Halting the loss and degradation of forest ecosystems and promoting their restoration could contribute more than one-third of the total climate change mitigation needed to meet the targets of the Paris Agreement (IUCN, 2021).
However, investing in forests and sustainable land use [FSLU] is complex and has proved challenging to deliver at scale.
Currently, most of the $133bn invested in nature, including forests and land use, comes from public sources (UNEP, 2022). The amount invested needs to be tripled by 2030 and to increase by at least four-fold by 2050 to meet net-zero commitments and protect and restore nature (UNEP, 2022). Investing at least $500bn annually in nature is a challenge, but also presents new and potentially attractive opportunities for investors.
Moving from commitments to meaningful action will require greater collaboration between public funders and private sector investors.
While the market for investment in nature is growing, it is still at an early stage, and relies heavily on public funds, which have limited scope to increase. Currently only 26% of climate finance is being shared between areas of need such as water, waste, infrastructure, and land use and forests (GEF, 2023). Private finance will therefore need to be mobilized at scale to address this gap. While corporate financing through carbon markets has the potential to meet this gap for some large-scale projects, the recent media attention on carbon integrity issues has highlighted the need for private finance to deployed in the ‘right’ way if it is to achieve its intended climate impact. Moving from commitments to meaningful action will require greater collaboration between public funders and private sector investors.
Blending public and private finance presents one of the answers for de-risking and scaling up FSLU investments. Mobilising Finance for Forests [MFF], is a UK Government-funded blended finance investment program, delivered by FMO, which aims to combat deforestation and other environmentally unsustainable land-use practices contributing to global climate change. With a GBP 150m commitment from the UK Government, MFF aims to catalyze substantial additional private sector investment into forestry and sustainable land use projects in Africa, Asia, and the Amazon Basin over 5 years. MFF will offer long-term financing of up to 15 years, and targets projects that reduce deforestation pressures by increasing the value of standing forest or integrating forest protection and restoration into agricultural and forestry production.
MFF highlights the commitment of both the UK government and FMO to raise climate ambition and promote nature-based solutions
MFF highlights the commitment of both the UK government and FMO to raise climate ambition and promote nature-based solutions to tackle the drivers of climate change and biodiversity loss; to mobilize financing to protect and restore critical ecosystems; and to build resilience and kick-start a just rural transition towards sustainable land use to benefit people, climate and nature.
As well as making investments, the MFF program will gather ‘blueprints’ of sustainable land-use and forestry investment models, to be disseminated to the wider investment community via a ‘Learning Convening and Influencing Platform', which is bringing together experts and practitioners to share learnings and develop best practices for investing in FSLU.
Today, there is an increasing number of attractive investment opportunities that can deliver both impact and financial returns from the transition to a more sustainable economic model that harnesses and preserves nature. As a leading provider of blended finance, FMO is committed to unlocking private sector investment in projects that protect and restore tropical forests and drive the transition to a more sustainable, net-zero economy.