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Theme 3: Finance for forests

Accelerating global action on climate adaptation is critical to reducing vulnerability and building resilience, but significantly larger financial resources are urgently required. In addition to various environmental and social gains, adaptation can generate substantial economic returns. Depending on the sector, investments in adaptation and improved resilience can produce rates of return ranging from 2:1 to 10:1, or even higher in certain scenarios.  
Total tracked finance for climate adaptation has risen over the years to roughly USD 63 billion in 2022 – up 29% from in 2020. However, these funds pale in comparison to estimated needs. Developing countries alone, for example, will require anywhere from USD 215 billion to USD 387 billion per year this decade to adapt. While both public and private finance for adaptation must increase dramatically, particular focus on mobilizing private investments is warranted as the vast majority of tracked adaptation finance flows from public actors – 98% in 2021/2022. 

Accelerating global action on climate adaptation is critical to reducing vulnerability and building resilience, but significantly larger financial resources are urgently required. In addition to various environmental and social gains, adaptation can generate substantial economic returns. Depending on the sector, investments in adaptation and improved resilience can produce rates of return ranging from 2:1 to 10:1, or even higher in certain scenarios.  
Total tracked finance for climate adaptation has risen over the years to roughly USD 63 billion in 2022 – up 29% from in 2020. However, these funds pale in comparison to estimated needs. Developing countries alone, for example, will require anywhere from USD 215 billion to USD 387 billion per year this decade to adapt. While both public and private finance for adaptation must increase dramatically, particular focus on mobilizing private investments is warranted as the vast majority of tracked adaptation finance flows from public actors – 98% in 2021/2022. 

Indigenous Peoples and local communities are among the most vulnerable to climate change impacts and urgently need resources with which to plan for and implement adaptation measures. Yet only a small fraction of adaptation funds actually reach them, and worse still, they rarely have much authority when it comes to adaptation decision-making processes. By one estimate, less than 10% of 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 actually reaches local communities, then, remains a crucial and predominantly unanswered question, as it is largely not tracked. However, it is an important data gap to highlight, given the increasing recognition of the importance to ensure climate finance meets the needs of those most at risk. 

Indigenous Peoples and local communities are among the most vulnerable to climate change impacts and urgently need resources with which to plan for and implement adaptation measures. Yet only a small fraction of adaptation funds actually reach them, and worse still, they rarely have much authority when it comes to adaptation decision-making processes. By one estimate, less than 10% of 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 actually reaches local communities, then, remains a crucial and predominantly unanswered question, as it is largely not tracked. However, it is an important data gap to highlight, given the increasing recognition of the importance to ensure climate finance meets the needs of those most at risk. 

Forests and other land ecosystems are under continuous and increasing economic pressures, such as the expansion of agriculture and other extractive activities like mining and logging. Protecting ecosystems from these pressures will require policies that discourage conversion, such as payments for ecosystem services, which increase the financial attractiveness of standing forests and have been successful in many contexts at reducing deforestation. In 2018, the total global value of payments for ecosystem services was estimated at USD 36 billion in annual transactions. 

Forests and other land ecosystems are under continuous and increasing economic pressures, such as the expansion of agriculture and other extractive activities like mining and logging. Protecting ecosystems from these pressures will require policies that discourage conversion, such as payments for ecosystem services, which increase the financial attractiveness of standing forests and have been successful in many contexts at reducing deforestation. In 2018, the total global value of payments for ecosystem services was estimated at USD 36 billion in annual transactions. 

Recent international 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 accounted for in this indicator 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).  
The pledges by governments, financial institutions, companies, and foundations amount to USD 28.9 billion between 2021 and 2025, equating to an average additional USD 5.8 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 being counted towards three pledges simultaneously: its own, the Global Forest Finance Pledge, and the Congo Basin Pledge. 

Recent international 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 accounted for in this indicator 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).  
The pledges by governments, financial institutions, companies, and foundations amount to USD 28.9 billion between 2021 and 2025, equating to an average additional USD 5.8 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 being counted towards 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 levels of ambition on reaching forest goals. It is essential, however, that these commitments are put into practice and do 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 28.9 billion in international forest finance committed between 2021 and 2025, as of October 2023, just over USD 5.7 billion has been disbursed. Half of the pledges are reported to be on track, but the remainder are not on track or have no progress reports available.

Any increase in financial commitments for sustainable forest management and forest conservation and restoration is a welcome development that points to current levels of ambition on reaching forest goals. It is essential, however, that these commitments are put into practice and do 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 28.9 billion in international forest finance committed between 2021 and 2025, as of October 2023, just over USD 5.7 billion has been disbursed. Half of the pledges are 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 agriculture, sustainable forest management, and forest conservation and restoration. The Climate Policy Initiative reports a generally positive trajectory in climate finance for agriculture, forestry, land use, and fisheries (AFOLU) from 2013 to 2020. However, there are notable gaps in data collection, particularly concerning public domestic financial flows and both domestic and international financing from the private sector. The majority of tracked AFOLU climate finance derives from public sources, with only a small portion attributed to philanthropic organizations on the private side. In Africa, public finance is six times greater than private finance. The East Asia and Pacific region leads in receiving climate finance for AFOLU, with Sub-Saharan Africa following. The International Fund for Agricultural Development highlights a growth in climate finance over the past decade, reaching USD 632 billion in 2020, although the rate of increase slowed from 24% between 2015/2016 and 2017/2018 to 10% between 2017/2018 and 2019/2020. Additionally, this amount accounted for merely 2.5% of the total tracked climate finance in 2020, while the AFOLU sector was responsible for 25% of global emissions in 2021. This indicates that AFOLU sectors are underfunded in comparison to other sectors, such as renewable energy generation. 

Increasing the amount, effectiveness, and accessibility of international finance and investment is necessary to enable sustainable agriculture, sustainable forest management, and forest conservation and restoration. The Climate Policy Initiative reports a generally positive trajectory in climate finance for agriculture, forestry, land use, and fisheries (AFOLU) from 2013 to 2020. However, there are notable gaps in data collection, particularly concerning public domestic financial flows and both domestic and international financing from the private sector. The majority of tracked AFOLU climate finance derives from public sources, with only a small portion attributed to philanthropic organizations on the private side. In Africa, public finance is six times greater than private finance. The East Asia and Pacific region leads in receiving climate finance for AFOLU, with Sub-Saharan Africa following. The International Fund for Agricultural Development highlights a growth in climate finance over the past decade, reaching USD 632 billion in 2020, although the rate of increase slowed from 24% between 2015/2016 and 2017/2018 to 10% between 2017/2018 and 2019/2020. Additionally, this amount accounted for merely 2.5% of the total tracked climate finance in 2020, while the AFOLU sector was responsible for 25% of global emissions in 2021. This indicates that AFOLU sectors are underfunded in comparison to other sectors, such as renewable energy generation.