversity credits encourages sustainable private investment.
- Community & Gender Inclusion: Programs like Ecuador’s gender-responsive credit line support women producers.
- Local Ownership: Tropical forest nations now spend 36 times more domestically than what they receive via international aid.
- Transparency: Improved tracking frameworks ensure better accountability.
Major Challenges
- Funding Gap: Shortfall of US$ 16 billion/year between current and required investments.
- Weak Private Sector Participation: Only 1 in 10 dollars comes from private sources.
- Harmful Subsidies: Governments still provide US$ 500 billion in environmentally damaging agriculture subsidies.
- Limited Access for Communities: Indigenous Peoples and Local Communities (IPLCs) received less than US$ 150 million (<0.5% of total international forest finance).
- Data & Governance Gaps: Weak monitoring of private finance and lack of gender-disaggregated data impede effective policymaking.
Key Recommendations
- Triple Forest Investments by 2030
- Scale annual investments to US$ 24 billion through blended finance, carbon pricing, and subsidy reforms.
- Reform Harmful Subsidies
- Redirect environmentally damaging agriculture subsidies to nature-positive incentives.
- Mobilize Private Capital
- Expand green bonds, carbon markets, and biodiversity credits with transparent risk management.
- Empower Communities and Women
- Establish direct financing channels for Indigenous Peoples and women-led forest projects.
- Strengthen Governance and Data
- Build robust forest finance tracking systems and integrate forests into national climate finance strategies.
