A new global fund meant to reward tropical countries for protecting forests could instead drive deforestation and deepen debt in the developing world, civil society groups warn.
The Tropical Forests Forever Facility (TFFF), launched Nov. 6 in Belém, Brazil, ahead of the U.N. Climate Change Conference, aims to raise $125 billion and promises to pay countries up to $4 per hectare ($1.62 per acre) of standing forest each year.
More than $5.5 billion has been pledged so far, and the plan is officially supported by more than 50 nations, including countries making up the Amazon, Congo and Borneo basins. The fund mandates that at least 20% of the payments to each country must be allocated to Indigenous and local communities.
But more than 50 Indigenous and other civil society organizations from Latin America and the Caribbean argue the TFFF will make developing countries absorb the risks for the investments, while generous returns are guaranteed for investors and financial intermediaries.
The TFFF seeks to raise its initial $125 billion capital from wealthy countries and institutional and private investors. It aims to invest this in a diversified portfolio, mostly consisting of high-interest bonds issued by emerging markets and developing economies. Any profits generated are distributed first to private investors, then the sponsor countries. What remains is transferred to tropical forest countries that meet the deforestation criteria.
If the fund performs poorly financially, the price per hectare is reduced, even if environmental goals are met.
“In other words, it is ultimately the taxpayers of the Global South themselves who must finance the protection of forests historically deforested by corporations from countries in the North and, moreover, who will guarantee the returns for financial elites,” the groups wrote in a joint statement.
Cartoon courtesy of Frédéric Hache/Green Climate Initiative.
TFFF’s exclusion list for potential investments currently bars coal, oil and gas investments, but ratings agencies are still negotiating the full exclusion list. The investment arm of the fund, the TFIF, is a separate entity, so tropical forest countries won’t have a say in investment decisions, which will be made by “international asset managers selected through a competitive procurement process.”
A recent report by the Uruguay-based World Rainforest Movement (WRM) said the mechanism may also finance state-supported “clean” projects such as hydropower dams, mining linked to batteries, and industrial agriculture such as eucalyptus tree farms, despite evidence of their severe environmental impacts and harm to Indigenous communities.
To contain ballooning interest payments and meet debt obligations for the bonds they sell, governments may further cut public spending on health, education and even forest protection, the report adds.
Brazil Environment Minister Marina Silva, the fund’s main proponent, said at a press conference that it brings stability for forests. “It is possible to have a tool to finance the maintenance of tropical forests that is not based on donations.”
Banner image: TFFF roundtable in Belém, Brazil on Nov. 6. Image courtesy of Fernando Donasci/MMA.
