{"id":137006,"date":"2025-09-06T12:04:12","date_gmt":"2025-09-06T12:04:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/137006\/"},"modified":"2025-09-06T12:04:12","modified_gmt":"2025-09-06T12:04:12","slug":"a-125bn-scheme-to-save-the-worlds-rainforests","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/137006\/","title":{"rendered":"A $125bn scheme to save the world\u2019s rainforests"},"content":{"rendered":"

This article is an on-site version of our Moral Money newsletter. Premium subscribers can sign up here<\/a> to get the newsletter delivered twice a week. Standard subscribers can upgrade to Premium here<\/a>, or explore<\/a> all FT newsletters.<\/p>\n

Visit our Moral Money hub<\/a> for all the latest ESG news, opinion and analysis from around the FT <\/p>\n

Welcome back.<\/p>\n

We all stand to gain from the survival of the world\u2019s tropical forests, with their powerful stabilising effect on the climate. Is there a way of mobilising international finance at sufficient scale to halt their ongoing destruction?<\/p>\n

Brazil\u2019s government insists that there is. And with just two months to go until the launch of its proposed global forest fund at the COP30 climate summit, we\u2019ll soon find out whether it has a chance of success.<\/p>\n

CLIMATE FINANCEMaking forest protection pay<\/p>\n

Five years ago, during one of Brazil\u2019s worst periods of rainforest destruction, I followed a plume of smoke in the jungle near Boca do Acre, deep in the Amazon region. It led me to a local man named Ezio, who was in the process of burning a large swath of rainforest for cattle pasture. \u201cIn this region, there\u2019s no other form of income,\u201d he told me<\/a>.<\/p>\n

The problem then, according to Ezio \u2014 and many experts on deforestation \u2014 is largely a simple one of economic incentives. There is money to be made from destroying rainforests but, all too often, none to be made from conserving them.<\/p>\n

Brazil wants to use its presidency of November\u2019s COP30 summit to change that, through a proposed $125bn international fund it has dubbed the Tropical Forests Forever Facility.<\/p>\n

Initially floated by President Luiz In\u00e1cio Lula da Silva in 2023, the plan is to induce wealthy countries to contribute financially to the preservation of tropical forests that, by absorbing huge amounts of carbon, benefit the whole planet. <\/p>\n

\u201cIt has always been this idea of: how do we mobilise funding to come at least close to the true value of forests to the world?\u201d said Andr\u00e9 Aquino, head of the economic and environmental advisory office at the Brazilian environment ministry.<\/p>\n

Crucially, the proposed fund would not rely on donations. Instead it would be financed entirely by interest-bearing debt. By leveraging public money to raise larger amounts from commercial investors, it would become the world\u2019s biggest \u201cblended finance<\/a>\u201d vehicle if it can get anywhere close to its target size. Is that a realistic prospect?<\/p>\n

The plan<\/p>\n

The fund would borrow an initial amount of capital from \u201csponsors,\u201d including wealthy nations and potentially other sources, such as foundations. This 40-year debt would have a low interest rate matching US Treasury yields. The fund would aim to issue $25bn of this debt within its first few years of operation.<\/p>\n

The sponsors would agree to a junior position in the debt structure, meaning they would take the first hit from any losses. Brazil reckons this would enable the fund to issue a much larger amount of senior debt \u2014 the target is $100bn \u2014 to pension funds and other commercial investors.<\/p>\n

The fund would invest in emerging market sovereign and corporate bonds, earning a higher yield than its cost of capital. That should mean that, after servicing its interest payments, it would have money left over \u2014 roughly $4bn per year, according to the plan \u2014 to fund forest conservation.<\/p>\n

\"\"A diagram of the proposed fund\u2019s financial structure <\/p>\n

How will that money be distributed? The latest concept document<\/a> has a list of 74 developing countries with more than 1bn hectares of tropical forests between them, from Argentina to Kenya to Vietnam. But they\u2019d only be eligible for payments if they have an annual deforestation rate of less than 0.5 per cent (this will be monitored through satellite imaging). Those that qualify will receive a fixed amount \u2014 perhaps $4 \u2014 for every hectare of forest they hold. This payout will be reduced at a punitive rate for every hectare that\u2019s destroyed.<\/p>\n

Countries will be asked to report on how they use the funds, and must ensure that at least a fifth goes to local communities and indigenous peoples. The hope is that, if governments have a real financial incentive to reduce deforestation, they will in turn alter the incentives for people on the ground. The expected income for Brazil, at more than $1bn, would be more than triple the environment ministry\u2019s current annual budget, Aquino said.<\/p>\n

\"ARubens Suru\u00ed, chief of the Paiter-Suru\u00ed tribe in Brazil\u2019s Amazon region, in a section of his people\u2019s reserve that has been deforested and turned into pasture by a local cattle rancher \u00a9 Simon Mundy<\/p>\n

Rafael Dubeux, a finance ministry official involved with the plan, argued that this interest-bearing model has more chance of attracting serious sums from rich-world governments than a scheme reliant on donations. Major economies across much of the developed world have slashed their foreign aid budgets over the past year.<\/p>\n

A group of six wealthy nations \u2014 France, Germany, Norway, the UK, the United Arab Emirates and (before Donald Trump took office) the US \u2014 have been involved in consultations on the scheme. At last year\u2019s COP29 summit, rich nations agreed to \u201ctake the lead\u201d in mobilising $300bn a year<\/a> in climate finance for developing countries. \u201cDespite the constrained budgets, most of those countries still want to keep engaged in that agenda,\u201d Dubeux told me.<\/p>\n

The risks<\/p>\n

But risks to the scheme abound. Lula is set to announce a Brazilian contribution to the new fund later this month. Will other nations follow \u2014 and will they provide the kind of sums Brazil is hoping for, or something on the far more modest scale of the amounts committed<\/a> to the UN fund for climate loss and damage?<\/p>\n

Even if rich-world governments prove enthusiastic, will private-sector investors follow suit? With the junior debt investors agreeing to take the first hit from any losses, the fund could offer commercial investors a low-risk investment that \u201cwould attract your regular Danish pension fund\u201d, argued Aquino.<\/p>\n

This claim is supported by rigorous modelling and analysis of historical bond market performance, said Christopher Egerton-Warburton, founding partner of Lion\u2019s Head Global Partners and a former Goldman Sachs banker, who worked on structuring the proposal.<\/p>\n

Private-sector interest will hinge largely on what verdict the credit rating agencies reach on the new fund. Fitch is currently undertaking an initial review of the concept, but full rating decisions will follow only as the fund takes shape and starts preparing bond issuances.<\/p>\n

Then there\u2019s the Trump risk. A key part of the plan is that the new fund should be administered by the World Bank \u2014 an institution \u201cviewed as a financially very stable pair of hands, and the market values that\u201d, said Egerton-Warburton. The World Bank has been engaging in talks on the idea, and Brazil is hoping for a formal commitment soon. But as the climate-sceptic Trump government leans on the World Bank<\/a> to align with its policy priorities, the risk of cold feet can\u2019t be dismissed.<\/p>\n

Still, like the carbon market integration idea I discussed on Wednesday<\/a>, this is an example of fresh, innovative financial thinking around the climate challenge at a time when it\u2019s badly needed. Over the past two months the scheme has received formal endorsements from the BRICS nations<\/a> and from the eight nations that share the Amazon rainforest<\/a>. <\/p>\n

\u201cThis is a chance to shift the forest economy,\u201d said Aquino, \u201cto one where the actors that protect the forests significantly benefit from it.\u201d<\/p>\n

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