Meeting Report | Financing Tropical Forest Protection: Session 2 of the Brazil-U.S. Dialogue on Sustainability and Climate Change

Report Recommendations

• 1. When it comes to financing through carbon market mechanisms, project-based credits need to be appropriately nested within jurisdictional accounting frameworks to avoid some of the worst concerns regarding risks such as leakage and additionality.

  Financing for forests has traditionally existed in two separate universes: one in which project-scale credit is available through voluntary private markets; and another with jurisdictional programming financed through public sector funding. To take advantage of corporate interest and the significant amount of capital present in the private sector, it is urgent that policymakers reconcile these two universes in a way that leverages the positive features of each in order to attract finance at scale

• 2. International funding for forests requires an integrated, layered approach that combines multiple types of capital with innovative tools and new mechanisms to evaluate and aggregate small projects into “large-enough” investment opportunities.

  Translating a temperature target—or any other sustainability metric—into an investment strategy is inherently complex. It requires not only a shift from focusing on purely financial returns to integrated value creation but also the development of new tools and standards to assess risks, results (carbon and non-carbon benefits) and returns.

• 3. There needs to be significant attention given to “last-mile” readiness to ensure that local communities and local governments most impacted by forest degradation have access to financing and credit.

  The counterpart to the need to develop mechanisms for channeling financing for forests is ensuring that local governments and local communities have the tools and capacity required to access and use that financing. Government agencies, particularly at the subnational level, lack the resources and technical capacity to develop and administer the types of rigorous jurisdictional programs needed to tackle the climate challenge. Similarly, local stakeholders often lack the information needed to access capital markets; or their projects may be considered too small to be of interest to investors. Both of these challenges will need to be resolved if we are to address deforestation in the Amazon.