Sustainable Finance
Forestry
and capital markets have a checkered history. Most investments by
capital markets into the forestry sector in developing countries has
been with “impatient” finance — equity or highly geared models looking
for high returns over short time frames. This has resulted in the unsustainable mining and conversion of our global forest resource.
More
often than not, income from forests is heavily discounted by commercial
lenders and the market for non-timber services such as carbon
sequestration and ecosystem services are largely undervalued in today's
markets.
Forest Bonds
A long dated low-yield self amortising forest-backed bond
could deliver the up-front capital needed to secure long term tropical
sustainable forest management and reduce the economic bias towards
unsustainable extraction that results when natural forests are financed
with expensive local bank loans or equity.
A tradable bond
backed by sustainably managed forests can bring together capital from a
range of sources beyond banks, including conservation organisations,
philanthropic investors, governments and development organisations.