Financing for REDD+ and sustainable forest management needs to influence the private sector

To halve deforestation between 2005 and 2030, an estimated USD 17- 28 billion is needed annually. However, even if this investment is achieved, as long as the causes of this phenomenon are not addressed, it will be difficult to stop the loss and degradation of forested areas.

This is one of the conclusions of the Regional Knowledge Exchange "Funding Strategies for Sustainable Forest Management (GFS) and REDD+," which took place on July 11 and 12 in Panama City, Panama. More than 50 representatives of forestry and climate change public entities from 12 Latin American countries, as well as experts from banks, funds and development programs, among others, participated in the event.

One of the main challenges to tackling deforestation is that cutting the forest continues to be financially more attractive than protecting or recovering it. That is why the answer is not only to increase the flow of financing to REDD+ but also to achieve structural changes in the private sector, for instance, shifting preferences from “business as usual” to sustainable forest management and activities free of deforestation.

Worldwide, private forestry investment is 24 times bigger than Official Development Assistance (ODA), according to the World Bank. But this private financing is not necessarily aimed at sustainable practices.

In the case of Latin America, while the average annual investment in the forestry sector with sustainability objectives and coming from the Official Development Assistance is US 326 million, the investment in plantations is 1,464 million, and the one in forest processing amounts to 2,240 million. It is estimated that the total plantations area is about 24.2 million hectares in the region, of which 18.8 million are privately owned.

Similarly, state or private investment in activities that may be fostering the expansion of the agricultural frontier is several times bigger than REDD+ financing. In Ecuador, agricultural credits and state investment in livestock programs –the major use of land that replaced forests between 2009 and 2014- were 219 and 26 times higher than REDD+ resources in 2015. These figures show the need for sustainable forest management and REDD+ financing to influence activities leading to deforestation and forest degradation, where the private sector has a leading role.

Expand the fight against deforestation to other ministries

The vast majority of activities involved in implementing sustainable forest management are the same as the ones developed under REDD+. In many of the countries that participated in the Regional Knowledge Exchange, sustainable forest management and REDD+ are the responsibility of the ministries of Environment, with some interactions with other departments such as Agriculture or Foreign Affairs. During the workshop, participants highlighted that, to achieve a structural change in the private sector, it is necessary to expand sustainable forest management and REDD+ activities geographically and among other governmental entities.

In geographic terms, it means that efforts to reduce deforestation should not be concentrated exclusively on forested areas and ecosystems, which are the direct responsibility of the ministries of Environment. On the contrary, they should be extended to all areas, mainly agriculture and livestock, but also to others like mining or urban development.

On expanding to other governmental entities, institutions that lead sustainable forest management and REDD+ are often restricted to native species management, community work, or environmental control. It is necessary that both sustainable forest management and REDD+ can also be the responsibility of entities closest to the private sector, such as those that interact with the agricultural, mining, production, commercial, financial and even education sectors.

Financial strategies in Latin American countries

To date, most of the Latin American and Caribbean countries have developed their Nationally Determined Contributions under the Paris Agreement. More than half of the countries have included the forestry sector as one of their priorities for tackling climate change. Some of the countries that include land use, land use change, or forestry are Mexico, Guatemala, Belize, El Salvador, Panama, Colombia, Venezuela, Guyana, Suriname, Brazil, Bolivia, Chile, Argentina, Paraguay, and Uruguay. Those that include forest goals are Honduras and Venezuela.

For both, sustainable forest management and REDD+, several countries have built their national policies. Within the framework of these policies, financial strategies are developed, i.e., projections and plans that estimate the expected costs, possible income, sources of financing and mechanisms to obtain resources.

In addition to national policies and financial strategies, many countries develop investment or implementation plans. Some are more accurate than others, and may well have been built to allocate funding already obtained, or be themselves a fundraising tool. In the case of Latin America, these plans have big differences between them. Some include the entire country, such as Costa Rica, others only a region or ecosystem, such as the Action Plans for Prevention and Control of Deforestation in Cerrado and the Amazon in Brazil, and others are specific to an area of action. Most cover a time-span of 5 to 10 years.

The investment/implementation plans include the different policies, measures, and actions that are required for REDD+ and that are the responsibility of different entities. For this reason, its preparation requires intersectoral and multi-stakeholder coordination. The difficulty of coordinating stakeholders was another of the Regional Knowledge Exchange’s conclusions.

Knowledge exchange photos available here.

Knowledge exchange short interviews available here.

Knowledge exchange presentations available here.

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