This comes as the last article in our 2022 āRoutes to rootsā series on forest restoration, in which weāve talked about what is being done, what needs to be done and what can be achieved. And so we arrive here at what might be the biggest question in forest restoration: How do we pay for it all?
The answer should be a no-brainer. While the environmental costs of destroyed and degraded landscapes is already in the billions ā and getting higher every year ā the amount of return from on investment in forests is potentially massive. For every dollar spent on forest restoration, anywhere between USD 7 and 30 can be reaped in economic benefits, according to Helen Ding, a senior economist at the World Resources Institute (WRI).
Yet restoration finance remains an underdog in the overall calculations of what is being spent on efforts to combat climate change. Last yearās Global Landscape of Climate Finance report from the Climate Policy Initiative put the amount of overall climate finance at USD 625 billion, with only 14 billion going to the land-use sector, and to restoration āonly a fraction of that,ā says Ding. The shortfall, according to the UN Environment Programme (UNEP), is anywhere from USD 600 billion to well over 800 billion a year.
Most of the money that does go to climate comes from international bodies, environmental funds set up by international agencies, government programs and public development banks. That said, the worldās 50 largest financial institutions did increase their investments in deforestation-linked commodity companies by more than USD 8 billion since 2020 alone, according to Forests & Finance, a coalition of non-governmental groups.
The private sector is still putting only 14 percent of total investments into nature-based solutions to climate change, says UNEP, and a number of barriers to greater involvement on their part still exist.
The long time horizon for tree growth before any monetary results come in dampens investorsā appetites, as do risks involved, particularly in places where land tenure isnāt clear and governance is questionable. The complicated nature of forest restoration also means one area might be replanted with trees or left to regenerate on its own, while a neighboring area is not. This can affect the success of the whole endeavour. āYou have to maintain the current eco-system in order to make sure the restoration will succeed,ā says Ding.
Another problem is the huge disparity in the amounts of money investors have at their disposal and the modest size of the projects that can use it. With its new TerraFund for the African Forest Landscape Restoration Initiative (AFR100), launched last year, WRI is trying to overcome this problem by grouping together small tree-growing projects to attract large financial players. āProject managers on the ground can upload their information about the project,ā says Ding, and WRI and its partners ā One Tree Planted and Realize Impact ā will match them with finance. Then, through the TerraMatch platform, the organizations receiving money submit updates on their progress every six months, with WRIās satellite monitoring techniques and-on-the ground verification corroborating the impact.
So far, the program has already deployed USD 15 million in finance through grants and loans for locally led projects in several member countries of AFR100.
Lack of coherence among different funding bodies or national government departments, however, creates yet another disincentive for investors. If one ministry, for example, is financing restoration and another is handing out agricultural subsidies, āyou continue to create higher opportunity costs to compete with land conservation and subsidizing deforestation [for agriculture],ā she says.
Forest conservation and restoration financing āshould be around people, because restoring land is not just about increasing tree cover,ā she says. āItās about increasing tree cover for the local people who live nearby, and how can we improve their livelihoods. If the people donāt get anything from those protection mechanisms, and if itās not attractive enough for farmers to give up other activities that generate more income, you wonāt see any effect, even if you continue to throw money into the protected area.ā
Yet the main issue impeding effective financing for restoration, preserving natural areas and allowing for natural generation is probably the difficulty in assigning a value to nature. Referring to that USD 7 to 30 economic benefits figure, a large amount of those gains are not really quantifiable, says Ding.
āThereās no good financial mechanism to pay for those services, even though theyāre essential for the whole ecosystem to provide what we need, food production, biodiversity and water. The difficulty is: How can we actually put a dollar amount on that?ā
For Tom Crowther, founder of the RESTOR digital restoration mapping platform and co-chair of the UN Decade on Ecosystem Restoration, transparency in the finance sector āis the key to getting it right. I think people are trying to invest in nature, and theyāre doing so either well or badly because itās a throw of the dice,ā he says. āItās very difficult to monitor and get proper, well-standardized measurements on your returns and your impacts.ā
Voluntary carbon markets are already playing an increasing role in financing for restoration initiatives, the value of carbon credits traded approaching USD 2 billion in 2021 ā four times more than the previous year, according to Ecosystem Marketplace. Projects that sequester carbon in forests and soils generate a significant share of the credits traded on the market.
āForests are our most valuable asset in the fight against climate change,ā says John Lotspeich, executive director of Trillion Trees, a joint venture between the World Wildlife Fund, the Wildlife Conservation Society and BirdLife International. āThey are fantastic at drawing down carbon, particularly at the forest frontiers where the soil is richer and not totally degraded. So those are the places where you want to work.ā
The price of carbon is still way below what is needed to make projects like that viable, he adds, and there is a shortage of what he calls āgood carbonā credits from those kinds of projects.
However, says Ding, āthe difficulty with the carbon market is setting up a baseline to understand additionality, adjusted by doing restoration on land,ā referring to the fact that any green-house gas reductions can only be additional if they would not have occurred anyway. If emissions reductions are not additional, then purchasing offset credits in lieu of actually reducing emissions will make climate change worse.
āIf itās tree-based, itās easier,ā she adds, which means using agroforestry or silvopasture approaches because a well-developed methodology for measuring annual growth of above- and underground biomass that can sequester carbon already exists. āBut you still need to set up a baseline that can be verified, ā she says, āto make sure that practices are linked to additionality, which can then allow a claim for carbon credits to sell.ā
With limited information in economic studies on forest restoration variables such as how well the land has been restored, or whether nearby areas remain degraded, for example, WRI along with the UN Food and Agriculture Organization (FAO) have now begun working on the creation of a standardized framework for data collection of costs and benefits ā and what is the real return on investment. āIn a few yearsā time, we will have much better granularity of the data, which can help us to better assess and understand what is the exact return,ā she says.
āI do see a really positive potential for impact,ā says Crowther. āThe whole climate movement is getting more money, and the environment movement is certainly getting its share. We just need more transparency so those investments can be increasingly shifted in the right direction.ā
With all of the pressure on countries to meet their commitments to the 2015 Paris Accords and keep global warming at no more 1.5 degrees Celsius, last yearās USD 12 billion Global Forest Finance Pledge can only be good news for the worldās forests ā if it is actually met. The critical juncture at which our forest ecosystems currently stand calls for both the money and the commitment to protect and enhance their crucial and precious lives.
Read the articles in this series:
Finallyā¦
…thank you for reading this story. Our mission is to make them freely accessible to everyone, no matter where they are.Ā
We believe that lasting and impactful change starts with changing the way people think. Thatās why we amplify the diverse voices the world needs to hear ā from local restoration leaders to Indigenous communities and women who lead the way.
By supporting us, not only are you supporting the worldās largest knowledge-led platform devoted to sustainable and inclusive landscapes, but youāre also becoming a vital part of a global movement thatās working tirelessly to create a healthier world for us all.
Every donation counts ā no matter the amount. Thank you for being a part of our mission.
Three African women leaders on what needs attention most in upcoming climate negotiations that have been dubbed as the Africa COP.
What is landscape restoration, and why is it such an important climate change solution? Here are 5 things you need to know.
A 15-minute "climate crash-course" on the greenhouse gas basics with Colombian expert Paola Andreas Arias.