Increase effective, accessible finance for forests and land

Recent international forest financial commitments, most of which were made at COP26 in Glasgow in 2021, demonstrate increases in ambition to meet 2030 goals for sustainable forest management and forest conservation and restoration. Pledges include the Lowering Emissions by Accelerating Forest (LEAF) Coalition (2021); The Congo Basin Pledge (2021); Finance Sector Deforestation Action (FSDA) initiative (2021); Global Forest Finance Pledge (2021); IPLC Forest Tenure Pledge (2021); Innovative Finance for the Amazon, Cerrado, and Chaco (IFACC)(2021); Forest, People, Climate (FPC) (2022); and The Libreville Plan (2023). At UNFCCC COP28, the Democratic Republic of Congo, Ghana, the Republic of Congo, and Papua New Guinea announced forest protection initiatives totaling USD 242 million from partners under the Forest and Climate Leaders’ Partnership. Brazil’s development bank announced a USD 200 million pledge to restore Amazon forest by 2030. The United Arab Emirates announced a new contribution of USD 100 million for nature and climate projects, and Norway committed an additional USD 100 million in results-based payments to Indonesia. 

The pledges by governments, financial institutions, companies, and foundations total USD 30.03 billion from 2021 to 2025, equating to an average USD 6 billion in finance for forests per year. This represents a significant increase in forest finance commitments compared to the previous decade. However, it is not yet clear whether these finance pledges are additional to one another; as such, the overall pledge total may be an overestimation. For instance, the progress report for the IPLC Forest Tenure Pledge noted that the same finance contributions are likely counted toward three pledges simultaneously: its own, the Global Forest Finance Pledge, and the Congo Basin Pledge.

Any increase in financial commitments for sustainable forest management and forest conservation and restoration is a welcome development that points to current ambition levels on reaching forest goals. These commitments must be put into practice and not simply remain a “promise.” Public disclosures and reporting are also essential for measuring progress made against commitments, but these are not available for all pledges. 

Of the USD 30.03 billion in international forest finance committed from 2021 to 2025, over USD 11.19 billion had been disbursed as of August 2024. As of 2023, half of the pledges were reported to be on track, but the remainder are not on track or have no progress reports available. 

Increasing the amount, effectiveness, and accessibility of international finance and investment is necessary to enable sustainable practices related to agriculture, forests, and other land use (AFOLU). 

While, according to data reported by the Climate Policy Initiative, climate finance for AFOLU more than tripled from 2019 to 2021, it dropped by 11% in 2022 compared to 2021. Additionally, the average amount of finance directed to AFOLU accounted for merely 3.4% of the total annual average of tracked climate finance from 2021 to 2022, even though the AFOLU sector was responsible for 25% of global emissions in 2021. This indicates that AFOLU is underfunded relative to its climate impacts. However, there are notable gaps in data collection, particularly concerning public, domestic financial flows and both domestic and international financing from the private sector.

This indicator tracks finance specifically dedicated to nature-based solutions (NbS) – actions that restore, preserve, or manage ecosystems, including through more sustainable forest management, forest conservation, and restoration, to address climate change and protect nature. NbS can help reduce greenhouse gas emissions, bolster adaptation, boost ecosystem health, protect biodiversity, reduce soil erosion, and avoid deforestation.  

Finance directed toward NbS reached USD 200 billion in 2023, with public finance contributing 82% of this total. However, this level of investment is not enough to reach global climate goals. Estimates suggest that, to meet biodiversity goals, total investments into NbS need to more than double to reach USD 440 billion by 2030 and increase nearly fourfold to reach USD 740 billion by 2050. Moreover, these figures likely underestimate total finance needs since more work is required to quantify the need for marine-based NbS. 

The 2022 Global Biodiversity Framework identified the need to increase financial resources for biodiversity to at least USD 200 billion per year by 2030 and suggested growing international financial flows to developing countries by at least USD 10 billion per year. The extinction crisis could cause devastating losses to the global economy and society at large. Business sectors that directly rely on biodiversity will experience losses in profitability and risks to long-term continuity unless biodiversity is protected. For example, USD 235–577 billion in annual global food production is dependent on bees, while coral reefs generate USD 36 billion in ecotourism every year.  

Leveraging public and private finance will be essential to reach global biodiversity goals, yet recent trends show that investment is falling short. From 2015 to 2017, global biodiversity finance averaged USD 78.3 billion annually, with public sources providing at least USD 71.7 billion per year and private sources contributing at least USD 6.6 billion. Total biodiversity finance will need to nearly triple to reach USD 200 billion by 2030 and needs to grow at an average rate of USD 10 billion per year from 2017 to 2030 to meet this goal.

Climate finance flows to underserved and marginalized communities are crucial to protect livelihoods and support communities’ ability to adapt and build resilience to future climate impacts. Certain groups, such as Indigenous Peoples and local communities, are especially vulnerable to climate impacts because their physical risks are compounded by marginalization and inequity. The Intergovernmental Panel on Climate Change found that considerable gains in well-being can be reached by prioritizing finance dedicated to reducing marginalized communities’ climate risks. Climate finance needs to be more inclusive of underserved and marginalized groups, especially given the fact that those who contribute the least to climate change experience the burden of its impacts most.

At this time, while the finance needs of communities are documented, no reliable data set has been identified to track finance flows to meet those needs. 

To support the development of profitable, sustainable agriculture, farmers around the world need greater access to financial services. Shifting to climate-smart, resilient agriculture often requires significant up-front investments, expensive inputs, and higher implementation costs – additional expenses that many farmers, particularly smallholder farmers, cannot afford without additional financial support. Additionally, some practices can also have long payback periods, requiring farmers to wait for initial returns on their investments. However, the tightness of credit conditions often inhibits access to finance, particularly for smallholders.

The share of small and medium enterprises required to provide collateral on loans serves as a proxy indicator of credit conditions. For example, 44% of small and medium enterprises were required to provide collateral on their last bank loan in Brazil, a country with high rates of deforestation driven by agricultural expansion and low levels of farm productivity. This tightness of credit could limit farmers’ ability to adopt climate-smart and lower-forest-risk practices.

To support the development of profitable, sustainable agriculture, farmers around the world need greater access to financial services such as banks, savings accounts, and loans. Improved access to financial services allows farmers to invest in practices, tools, and equipment that enhance climate resilience – such as the use of new crop varieties or improved irrigation systems – that they otherwise may not have been able to adopt due to financial constraints. While excessive debt in a household or economy can be dangerous, the widespread use of lending services is a good indicator of financial options. Financial inclusion serves as an enabler for seven of the 17 UN Sustainable Development Goals and is considered to be a key element for reducing poverty.  

According to the World Bank, 22% of adults worldwide borrowed from a financial institution in 2017. This number increased to 28% in 2021.

The amount of finance received by projects supporting Indigenous Peoples’ (IPs) and local communities’ (LCs) forest and tenure management must be tracked as these groups are essential to reaching the goals set by the GLD. IPs and LCs are effective stewards and guardians of their forest territories and key stakeholders and partners in the development of forest management and governance solutions. Protecting IPs’ and LCs’ land rights is an evidence-based climate change solution that is a cost-effective approach compared to some other mitigation options. 

Finance and investment to support IPs and LCs remains far below their estimated needs for securing tenure rights and preserving the ecosystems in their territories. From 2011 to 2023, funding from bilateral, multilateral, and philanthropic donors to projects supporting IPs’ and LCs’ tenure and forest management amounted to USD 4.6 billion, an average of approximately USD 353 million per year, according to the Path to Scale Funding Dashboard. A 2024 analysis by RRI and RFN finds that disbursements have increased in recent years. Donor funding from 2020 to 2023 was up 36% compared to the preceding four years, averaging USD 517 million annually. The majority (72%) of this increase is attributed to the Forest Tenure Funders Group (FTFG), the group of 25 donors that made the COP26 IPLC Forest Tenure Joint Donor Statement, pledging USD 1.7 billion in support from 2021 to 2025.

The same analysis found that funding for tenure rights and forest guardianship has increased in Africa and Asia in the last 4 years, but it has decreased in Latin America. From 2020 to 2023, funding that mentioned Afro-descendant Peoples in Latin America and the Caribbean totaled just 8 to 13% of all funding for tenure and forest management in the region, even though people of Afro-descendant comprise 21% of the total population in Latin America and the Caribbean.

An analysis conducted by Path to Scale estimates that an additional USD 10 billion is needed by 2030 to support the recognition of tenure rights of Indigenous Peoples, local communities, and people of Afro-descendant globally. This finance could enable the recognition of tenure rights over an additional 400 million hectares of tropical forests, supporting these actors to make meaningful contributions to global climate and biodiversity targets.

Despite recent funding increases, there is little evidence to suggest that there have been systemic changes in donor funding approaches. From 2011 to 2023, just 3% of projects in the RRI and RFN analysis received over half of the total funding disbursed, with no changes observed since the FTFG pledge in 2021. While evidence indicates that small, tailored grants provided directly to national or local-level non-governmental organizations have a higher likelihood of effectively supporting Indigenous and local community organizations, many of the top funding recipients remain large projects implemented by consulting firms, governments, or multilateral institutions.

Direct access to climate and forest finance by Indigenous Peoples (IPs) and local communities (LCs) is essential for meeting forest conservation and restoration goals and supporting Indigenous and local livelihoods, resilience, and adaptation capacity in the face of climate change. Indigenous territories have significantly lower rates of deforestation and significantly higher rates of biodiversity and carbon storage than any other types of land — including protected areas. At the same time, IPs and LCs are far more vulnerable than other groups to the effects of climate change due to ongoing marginalization and historical and ongoing colonialism. Additionally, these groups often face threats of violence when mobilizing for environmental protection or defending their land from encroachment or invasion.  

We have not identified a publicly available global data source to track the direct access of IPs and LCs to climate and forest finance. However, available analyses suggest that direct finance for IPs and LCs remains far below funding needs. A 2023 analysis from the Forest Tenure Funders Group found that around USD 8.1 million directly funded IPs’ and LCs’ organizations in 2022 — representing about 2.1% of total contributions toward the COP26 forest pledge. A 2024 analysis from RRI and RFN found that direct finance for IPs and LCs did not increase from 2020 to 2023, even though overall funding for tenure rights and forest guardianship scaled up. Another analysis found that from 2016 to 2020 just 0.6% of philanthropic funding benefited Indigenous Peoples.

Direct funding for IPs and LCs primarily comes in the form of small grants and may increasingly come from IP- and LC-led funds such as Shandia, the Mesoamerican Territorial Fund, the Nusantara Fund, the AYNI Indigenous Women’s Fund, and the Podáali Fund.

Indigenous Peoples and local communities are among the most vulnerable to climate change impacts and urgently need resources with which to plan and implement adaptation measures. Yet only a small fraction of adaptation funds reach them, and worse still, they rarely have much authority with adaptation decision-making processes. By one estimate, less than 10% of total international climate finance was directed to the local level (where most implementation of adaptation actions must take place) between 2006 and 2016, and only 7% of climate finance overall was transparent enough to be tracked and included in this analysis. Improving direct access to finance provides Indigenous Peoples and local communities with decision-making power and authority over how adaptation funds are spent, increasing the odds that they will benefit and that adaptation actions will be more equitable and effective.  

How much climate adaptation finance reaches local communities remains a crucial and mostly unanswered question, as it is largely not tracked. However, it is an important data gap to highlight, given the increasing recognition of the importance of ensuring climate finance meets the needs of those most at risk.