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Context

The 2025 State of Finance for Forests (SFF) report, "Unlock. Unleash.," reveals financial shortfall in protecting and restoring global forests.  

The Global State of Forest Finance: Key Findings

Massive Funding Gap

• An annual shortfall of $216 billion is needed between now and 2030.
• Annual forest investments must more than triple, from $84 billion in 2023 to $300 billion by 2030, to meet 2030 targets under the Rio Conventions (Climate Change, Biodiversity, and Desertification).
• Long-term investment needs are projected to reach $498 billion annually by 2050.

Imbalance: Public vs. Private Finance

• Public funding dominates, accounting for 91% of total forest finance.
• Private investment remains minimal, under 9%, indicating a failure to mobilize private capital for conservation.

Imbalance: Domestic vs International Finance

• Domestic government spending provides an overwhelming 96% ($75 billion) of public funds.
• International public finance, including Official Development Assistance (ODA), contributes only 4% ($2.9 billion).

India's Leadership in Domestic Commitment

• High Domestic Expenditure: In 2023, India's domestic forest expenditure was $7.1 billion, ranking third globally after China ($19.4 billion) and the US ($11.7 billion).  
• Modest International Aid: India was a top 15 recipient of international public forest finance in 2023, receiving $81 million.

The Need for "Nature-Based Solutions" (NbS)

The report emphasizes that a significant expansion of nature-based solutions (NbS) is crucial to achieve climate, biodiversity, and land degradation targets.

Expansion Targets: The area under protection and other types of NbS needs to expand by an additional 1 billion hectares by 2030 and 1.8 billion hectares by 2050.

Six Complementary NbS for Tropical Forest Countries: The report projects that by 2030, tropical forest countries will require an estimated $67 billion annually, allocated across six key NbS:

• Avoided Deforestation: Protecting existing forests, a cost-effective climate strategy, requires $16 billion annually for tropical forests.
• Reforestation: Regenerating degraded land demands $33 billion annually to restore millions of hectares.
• Agroforestry (Silvoarable and Silvopastoral Systems): Integrating trees into agriculture needs $18 billion per year to strengthen rural livelihoods and diversify incomes.
• Protected Forest Areas: Establishing and managing these areas.
• Avoided Forest Peatland Conversion: Protecting carbon-rich peatlands.
• Sustainable Forest Management: Managing forests for long-term health.

Harmful Financial Flows That Undermine Conservation

The report highlights a critical issue: significant financial flows continue to harm forests, undermining conservation efforts.

• Private Financial Institutions: As of November 2024, private financial institutions provided $8.9 trillion in active financing to companies with the highest deforestation risk. This shows a massive disconnect where financial systems are indirectly funding deforestation.
• Environmentally Harmful Agricultural Subsidies: Environmentally damaging agricultural subsidies reached approximately $406 billion in 2023, encouraging practices that lead to forest conversion and degradation.

Way Forward

Triple Investments by 2030: Governments and private investors must commit to increasing forest investments dramatically to meet the $300 billion annual target.

Shift Public Finance to International Support: Developed countries must increase their international public finance for forests, particularly for tropical forest countries.

Mobilize Private Capital: Innovative mechanisms are needed to attract private investors, moving beyond traditional finance models to include blended finance, green bonds, and impact investing.

Align Policies and Regulations: Governments must align their economic, trade, and land-use policies with forest goals, actively discouraging environmentally harmful subsidies and financial flows.

Empower Indigenous Peoples and Local Communities: Direct funding and legal recognition of customary land rights for Indigenous Peoples and Local Communities (IPs and LCs) are crucial, as they are proven, effective guardians of forests.

Strengthen Voluntary Carbon Markets: Improve the integrity and transparency to build investor confidence and ensure that carbon credits represent genuine, verifiable emissions reductions.

Conclusion

The "State of Finance for Forests 2025" report highlights the severe undervaluation and underfunding of forests, critical for climate and biodiversity. Despite India's domestic spending, global public and private investment is crucial to close the finance gap, align economic policies, and achieve 2030 deforestation targets.

Source: DOWNTOEARTH