Forests are at the heart of global efforts to tackle climate change and biodiversity loss — yet finance for their protection and restoration remains far short of what is needed, creating both material risks and missed opportunities for financial institutions. Ahead of COP30 in Belém, this article aimed at banks, insurers, investors, development finance institutions, and financial supervisors outlines the current state of forest finance, why action matters for your institution, and concrete steps you can take to assess both your risks and opportunities.  

UNEP has just launched the inaugural State of Finance for Forests (SFF) report, revealing a critical funding gap that requires urgent action from the financial sector. Annual forest investments must more than triple from USD 84 billion in 2023 to USD 300 billion by 2030 and reach USD 498 billion by 2050 to meet global climate, biodiversity, and land degradation targets. The forest finance gap requiring closure is USD 216 billion per year by 2030. 

COP30 will present a pivotal moment for financial institutions to align their strategies with forest conservation and restoration, particularly through new mechanisms like Tropical Forests Forever Facility (TFFF) and high-integrity REDD+ programmes and the wider discussions on this as part of the Action Agenda. These topics are particularly discussed under the Action Agenda Plan to Accelerate Solution “Private Finance for Forests,” under the Activation Group for Stewarding Forests, Oceans, and Biodiversity as well as the Forest and Climate Leaders’ Partnership (FCLP) Forest Finance Roadmap for Action, which identifies six core solutions to close the forest finance gap by 2030.

 

Forest finance in context 

Current funding landscape 

According to the State of Finance for Forests, governments provided 91% of forest funding in 2023 (USD 76 billion), with over 96% from domestic spending and just 4% from international public finance. Private sector engagement remains limited: 

  • Private finance flows to forests totaled only USD 7.5 billion in 2023 
  • 39% (USD 2.9 billion) came through certified commodity supply chains, with nearly 80% directed to forest products in Europe and North America, while high-risk tropical commodities receive far less despite driving 97% of global deforestation 
  • Impact investing contributed 23% (USD 1.7 billion), with emerging carbon markets attracting USD 1.3 billion 

The paradox of harmful finance 

Private financial institutions provided USD 8.9 trillion in active financing to companies with the highest deforestation risk as of November 2024, while environmentally harmful agricultural subsidies reached approximately USD 406 billion in 2023. This stark contrast highlights both the problem and the opportunity for redirection of capital. 

 

Why forest finance matters to your institution 

Financial materiality 

  • Climate risk management: Forests absorb approximately one-third of CO₂ emissions from fossil fuels annually. Meeting global climate and biodiversity goals requires expanding nature-based solutions by 1 billion hectares by 2030 and 1.8 billion by 2050. Deforestation accelerates climate risks that threaten portfolios across all sectors. Our Net-Zero Asset Owner Alliance Guidelines and Recommendations for Halting Deforestation set out recommendations for companies, policymakers and data providers to take corresponding action to phase out deforestation risk exposures.
  • Regulatory alignment: Financial supervisors globally are strengthening nature-related disclosure requirements. The EU Deforestation Regulation (EUDR) and similar frameworks create compliance obligations for financed activities. Early movers gain competitive advantage.
  • Market opportunities: Forest protected areas and avoided deforestation require an estimated USD 32 billion annually, while reforestation of around 100 million hectares will require USD 96 billion per year by 2030. These represent substantial, underserved investment opportunities with multiple co-benefits. COP30’s Nature-based Solutions (NbS) Mobilization Campaign aims to secure at least USD 5 billion in new NbS commitments by 2025, offering a direct entry point for private finance.

New Forests is a global investment manager specializing in nature-based real assets, including sustainable forestry, conservation, carbon, and biodiversity projects, that deliver both financial returns and measurable environmental outcomes. Over the past decade, the firm has expanded across Australia, Asia, Africa, and the Americas, pioneering natural capital as an institutional asset class. Its assets under management have grown rapidly to AUD 11.7 billion covering 4.3 million hectares by end-2024 with a B-Corp score of 102.4.

.Reputational and strategic benefits 

Indigenous Peoples and local communities are key forest stewards, yet only USD 362 million of international public finance for forests was directed to IP and LC-related projects in 2023. Financial institutions supporting direct access to finance for these communities demonstrate leadership in equitable transition finance.

BNP Paribas, in partnership with Everland, launched a USD 50 million outcome bond to finance 20 Indigenous-led REDD+ forest conservation projects in the Amazon, certified under the Equitable Earth standard. The bond links disbursements to measurable outcomes such as avoided deforestation and carbon sequestration – and is projected to generate over USD 1 billion in carbon credit revenues over its first decade. It explicitly embeds fair revenue sharing with Indigenous and traditional communities, pushing climate finance toward community ownership and accountability.

 

New financing opportunities 

Tropical Forests Forever Facility (TFFF) 

The Tropical Forests Forever Facility (TFFF), under discussion at COP30, proposes a results-based financing mechanism to provide predictable, long-term funding to tropical forest countries for verified forest conservation. For financial institutions, TFFF represents: 

  • Co-investment opportunities alongside sovereign commitments 
  • De-risked entry points into tropical forest conservation through blended finance structures 
  • Alignment with Paris Agreement Article 6 mechanisms for carbon credit integrity 

High-Integrity REDD+ and investment case for financial instutions 

Jurisdictional REDD+ (JREDD+) methodologies were endorsed by the Integrity Council for the Voluntary Carbon Market in 2024, with estimates suggesting JREDD+ programmes could supply up to 300 million tonnes of credits annually by 2030. 

The voluntary carbon market has experienced volatility: total VCM value increased from USD 320 million in 2019 to USD 2.1 billion in 2021, then declined to USD 755 million by 2023. However, forest-related projects continue to account for roughly half of VCM transaction value, with REDD+, afforestation/reforestation, and improved forest management representing 46% of transactions in 2023. 

MSCI estimates total capital expenditure on forest-related carbon credit projects at USD 3.2 billion in 2023 (REDD+: USD 1.0 billion; ARR: USD 1.4 billion; IFM: USD 0.8 billion). High-integrity, jurisdictional approaches offer more stable returns and reduced reputational risk compared to project-level credits that have faced integrity concerns. Therefore there is a big investment opportunity for financial institutions.

Standard Chartered has struck a five-year deal with Brazil’s state of Acre to act as the exclusive seller of jurisdictional REDD+ carbon credits, potentially bringing ~5 million credits to market in 2026. Credits will be issued under the ART / TREES standard, and 72% of net proceeds are earmarked for Indigenous/local communities (with the remainder funding governance, MRV, and project management). Standard Chartered is supporting the development of the jurisdictional forest finance space, and is one of the first global banks to partner directly with a subnational government in this market.  

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How financial institutions can boost forest finance

For commercial banks 

  1. Screen and redirect financing: Assess agricultural and commodity lending portfolios for deforestation risk. Set targets to eliminate deforestation from financed activities by 2030. The Principles for Responsible Banking offers guidance for front office staff engaged with high risk and high dependency forestry activities: The Sector Action Guidance for Nature offers banks commodity-level, sector-tailored steps to integrate biodiversity and nature into their policies, client engagement, and risk frameworks, and the PRB’s Nature Target-Setting Guidance helps banks quantify nature-related dependencies and impacts (across forests, freshwater, etc.) and establish measurable, time-bound targets.
  2. Develop forest-positive products: Create dedicated credit lines for sustainable forestry, forest restoration, and certified sustainable commodity production. As an example, the 2023 gender-responsive credit line in Ecuador, through Banco Pichincha, directed USD 3.9 million to 228 women for forest protection and sustainable land management, demonstrating scalable models.
  3. Engage in blended finance: In emerging markets, 31 tropical forest countries allocated only USD 12.9 billion to forests in 2023—just 17% of global domestic government spending. Consider partnering with Development Finance Institutions and multilateral climate funds to de-risk investments in forest NbS and potentially participate in COP30’s NbS Mobilization Campaign to channel forest-positive lending to verified investment pipelines.

For investors 

  1. Increase allocations to forest impact funds: Target both public and private market vehicles focused on sustainable forestry, agroforestry, and forest carbon projects with verified integrity standards. Via the Innovative Finance for the Amazon, Cerrado and Chaco (IFACC), The Nature Conservancy, the Tropical Forest Alliance and the United Nations Environment Programme look to significantly increase and accelerate lending and investment in sustainable agriculture in Brazil, Argentina and Paraguay
  2. Engage portfolio companies: Use stewardship influence to require zero-deforestation commitments and transparent supply chain monitoring from companies in forest-risk sectors (palm oil, soy, beef, cocoa, timber).
  3. Integrate forest risk into analysis: Include deforestation exposure and forest dependencies in investment due diligence and risk assessment frameworks.

For insurers 

  1. Develop relevant insurance products: Innovate risk transfer solutions for the delivery of conservation and restoration projects, risk transfer solutions for forest-dependent communities (i.e. parametric insurance for forests), insurance for carbon credits / project developers to address climate and market volatility (and increase investor confidence). This could also include insurance for sustainable supply chains and forest positive businesses.
  2. Underwriting standards: For enhanced underwriting guidelines and criteria: consider any activities taking place in protected areas / Key Biodiversity Areas; or sectors/industries with potential material impact on forests (not only through deforestation). Offer preferential terms for certified sustainable forestry operations. This is outlined in the “Insuring a resilient nature-positive future: Global guide for insurers on setting priority actions for nature” guide for insurers.
  3. Investment portfolio alignment: Apply the same forest-positive principles outlined for institutional investors to insurance company investment portfolios.

For development finance institutions 

  1. Scale private finance mobilization: In 2023, an estimated USD 277 million of climate finance was mobilised for forests from the private sector by official development finance interventions, with over three-quarters leveraged by multilateral organizations. DFIs should increase use of guarantees, first-loss capital, and technical assistance to crowd-in commercial capital.
  2. Direct access mechanisms: Support Indigenous Peoples and local communities with capacity building and streamlined access to forest finance, addressing the structural gap in current flows.
  3. Support jurisdictional approaches: Prioritize JREDD+ programmes and subnational forest conservation initiatives that can attract private sector participation at scale.

For financial supervisors and central banks 

  1. Integrate nature into prudential frameworks: Develop guidance on nature-related financial risks, including deforestation exposure in stress testing and supervisory review processes.
  2. Mandate disclosure: Require financial institutions to report deforestation-related exposures and forest-positive financing volumes aligned with emerging practice such as the Taskforce on Nature-related Financial Disclosures (TNFD) and/or other relevant standards.
  3. Green taxonomies: Include high-integrity forest conservation, restoration, and sustainable management activities in sustainable finance taxonomies to guide market capital allocation.
  4. Collaborate with the COP30 Circle of Finance Ministers and Central Banks: Update supervisory expectations and sustainable taxonomy guidance that mainstream forest risk.

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Conclusion: The Belém moment 

COP30 in the heart of the Amazon represents an unprecedented opportunity for the financial sector to demonstrate leadership on forests. The State of Finance for Forests makes clear that business-as-usual is not an option: forests are significantly underfunded while harmful finance flows continue at scale.

The mechanisms are in place: TFFF, high-integrity REDD+, and jurisdictional approaches offer credible, scalable pathways. What is required now is decisive action from banks, insurers, investors, development finance institutions, and supervisors to redirect capital toward forest conservation and restoration. 

Additional Resources