Future Forest Finance

This article is a recap of a webinar, Future Forest Finance, hosted by the 1t.org US chapter on August 29. You can read the blog and view the recording of the webinar here.

These are the numbers you need to know:

•Globally, there is a 722-billion-dollar gap in nature financing.

•Half of the global gross domestic product is dependent or partially dependent on nature.

Trees and forests are among nature’s greatest assets in the addressing the twin challenges of climate change and biodiversity loss. However, they suffer from a lack of investment needed to capitalize on their unique ability to address those challenges now and in the future. Coupled with rapid decarbonization, halting deforestation and restoring and growing forests and trees are among the most powerful tools in our toolbox. They also provide immense benefits to people and our other fellow planetary inhabitants.

In the face of these challenges, the 1t.org US Chapter hosted a webinar, “Future Forest Finance,” which kicked off what will be an ongoing conversation with leading experts on the tools and strategies available today to help close this financing gap. We’re grateful for Eric Wilburn from Bezos Earth Fund, Peter Howell, Katie Michels, and Mary Powers from the Conservation Finance Network, Sarah Kitz from Lyme Timber and Julia Grant from Green Diamond Resource Company, for lending us their expertise.

Below, you'll find takeaways and key points from the webinar.

Eric Wilburn: Bezos Earth Fund

Eric Wilburn shared more about the potential value in nature, including information about the Natural Capital Accounting Project, which is researching the value in nature. It has shown there is still the knowledge of value, but not a lot of payments happening yet. There are many projects that are fundable, and financing that wants to flow towards these projects. The question is, how do we create mechanisms for recipients of the value of nature to pay the producers of natural value?

There are several short term opportunities for progress, including:

•Advancing progress in key landscapes via coordination and collaboration

•Supporting voluntary efforts like the Task Force for Nature Related Financial Disclosures (TNFD work) and building out the networks of actors and practitioners

•Multilateral efforts: we are hopeful to see additional commitments from governments, corporations and banks at COP16 and COP29.

Peter Howell: Conservation Finance Network

Peter Howell shared some of the key themes around conservation finance to help webinar attendees understand it better. He addressed what exactly conservation finance is, some common tools in the industry and key trends.

Conservation finance is the innovative and effective use and financing to pay for nature-based solutions. Through applying market-based mechanisms and public funding to raising and managing capital for environmental conservation, we can achieve positive social, environmental, and financial outcomes.

The Conservation Finance Network accelerates the pace and scale of land and resource conservation, restoration, and stewardship by expanding the use of innovative and effective funding strategies.

Howell shared four types of conservation finance, including public funding, private/philanthropic funding, consumer based and return-driven investments. Some of the ways that these categories can be financed are shared in the graphic below.

Conservation finance matters because we are falling short of the funds needed to conserve biodiversity and halt the climate crisis. If you break down the $150B we are currently spending, 60% of that is public funding. Very little of that funding comes from private or philanthropic investments. Public sector downpayments like the Inflation Reduction Act of 2022 (IRA) and the Bipartisan Infrastructure Law (BIL) are great starting points for increased leverage of nonpublic investment.

The chart below illustrates the gap in funding needed for biodiversity conservation.

There are several key areas for growth, including:

•Public, philanthropic, consumer-based (surcharges/certifications) and return driven investments

•Water funds, which are very promising globally, as are utilities paying for upstream forest protection

•Funding pilots/providing guarantees

Forest Financing Case Studies and On the Ground Perspectives

Our next set of speakers shared their perspectives from on the ground, doing the work of forest finance.

Julia Grant: Green Diamond Resource Company

Julia Grant from Green Diamond Resource Company provided an overview of how one of the nation’s larger private landowners is diversifying revenue streams with an eye towards ecosystem services.

Sarah Kitz: Lyme Timber

Sarah Kitz from Lyme Timber offered and overview of conservation financing tools and two place-based case studies on how forward thinking land owners and mangers can maximize their forest assets.

Case Study 1: Lyme St. Croix Forest: the largest land conservation effort in WI history

This case study features a Pine Barrens habitat and the headwaters of the two major rivers. It was purchased using equity and in concert with a  conservation partner. In exchange for a low interest rate, they granted The Conservation Fund (TCF) and local partners an option to purchase conservation easements over the property in a defined period of time. They were successful in doing this. Market rate equity, low-cost leverage through TCF, and public grant dollars were used to achieve this protection.

Case Study 2: Lyme St. Croix Forest: Lyme Allegheny Timberlands

In this case study, Lyme Timber partnered with TCF and the Pennsylvania Department of Environmental Protection. Key funding sources included the the state Clean Water Revolving Fund and TCF. This project took a considerable amount of political capital, and is a source for potential replication in other states and watersheds in the future.