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A Brazil-led initiative, the Tropical Forests Forever Facility (TFFF), has proposed raising $125bn to pay tropical countries for preserving forest cover. Unlike traditional grants or carbon markets, the fund will invest in green projects and bonds, aiming to yield 7.4% returns. Countries would receive $4 per protected hectare annually, with penalties of $100 per hectare lost. Crucially, 20% of funds will go to Indigenous communities. Critics argue it relies too heavily on financial markets and underrepresents Indigenous contributions. If successful, the TFFF could become the largest forest conservation fund to date. The proposal will launch at COP30. (New Scientist)
Why does this matter? The Tropical Forests Forever Facility (TFFF) offers a new model for conservation finance at a time when existing mechanisms fall short. Unlike traditional efforts that rely on carbon offsets or donor grants, the TFFF is a sovereign-backed endowment fund that directly compensates countries for preserving forest cover. If fully capitalised, it could embed forest conservation into national economic planning and deliver long-term climate, biodiversity, and development benefits. President Luiz Inácio Lula da Silva has made the TFFF a cornerstone of Brazil’s climate and development agenda and its release is timely – Brazil currently holds the G20 presidency and is hosting the upcoming COP30, giving the initiative a solid platform for its release.
The first hurdle is raising funds, with a goal of $125bn. If achieved, this would be significantly higher than previous, donor-based forest finance initiatives. The Global Forest Finance Pledge agreed at COP26, for example, set a target of just $13bn, with 77% raised in 3 years. Of the TFFF's target, the first 20% will come from "sponsors" and the remaining 80% from "market investors":
- Sponsors would include public funds from high-income countries, multilateral institutions like the World Bank, and international NGOs, making one-time, fully repayable investments. Some may also contribute through grants or concessional loans.
- Market investors would be drawn from debt capital markets via the issuance of highly rated, long-term bonds, targeting those seeking moderately higher returns than standard government bonds from countries such as the United States. Investors may include pension funds and re-insurance companies.
The fund would operate like a bank, borrowing at low rates and investing at higher ones, targeting a 7.6% return while lending at 4.9%. The resulting 2.7% profit margin would be sufficient to fund payments amounting to $4/ha to tropical countries for forest conservation once adjusted for deforestation-related penalties, according to the TFFF. The initiative's uniqueness lays in its simplicity, and is major departure from carbon credit schemes, which have been marred by scandals.
The initiative has drawn criticism due to the finance model largely relying on external factors, many of which are uncontrollable. These include continuous market growth, natural disasters or war affecting forest cover or global markets and a reliance on the skills of the fund managers. For example, should the $125bn target not be reached or 7.6% annual growth rate not be achieved, the $4/ha payment will be lowered or suspended, as discussed in the TFFF concept note –
"In the event that the market value drops below certain key thresholds it may be necessary to reduce the rate of payout to TFNs [Tropical Forest Nations]. However historical precedent shows that this would only occur in exceptional circumstances.”
It could be argued that exceptional circumstances are on the rise – natural disasters are increasing in frequency and severity, and geopolitical tensions continue to escalate with trade wars increasingly disputing global markets and conflict continuing in eastern Europe and the Middle East.
Another issue highlighted by critics is the allocation of funds. Although there are some rules stipulated for spending – including 20% for indigenous communities and spending on the development of satellite imagery to record forest cover – it is made clear that “the TFFF does not determine how tropical forest countries will use the funds awarded to them.” This approach lacks transparency, with critics suggesting all funds should be reinvested into the conservation and expansion of tropical forests.