The Paris Agreement seeks to achieve a balance between mitigation and adaptation activities. Financial mechanisms are a highly sought out means of addressing this balancing act, both within the FCCC and beyond. While the forest resource is certainly not unique in its desperation for tapping into potential funding pools, forests are currently undervalued and therefore underfunded yet vital resources for sustaining life on Earth.
All five of the speakers at today’s side event sponsored by Switzerland and the Climate Bonds Initiative (CBI) alluded to the need for an increase in private financial investments in conjunction with other public funding sources and policy initiatives to help address the pervasive effects of climate change on forests. Julian Richardson of the Parhelion Underwriting Ltd. credited the lack of financial flows in large part to a deficiency in understanding for how to value ecosystem services. In their publication distributed at Monday’s afternoon session (Forest Resilience Finance: Helping Forests Adapt to Climate Change), resilient forests are credited with providing: direct subsistence in the form of food and medicinal products; income generation from timber and non-timber-forest-products (NTFP); cultural traditions, rituals and recreation; and protection from natural extreme events and hazards (p. 6). While the world at large certainly recognizes the existence of these services, the lack of monetary worth on many of them prevents standard ideas and management practices that would help stakeholders feel secure in making investments in forests and receiving timely returns on them as well.
Ms. Chiara Soletti of the CBI described the development of their Green Climate Bonds as a means of soothing investment concerns in this resource area. In their “Fair-Trade” like labeling scheme for the green bonds, rigorous scientific criteria help bond investors quickly determine environmental credentials through compliance with the overarching climate bond’s standards (disclosure, i.e. project location and size), mitigation component (type or stage of forestry, i.e. sustainable forest management or NTFP), and adaptation and resilience component (risk assessments and strategies). Projects must comply with both the mitigation and adaptation criteria in order to be funded, helping to address both investor concerns and those of the PA.
One of the biggest hurdles for overcoming a lack of ambition to invest in the forest resource is the typical short-term, quick return nature of investment opportunities in our current economic paradigm. Forests do not provide outrageous capital returns in the same immediate time frame as some other “Wall Street” investment schemes on the market. But this mindset is greedy, unrealistic, and unsustainable, given the widespread value of forests in comparison to the quick and dirty stock market, and the call for a major paradigm shift in the most recent IPCC report. An investment in forests can also accompany an investment in a developing country’s resources, tackling two treaty birds with one stone.
Whether it be through green climate bonds and the private sector, or holistic sustainable forest management through municipalities and community groups, investing in forests is a surefire way to ensure our future is a green, clean, beautiful scene.