A New Paradigm for Standing Forests

Ajay Banga, Fernando Haddad, and Marina Silva

With this year’s global summits on biodiversity (COP16), climate change (COP29), and desertification (COP16) fast approaching, the consequences of the climate emergency are evident everywhere. Floods have ravaged Central Europe, super-typhoon Yagi has just struck Southeast Asia, and Hurricanes Helene and Milton have wreaked havoc in the southeastern United States. Hotter, drier conditions have created ideal conditions for wildfires like those that have raged across Brazil, South Africa, and Colombia, while droughts have pushed people into food insecurity this year in Africa.

If the scale and speed of our response to climate change are inadequate to the threat, this new normal will get only worse, jeopardizing hard-won development gains in low- and middle-income countries. In addition to curbing emissions from burning fossil fuels, one of the biggest priorities must be to protect and conserve the world’s remaining tropical forests.

Tropical forests store significant amounts of carbon, and their demise would result in a massive 1° Celsius increase in global average temperatures, not to mention the loss of untold biodiversity and the depletion of ecosystem services such as atmospheric rivers that supply water to food crops around the world. Scientists warn that the degradation of several of these forests is approaching a tipping point where the remaining forest will be unable to sustain itself or recover.

Individuals, countries, and NGOs are stepping up to protect and preserve the world’s forests from devastation. But we will need a combination of economic and environmental solutions to address the complex, rapidly changing factors driving illegal deforestation.

Fortunately, such solutions are at hand. In Brazil, President Luiz Inácio Lula da Silva’s administration has already significantly curbed deforestation. Between August 2023 and July 2024, tropical forest loss in the Brazilian Amazon was cut by 46%, compared to the previous 12 months. And at the global level, Brazil, which holds the G20 presidency this year, has emphasized nature-based solutions to climate challenges as part of its agenda, paving the way for further progress at COP30 in Belém in 2025.

For its part, the World Bank Group is supporting similar public and private efforts across developing economies. The goal is to design strong policies, build credible institutions, and mobilize investments in the infrastructure that is needed to conserve and manage forests sustainably. Making forest finance more widely available and more affordable is key.

The World Bank Group is also working to turn the vast potential of carbon markets into an income stream for developing countries that are committed to reducing emissions and conserving their forests. Already, 15 countries are benefiting from a pipeline that could produce more than 24 million carbon credits by the end of 2024 – a win for both the climate and development.

But those engaged in these efforts have long been dogged by the question of how to support the conservation of standing forests over the long term. While forest carbon markets have created new revenue streams, they usually reward only those countries, communities, or project developers that are focused on reducing their emissions from deforestation. Thus, forests that are not under immediate threat offer no financial reward.

One solution is the proposed Tropical Forest Forever Facility, a large-scale, performance-based mechanism that would use blended finance to generate financial returns and reward countries for protecting their standing forests. Instead of carbon credits, the TFFF would provide predictable long-term financial support linked to a country’s hectares of standing forests, thus aligning economic incentives with environmental outcomes.

Led by the Brazilian Ministry of Finance and Ministry of Environment and Climate Change, and in partnership with other tropical-forest countries, developed economies, and non-traditional sponsors, the TFFF aims to leverage sovereign and philanthropic funding to mobilize more private capital, thus expanding forest finance beyond purely public-sector tools. Crucially, it would allow private investors to support a global public good by quantifying and verifying the underlying asset on terms aligned with their business models.

This is the kind of bold, innovative solution that we need if we want to make a real difference in the fight against climate change. One of the biggest advantages of the TFFF is that it is not expected to depend on scarce donor grants and recurrent replenishments. Instead, it would require a one-time, fully repayable investment from potential sponsors, who therefore would be presented with a conceptually novel development-aid model.

Those designing the TFFF are also studying how to simplify disbursement models (without any loss of rigor) through digital monitoring, reporting, and verification systems, and how to disburse enough annually to tip the scales away from deforestation. Finally, another important question that is coming into focus is how to improve access to such mechanisms for indigenous peoples, local communities, and other forest owners and stewards. The countries working on the TFFF intend to address these issues by COP30.

Forests are vital not just for the carbon they store, but also for their role in maintaining ecological balance, supporting environmental health, and promoting economic growth and human development. The period between COP16 in Cali and next year’s COP30 in Brazil could be the perfect time to launch the TFFF and set the stage for a new era in forest-conservation finance. We must start properly rewarding countries that have controlled deforestation and redouble our efforts to conserve existing forests for future generations.

Ajay Banga is President of the World Bank. Fernando Haddad is Minister of Finance of Brazil. Marina Silva is Minister of Environment and Climate Change of Brazil.