Better data can help international forest finance flow

15 September 2015
Articles and blogs
Data on the world’s forest cover is getting better, as is our understanding of the intricate network of global forest finance – with pledges estimated at roughly $10billion over the last eight years.

Annual forest loss has slowed by more than 50% since 1990, according to the Global Forest Resources Assessment launched at last week's World Forestry Congress. But behind this figure is a less positive story; much of this slowdown comes from the planting of new forests, while natural forests continue to be lost at an alarming rate.

Over the last 25 years, forested areas equivalent to the size of South Africa have been destroyed, a fact obscured in the headline stat by the planting of 110 million hectares of new trees. This is most worrying in the tropics of South America and sub-Saharan Africa, where 83% of the global forest loss occurred between 2010 and 2014.

The good news is that more countries are reporting ever more reliable and complete information on forests, which means we now have data on 81% of the world’s forested land. This data gathering is crucial, as monitoring forest cover and other trends provides a benchmark for countries to measure reductions in deforestation and the impact on mitigating climate change.

Better information on donors and finance that protect forests is also more readily available. ODI helped make improvements in this area through the analysis of more than 23,000 projects and pledges of financial support. Our research, which we presented to the UNFCCC Standing Committee on Finance last week, uncovers an intricate web of finance, involving a growing number of developing country governments and a relatively small number of steady donors:
REDD+ international forests and climate change architectureFigures in US$ millions, data correct as of July 2015. Dotted line represents incomplete or limited data available on amount committed. Bilateral public finance excludes the contributions of countries to the multilateral funds. The Green Climate Fund is yet to indicate a proportion of the deposited US$10 billion that will be allocated to REDD+ activities. Shaded finance sources, funds and initiatives represent allocating all or some finance as result-based finance.

We found a significant proportion of international finance comes from the public sector, with individual institutions managing 51% of finance, compared to 33% managed by dedicated multilateral funds.

Norway, the US, Germany, Japan and the UK are the top donors, contributing more than 77% of global finance. We also found a lack of transparency surrounding private and some public finance which should be addressed through better reporting.

Forest finance is mostly spent helping developing countries plan a forest and climate policy, build institutional capacity and assess the state of their forest resources. Thanks to this support, some countries have been able to access additional finance by developing forest management plans and using the right tools to measure, monitor and verify emissions reductions with finance offered based on the results actually achieved.

The data suggests that early international finance combined with the intricate finance architecture is working. As countries get better at managing and measuring emission reductions through forestry programmes, they can build on this to access even more results-based finance (shaded in green in our diagram).

However, we still need to urgently slow the dangerous rate of global deforestation and its associated emissions. To do this, we must understand the finance flows that drive forest loss, as well as those that seek to protect forests.

A major part of this will be demystifying the role that private finance plays in deforestation, and finding new ways to shift often opaque investments towards supporting sustainable forest management (which ODI is working on right now with the United Nations Environment Programme Finance Initiative). 

We also need to understand how international finance works to incentivise protection, support development and mitigate climate change. Better data on forests and increased transparency on forest related finance is therefore central to protecting our forests and preventing catastrophic climate change.