The Glasgow Leaders’ Declaration on Forests and Land Use, where leaders from 141 countries committed to halt and reverse forest loss and land degradation by 2030 through conservation and restoration of forests and other terrestrial ecosystems, is supported by the Global Forest Finance Pledge, whereby 11 countries committed to providing US$12 billion for forest-related climate finance between 2021 and 2025.

These funds will need to be used in a highly catalytic manner to shift much larger public and private financial flows to achieve the Glasgow ’s Declaration on Forests and Land Use.

The financing needs to fully deploy forest-based solutions to advert catastrophic climate change, reduce biodiversity losses and ecosystem degradations, foster a green, climate resilient recovery from the Covid-19 pandemic and achieve the SDGs are estimated at USD 200 billion annually.

The previous section has highlighted the importance of incorporating forests into development and financial policy agendas. This cannot be overstated. Despite the risks posed by climate change and the destruction of forests, an analysis of USD 783 billion of sovereign bonds issued in 2020 and maturing in 30, 50, 100 years found that three-quarters did not disclose any climate or nature-related risks. 

Mainstreaming forest into national and sub-national development strategies and policies will not only prevent that public money be inadvertently invested into activities driving deforestation but will also reduce total financial needs to achieve the SDGs. According to some estimates, integrated development and climate polices could reduce the overall infrastructure financing needs by 40%.

Through its grant-based Readiness Programme, GCF can support developing countries in these efforts. I had the pleasure to discuss yesterday with his Excellency the Minister of Environment and Tourism a GCF readiness programme signed last Friday to assist the Government of Mongolia in reviewing its 800 laws and 4,000 orders to address legal gaps and optimize synergies across the entire legal framework of the country. This readiness programme will be implemented with the support of GGGI and my good friend Frank, who introduced the previous section.

The USD 68 million project implemented by GIZ project and co-financed by GIZ in Lao PDR builds on such a review of the forest’s legal and regulatory framework to mainstreaming forests into climate-resilient development planning processes at national and local levels and to encourage deforestation-free agriculture and agroforestry by enhancing agricultural productivity.

What else should we do to effectively bridge financing gap for forest protection, restoration, and sustainable management?

They are hundreds of forest financing mechanisms that are being explored. This diversity can be confusing as they tend to be context specific and do not apply to all jurisdiction alike. However, for the most part they can be grouped into two main types of objectives: create new asset classes and create new carbon and nature markets.

Turning first to new asset classes, Green, Social, Sustainability and Sustainability-linked (GSSS) Bonds represent a new asset class that has gained traction over the past years across developed markets. Even though GSSS bonds grew by USD 600 billion in 2021, they still make up just a fraction of the bond market.

However, the size of this market remains limited in developing countries. For example, Africa accounted for only 0.077% of the global green bond market in 2021. Adequate market infrastructure is needed to provide the foundation for capital market depth and liquidity.

This includes exchanges and trading platforms, clearing houses, credit risk assessment, custodians, and fiduciaries, and developing the capacity of local public development and commercial banks to issue green bonds. 

But the potential of Green, Social, Sustainable-linked bonds to help fill the SDG Financing Gap is significant. I mentioned in my remarks during the first section of the high-level panel yesterday the USD 600 million Amazon Bioeconomy Fund co-financed by GCF and implemented by the Inter-American Bank in six Amazon countries to support eco-businesses in the Amazon.

The initiative includes advisory services on how to effectively include bio-businesses into thematic bond issuances, as well as how to deploy credit enhancement guarantees for green bonds issued by public entities. The ambition of the Amazon fund is to create a new asset class for eco-businesses led by local communities to foster the protection and sustainable development of the Amazon region.

Turing now to creating new climate and nature markets, I would like to discuss the potential of carbon markets to finance forests.

Forest carbon credits often fetch higher prices in markets because of the range of co-benefits they provide, starting with adaptation and sustainable development.

REDD+ carbon credits have been soaring, with a growth of 280% in September 2021 year-on-year, showing the strong interest among voluntary buyers for REDD+ credits.

In response to the mandate given by the UNFCCC, GCF has been supporting since the inception of its operations all three phases of REDD+ to create a robust market for high quality carbon credits in terms of environmental integrity and development co-benefits. The GCF has financed over $12 million for phase I (readiness), $145 million for phase II (implementation), and the GCF was the world’s first provider of results-based payments with a total $497 million disbursed and under implementation.

The GCF’s REDD+ results-based payment pilot programme is used as a steppingstone by some countries to lay the basis for generating high-standard carbon credits that could be traded on markets but also through the LEAF Coalition.

For example, Costa Rica reinvested some of its proceeds from the GCF REDD+ Result-Based Payments into a system to document the transfer of rights to the revenue from carbon transactions from landowners, notably indigenous communities. This is an important step in accessing private finance for emissions reductions.

The adoption of the rules of Article 6 in Glasgow last year opens new opportunities for countries to leverage carbon markets to advert catastrophic climate change, restore ecosystems, protect biodiversity, and finance the SDGs. These opportunities apply also to blue carbon.

Blue carbon, which includes mangroves, has largely been left out of NDCs and neglected in policymaking, despite the critical importance of coastal and marine ecosystems to mitigate and adapt the impacts of climate change and preserve the livelihoods of over 500 million people across the globe. Blue carbon generated by mangrove restoration have the potential to deliver high-quality carbon credits that could fetch higher prices thanks to exceptional carbon storage potential and the multiplicity of co-benefits (adaptation, livelihoods, food security). GCF is currently exploring a series of initiatives to deepen blue carbon markets.

In its efforts to leverage new financing avenues to close the climate and nature financing gap, GCF’s places a strong emphasis on co-benefits and safeguards and the rigorous vetting processes leading to project approval.

This ensures that GCF finance is consistently aligned not only with mitigation and adaptation objectives, but also with the Sustainable Development Goals; and that GCF finance delivers benefits to all, including Indigenous Peoples and Local Communities.

We look forward to the insights of this section and to further working with our partners on these new financing opportunities to build a green, healthy and resilient future with forests.