UNITED NATIONS — With COP30 set to convene in Belém, Brazil, global attention is turning to one of the world’s most underfunded yet essential climate priorities: forests. According to the new State of Finance for Forests report by the UN Environment Programme (UNEP), annual investments in forests must more than triple from USD 84 billion in 2023 to USD 300 billion by 2030 to meet global climate, biodiversity, and land restoration goals. The gap—an estimated USD 216 billion per year—poses both a systemic risk and a strategic opportunity for the financial sector.
A financing gap with global stakes
The UNEP report underscores that governments accounted for 91% of all forest-related funding in 2023, contributing USD 76 billion, most of it domestically. In contrast, private finance amounted to only USD 7.5 billion—barely 9% of total flows. Of that, 39% came through certified supply chains, largely concentrated in Europe and North America, leaving high-deforestation tropical regions severely underfinanced.
Impact investing represented just USD 1.7 billion, while emerging carbon markets contributed USD 1.3 billion. Yet paradoxically, as of late 2024, private financial institutions had USD 8.9 trillion in active exposure to companies at high risk of deforestation. “The mismatch between harmful and helpful finance is striking,” the report warns, pointing to the USD 406 billion in environmentally damaging agricultural subsidies that continue to outweigh forest-positive spending.
Why forests matter for financial stability
Forests absorb roughly one-third of annual fossil fuel emissions. Their loss intensifies climate volatility and heightens portfolio exposure across sectors ranging from agriculture to insurance. As UNEP notes, achieving climate and biodiversity targets requires expanding nature-based solutions by one billion hectares by 2030.
Financial supervisors are also tightening disclosure requirements. The EU Deforestation Regulation, along with emerging nature-related frameworks, is driving compliance expectations across global markets. Early alignment could give institutions a competitive edge as regulatory standards converge under initiatives such as the Taskforce on Nature-related Financial Disclosures (TNFD).
Market potential is also expanding rapidly. Forest protection and avoided deforestation will require USD 32 billion annually by 2030, while reforestation demands around USD 96 billion per year. COP30’s Nature-based Solutions Mobilization Campaign aims to secure USD 5 billion in new private commitments by 2025, offering a pipeline of investable projects.
New mechanisms emerging at COP30
Among the most anticipated initiatives is the Tropical Forests Forever Facility (TFFF), a proposed results-based mechanism designed to channel long-term, predictable finance to tropical forest nations. For financial institutions, TFFF offers co-investment opportunities with sovereign funds, blended finance entry points, and alignment with Article 6 carbon market rules.
Equally significant are new high-integrity jurisdictional REDD+ (JREDD+) programmes, endorsed by the Integrity Council for the Voluntary Carbon Market in 2024. These large-scale frameworks could generate up to 300 million tonnes of carbon credits annually by 2030. Despite recent volatility in voluntary carbon markets—where overall value dropped from USD 2.1 billion in 2021 to USD 755 million in 2023—forest-related projects remain the backbone, representing 46% of all transactions.
“High-integrity, jurisdictional approaches provide greater stability and lower reputational risk than project-level credits,” the report concludes, citing examples such as Standard Chartered’s partnership with Acre to market jurisdictional REDD+ credits.
Turning commitments into capital flows
The UNEP report outlines clear pathways for financial actors:
Commercial banks are encouraged to assess deforestation risk across portfolios and align lending policies with the Principles for Responsible Banking and the Nature Target-Setting Guidance. Innovative products, such as Banco Pichincha’s USD 3.9 million gender-responsive credit line for forest protection in Ecuador, illustrate scalable models.
Institutional investors are urged to allocate more capital to forest impact funds and enforce zero-deforestation commitments across portfolios. Through the Innovative Finance for the Amazon, Cerrado and Chaco initiative, UNEP and partners aim to accelerate sustainable agriculture investment in Latin America.
Insurers, meanwhile, can develop risk-transfer instruments for conservation projects and forest-dependent communities, as outlined in UNEP’s Insuring a Resilient Nature-Positive Future guide.
Development finance institutions can play a catalytic role by deploying guarantees and first-loss capital to attract private investment, while financial supervisors are being called upon to integrate nature-related risks into prudential frameworks and green taxonomies.
The Belém moment
As COP30 convenes in the Amazon, the financial sector faces a defining test. Forests, long undervalued in global finance, are now recognized as central to climate stability, biodiversity, and economic resilience.
The mechanisms exist—TFFF, jurisdictional REDD+, and nature-based finance campaigns—to close the gap. What is needed now is commitment. As UNEP stresses, redirecting capital flows toward forest protection and restoration will determine whether the next decade marks a turning point for climate action—or a lost opportunity for sustainable growth.
For policymakers and financial leaders, the message is clear: forests are not a peripheral issue—they are a material financial frontier.
Additional Resources
- State of Finance for Forests report
- High-Risk Forests, High-Value Returns report
- UNEP FI Road to COP30: UNEP FI events in and around Belem and São Paolo
- Forest Declaration
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