Reducing Deforestation and Degradation: Deforestation and forest degradation continue to be leading challenges for reducing global climate emissions and managing local environments, exacerbating food insecurity, loss of water quality, soil loss, fire prevalence, and stalled or unequal economic growth, among other issues. Intact forest landscapes in particular have high conservation value because they provide a wide range of ecosystem services (1).
Conserving Forest: A few proven methods for investors to conserve forests and forest resources are highlighted here.
Growing Deforestation and Forest Degradation: Together, deforestation and forest degradation produce more emissions than the entire global transportation sector, comprising 17% of global carbon emissions (7). Loss of tree cover continues to accelerate in the tropics, rising over the past 17 years and reaching the second worst year on record in 2017 at a loss of more than 15 million hectares (8).
Five factors can explain global forest loss between 2001 and 2015 (9):1 Commodity Production: Commodity production, such as agriculture, mining, and oil and gas, is responsible for 27% of deforestation, most of which is in the tropics. Deforestation for this purpose is often permanent. 2 Shifting Agriculture: Shifting agriculture, where land is cleared and burned to produce subsistence crops, is practiced in low-income, tropical regions and accounts for 24% of global deforestation. Depending on the region, this practice can either offer a stable, well-managed cultivation cycle or demand continual expansion into intact forest landscapes. 3 Urbanization: Urban areas continue to grow, impacting nearby forests and contributing to less than 1% of global deforestation. Two-thirds of global forest loss due to urbanization occurred in the eastern United States. 4 Wildfires: With increasing intensity and frequency and comprising 23% of global deforestation, wildfires destroy large swaths of forest, particularly in northern Canada and Russia. Wildfires can be caused by both a warming climate and human interaction. 5 Forestry: The forestry industry manages natural forests and tree plantations throughout North America, Europe, Russia, China, southern Brazil, Chile, South Africa, and Australia. The industry contributes 26% of global forest loss, most of which is temporary, planned harvest of timber and other wood products. Sustainable forestry certification is uncommon outside of the northern hemisphere.
The Planet: Forests help to regulate climate, sequestering carbon and moderating the effects of climate change. Reducing tropical deforestation has a particularly large impact, since tropical forests store almost 2.7 times more carbon than an average temperate forest and 3.5 times more carbon than a boreal forest (10).
Animals, Plants, and Insects: Forests are home to a large share of the earth’s land-based biodiversity. Animals, plants, and insects are at risk of extinction if their forest habitat is destroyed, which can cause additional social and economic damage directly to humans due to the adverse effects of throwing ecological systems out of balance. For example, pollinators provide essential services for the world’s food crops, and their loss could cost USD 285 billion to USD 577 billion per year (11).
Concerning socio-economic challenges in general, rural and urban communities can both benefit from improved forest protection.
Rural Communities and Local Indigenous Communities: More than 1.6 billion people depend on forests for their food, water, fuel, medicines, traditional cultures, and livelihoods (12). In developing countries, for example, 28% percent of total household income derives from economic activities in the environment, primarily activities in natural forests (13). Indigenous people and local communities often live inside or close to dense forests and are recognized as either owning or controlling 18% of global land (14). Those communities that live closest to the forests and who rely on them for resources will ultimately benefit most from conservation initiatives.
Urban Communities: Although conservation efforts often focus on rural communities living close to forests, city dwellers also benefit. Healthy forests can improve water quality in urban areas, offer protection from extreme weather events, and make urban communities healthier and happier (15).
Forests in regions all around the world provide value for local communities, local flora and fauna, and global environmental objectives. Many forest conservation projects focus specifically on areas with high rates of deforestation or a large area of intact forests.
Current Trends: About half of the world’s deforestation takes place in tropical countries. Between 2002 and 2012, half of tropical deforestation occurred in Latin America (10). More recently, from 2015 to 2017, the main countries with forest loss included Brazil, the Democratic Republic of Congo, Indonesia, Malaysia, Bolivia, Colombia, Paraguay, Mozambique, and Côte d’Ivoire (10,16).
Global Opportunities for Conservation: Intact forest landscapes are found primarily in humid tropical forests in the Amazon and Congo River basins, the islands of Borneo and New Guinea, and the southeast Asian highlands. In addition, a high percentage of the northern boreal forests in Russia, Canada, and the United States’ Alaska continue intact, yet only 12% of them is permanently protected (27).
The responsibility for forest conservation has often been attributed to governments. But global environmental funding for forest conservation projects has not materialized as expected, as public investment in agriculture, forestry, land use, and natural management totals only 3% of all public investment in climate action (17). As a result, impact investors can play an essential role in conserving these areas of significant value.
Forests extend over a third of the earth’s surface area and support billions of people in both rural and urban communities (18). Each investment will require separate calculation of its total number of target stakeholders, which will vary with factors such as how close communities live to the protected forests and which benefits these communities derive from these forests. In any case, local communities are likely to gain the most from forest protection (19).
Increasing forest conservation can offer substantial benefits to local communities who rely on the forest. Conserved forests also continually sequester carbon, reducing the global effects of climate change. Investors in forest conservation should consider their investments over a long-time horizon to ensure that the forest and its resources continue to provide the expected benefits.
The following is one example of impact from a project aligned with this strategy:
External Risk: Even within conservation areas, the drivers of deforestation can continue. Forests must be carefully monitored for illicit activity, such as illegal timber harvesting or wildlife poaching. Natural drivers of deforestation, such as extreme weather and natural disasters, can also affect the stability and resilience of conserved areas. Insurance can protect investors against potential damage caused by fire, tree diseases, insect outbreaks and extreme weather events. Multilateral consultations and partnerships during project design stage can also help secure community’s long-term buy-in and mitigate external risks caused by human activities.
Stakeholder Participation Risk: Effective forest conservation requires respecting the rights and ensuring the buy-in of local communities in and around the forested areas. The support of local groups, including their capacity to manage resources sustainably, is essential both for long-term business success and to increase the likelihood that forests stay intact (21).
Drop-off Risk: A successful forest-conservation business ensures the permanence of the conserved area and must execute a long-term strategy that creates sustainable revenue to manage the property. In the United States, for example, land trusts use stewardship endowments to help ensure long-term conservation (22).
Unexpected Impact Risk: To avoid overuse and permanent damage, businesses profiting from conservation areas must be thoughtful about how they use the land. For example, a successful business may bring numerous visitors or employees into a conserved area; such a business must be sensitive to the impact created by the additional human traffic. In addition, conservation projects should carefully evaluate impact beyond their boundaries, evaluating whether they have caused leakage or deforestation in neighboring areas.
Each project must individually estimate the probability that any of these risks happen based on the conservation solution and location, among other factors.
Failure to preserve forests may put both the business model and impact at risk. Heavy use of the forest may require revenue activities to pause while the forest recovers.
INVESTMENT 1: Ecotrust Forest Management (EFM) manages more than 100,000 acres of forest land across Oregon, Washington, and California using a climate-smart management philosophy and strategy to preserve high-carbon-sequestering forests in the western United States. EFM’s maintenance of healthy watersheds also preserves vital habitat for Northwestern fish populations, such as wild salmon and trout. EFM has pioneered its climate-smart forestry methods over 15 years. Its model extends the average age of forests, increases land in protected reserves, retains 10–30% more trees on the landscape, restores habitat, and develops strong relationships with local communities. To ensure shared local prosperity, EFM actively looks for opportunities to transition its land ownership to community and conservation owners like tribes, land trusts, water districts, conservation groups, and public agencies (22).
INVESTMENT 2: &Green approaches the challenge of deforestation by focusing on one of its main drivers, agricultural production systems. By investing in commercial projects in agricultural value chains, &Green protects and restores tropical forests and peatlands and makes agriculture more inclusive and sustainable. In Indonesia’s Jambi and East Kalimantan provinces, the fund financed Royal Lestari Utama to pioneer sustainable natural rubber production. Its rubber concessions function as a buffer to Jambi’s Bukit Tigapulu National Park. In addition, Royal Lestari Utama set aside a total of 28,000 hectares of its land in Jambi (24% of the concession) and East Kalimantan (51% of the concession) to protect high-conservation-value (HCV) areas, high-carbon-stock forests, and other areas with conservation value. The project expects to create a program for 3,000 smallholder farmers and support an estimated 16,000 jobs once the plantations are fully developed (23).
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Weisse, Mikaela and Elizabeth Dow Goldman. “2017 Was the Second-Worst Year on Record for Tropical Tree Cover Loss.” World Resources Institute (blog), June 26, 2018. https://www.wri.org/blog/2018/06/2017-was-second-worst-year-record-tropical-tree-cover-loss.
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This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.
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Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.
Area of land that is protected from deforestation as of the end of the reporting period.
Organizations should footnote the methods applied to measure avoided deforestation.
Area of land that has been deforested by the organization during the reporting period.
Organizations should footnote the reasons and methods for deforestation, and all assumptions used. See usage guidance for further information.
Project boundaries should be clearly demarcated and monitored throughout the project. In monitoring deforestation risk, investors can consider using Global Forest Watch (https://www.globalforestwatch.org/) or Global Forest Watch Pro (https://pro.globalforestwatch.org/). This metric should also capture any potential leakage of deforestation into nearby forested areas outside of the project boundaries. Area of land deforested may be broadened in its definition to include land illegally deforested by others within or outside of the project boundary.
The project should report on both area of deforestation avoided and area of land deforested, as they are both needed to determine the impact of the project on total forest conservation.
Indicates whether the organization has undertaken biodiversity-related assessments to evaluate the biological diversity present on the land that is directly or indirectly controlled by the organization.
Organizations should footnote details about what the assessments evaluate. See usage guidance for further information.
Depending on what kind of biodiversity the project is interested in measuring, a variety of different resources can help with biodiversity assessments, including the Integrated Biodiversity Assessment Tool (https://www.ibat-alliance.org/).
Analyzes connectivity between terrestrial protected areas.
Organizations should footnote the methods applied to ensure protected land status.
More information on this indicator can be found through the Biodiversity Indicators Partnership (http://bipdashboard.natureserve.org/metadata/paconnectednessindex), which uses remote satellite imagery to visualize forest change and land cover compared to global protected areas.
Looking at connectivity between protected areas helps understand the project’s contribution to preserving biodiversity, as fragmentation of natural habitat is a primary driver of biodiversity loss. This indicator is used by the Convention on Biological Diversity’s Aichi Biodiversity Target 11, which looks at improving biodiversity by safeguarding ecosystems, species and genetic diversity, and relates to other UN conventions such as SDG15 and the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services.
Number of communities that benefited from this project during the reporting period.
Organizations should footnote their definition of community and all assumptions used. See usage guidance for further information.
This metric should be disaggregated by income level and indigenous affiliation. In addition, it is essential to look at historical land titles. LandMark (http://www.landmarkmap.org/) provides data on indigenous and community land rights.
This metric captures the total number of communities that benefit from the investment. Forest conservation projects benefit from communities and other traditional landowners taking ownership in their project, meaning that it is essential to understand how communities engage with the investment.
Indicates whether the organization implements a strategy to manage its interactions with local communities affected by its operations.
Organizations should footnote the relevant details about their community engagement strategy, and how it is being implemented. See usage guidance for further information.
One way to consider which communities to engage is to look at historical land titles. LandMark (http://www.landmarkmap.org/) provides data on indigenous and community land rights. In engaging the community, a consent process should be put in place to ensure that the community as a whole endorses the project, as opposed to a few elite members.
Forest conservation projects will often require involving traditional landowners, or others from the community who rely on the land. The carbon project should take care to ensure the community’s support for the project. This type of community involvement is especially important for REDD+ projects. In addition, to deliver long-term impact on local communities and the forests they depend on, a community engagement strategy is an important first step to understand which services the project can best provide for the community (e.g., training, access to market, tenure, etc.). Metrics can then be formed around the successful delivery of these individual goals.
Number of full-time equivalent employees working for enterprises financed or supported by the organization as of the end of the reporting period.
Organizations should footnote all assumptions used. See usage guidance for further information.
This measurement should be relatively easy to measure by analyzing a business’ daily operations. This metric focuses on formal jobs provided by the business.
Forest conservation projects will often bring new jobs to local communities, creating new prosperity at the local level. Since employment is generally easy to measure, it functions as a proxy for the development of shared prosperity between the business and the community, and can help determine the long-term involvement and interest of the community.
Length of freshwater streams under ecological restoration management on protected land, land under sustainable stewardship, or land under sustainable cultivation during the reporting period.
Organizations should footnote all assumptions used as well as relevant ecological restoration activities undertaken during the reporting period.
This measurement focuses on the freshwater streams protected as a result of the project. To measure this indicator, analyze the total length and area of freshwater streams within the project’s total terrestrial area, whether conserved in their natural habitat or actively restored through planting vegetation.
Protecting bodies of fresh water, especially streams, add additional value to the forest conservation project. Carefully managed, healthy streams can provide freshwater for many downstream communities, as well as native flora and fauna.
Area of land with a permanently protected land status as of the end of the reporting period.
Organizations should footnote the methods applied to ensure protected land status. See usage guidance for further information.
This measurement will depend on the definition chosen for “permanently protected land”. In some cases, land may be designated as a national public park, a private reserve, or hold other long-term guarantees such as through certification status.
Permanently protected land ensures the forest will survive across generations. This metric is especially important in voluntary carbon markets to ensure the permanence of the carbon credit.
Amount of greenhouse gas (GHG) emissions avoided or sequestered during the reporting period.
Organizations should footnote relevant details on the assumptions/methodologies used in calculating the emissions avoided or sequestered.
The amount of greenhouse gas emissions is calculated through a carefully monitored process, and should include all emissions avoided, reduced, or sequestered. For details on how to calculate all the emissions avoided or sequestered refer to the regulations for compliance markets or certification standards such as Verra’s Verified Carbon Standard, Climate Action Reserve, Gold Standard, Plan Vivo, or American Carbon Registry.
Climate mitigation is often a key reason for impact investors to fund forest conservation projects, such as through the REDD+ work. For carbon-focused projects, the amount of greenhouse gas emissions avoided or sequestered should be measured to determine the carbon-related impact.