14 October 2024
The tropical forest fund was launched during the G20 in Brasil and will be operational at COP 30, which will hold its presidency in 2025. The Tropical Forest Finance Facility (TFFF) will have funds reverted to the preservation and mitigation of the impacts of climate change, with an expected funding of 125 billion dollars (approximately BRL 700 billion).
Climate extremes are being experienced daily on all continents. The rise in the ocean level and the planet’s average temperature is a reality that anticipated the most pessimistic expectations. The warnings of the need for immediate action to slow down planetary depletion can no longer be ignored, and response plans must be put into practice.
This logic guided the ambitious Brazilian plan to raise 125 billion dollars to finance tropical forest conservation. The fund, which receives support from rich countries and financial institutions, seeks to protect vital biomes, reduce carbon emissions, and preserve global biodiversity.
During a meeting of the Finance Track in Rio de Janeiro, the minister of the environment and climate change, Marina Silva, presented a revolutionary project by creating a billion-dollar global fund. Named the Tropical Forest Finance Facility (TFFF), the fund offers a financial solution for conserving approximately 1 billion hectares of tropical forests worldwide. The goal is to compensate countries that own these forests for their conservation efforts, ensuring the preservation of areas essential to the global environmental balance while supporting the local population in maintaining biodiversity.
According to the Brazilian Minister of Economy, Fernando Haddad, the fund will raise 20% of its resources through long-term loans from developed countries and philanthropic entities. These funds will be combined with 80% of capital from institutional and retail investors, who can purchase debt securities issued by the fund.
The proposal is to borrow resources from wealthy countries’ governments, multilateral organizations, and institutional investors at interest rates aligned with their risk levels, invest in a higher-yielding portfolio, and use the income to compensate countries for conserving tropical forests.
The income generated by these investments will be applied to tropical forest conservation, resulting in a return that, according to initial estimates, may pay up to 4 dollars per hectare annually to eligible countries. The differential between catchment and application rates will be used to finance the participating countries, focusing on the strict control of deforestation and forest degradation.
“We believe this fund will be a game-changer in global climate finance. This solution benefits donor countries and countries that protect their forests. We are creating a robust mechanism that not only conserves but generates sustainable development,” said Garo Batmanian, director of the Brazilian Forest Service and one of those responsible for creating the initiative.
Ministers Fernando Haddad and Marina Silva at the meeting that presented the Fund’s design during a Finance Track meeting in Rio de Janeiro. Photo: Audiovisual/G20
International Participation and Transparency
Marina Silva highlights the importance of international participation in the project, emphasizing that the fund was designed to attract the engagement of developed countries. World Bank President Ajay Banga, attending the event, expressed support for the fund, describing it as an essential tool for achieving the global climate goals set by the Paris Agreement.
The fund will only be eligible to receive contributions from countries with tropical forests and low deforestation rates. Currently, 79 nations have tropical forests, and the initial proposal suggests that only those that reduce their deforestation rate to a maximum of 0.5% per year will be allowed to participate. The Ministries of Finance and Environment believe that the criterion will encourage practical actions to protect forests and create a new dynamic of preservation.
A sophisticated satellite monitoring system will be implemented to ensure transparency in measuring deforestation and distributing resources. This system will avoid complex carbon calculation methods and focus on the direct preservation of vegetation cover. “Simplicity and transparency are the pillars of this fund. We want quick and measurable results,” explained the director of the Brazilian Forest Service.
The fund is seen as a practical breakthrough in climate finance, particularly for the Global South. In addition to protecting forests, it should boost the market for green, blue (linked to the preservation of water resources), and sustainable bonds, contributing to the flow of capital in projects with a positive environmental impact.
For rich countries, the mechanism has the advantage of being a loan, not a donation, which facilitates its approval by parliaments and offers long-term financial returns. “This is a fund that offers benefits for everyone involved. Preserving tropical forests is a global mission and a shared responsibility,” Haddad said.
The TFFF’s final proposal is expected to be presented at the COP29 in Azerbaijan in 2024, with the operational launch at the COP30 in Belém, the capital of the Amazonian state of Pará, in 2025.
Translated by PGET-UFSC
Source – Brasilian G20 Presidency