Read more at Yale E360

• Objective: There is an ambitious new plan from Brazil to triple global finance for tropical forest conservation.
• Structure: It aims to create a $125 billion investment fund to provide up to $4 billion per year to 74 tropical and subtropical nations.
• Funding Mechanism: The plan channels profits from international trade in government bonds, relying on private investors and bond markets to finance conservation.
  • The total fund is expected to be $125 billion, with 80% ($100 billion) from private investors and 20% ($25 billion) from governments and philanthropies.
  • Brazil has already pledged $1 billion in seed funding.
• Disbursement: Countries are rewarded based on satellite measurements of their standing tropical forests at an initial rate of $1.60 per acre.
• Governance: The World Bank has agreed to become the facility’s trustee and interim host, overseeing the transference of profits.
• Anti-Deforestation Incentive: For every acre deforested in subsequent years, a country’s payment would be reduced by an equivalent of at least 100 acres of standing forest reward.
• Exclusion: Countries with an annual deforestation rate above 0.5% (e.g., Indonesia and the Democratic Republic of the Congo) would be barred from receiving funds.
• Indigenous Communities: At least one-fifth (20%) of the money dispersed must ultimately be devoted, directly or indirectly, to Indigenous and forest communities.
• Loose Definition of Forest Integrity: Critics, including forest ecologists, argue that the TFFF’s criteria for full payment only require 20% canopy cover.
  • This loose definition could allow for payouts even where industrial logging is occurring in primary forests.
• Financial Risk and Fairness: Economists question the viability and ethics of the financial architecture:
  • The conservation money ($4 billion/year) comes from the high-interest rates charged on volatile loans to the very developing countries the fund is meant to benefit.
  • The reliance on the difference between the high-risk bond yield (8%) and the investor payout (5%) means the fund could unravel during a market crash.
• Penalties for Degradation: The fund’s rulebook currently imposes degradation penalties only for forest fires, which critics say is insufficient, as logging and mining should also trigger penalties.
• Indigenous Control: Some activist groups fear that national governments will not directly hand over the funds to Indigenous groups, potentially leading to government agencies or private companies gaining more control over Indigenous-managed forests.
• High Hopes: Backers, including major environmental groups and the Bezos Earth Fund, call the TFFF the “only game in town for forest finance,” viewing it as a lifeline given the crash of foreign aid budgets and the failure of carbon offset schemes.
• Precedent: If successful, the TFFF could become a blueprint for protecting other critical ecosystems like peatlands and mangroves.
• Urgency: The plan comes as global deforestation rates in the tropics reached a record 16.5 million acres last year, far off track from promises to end deforestation this decade.