The world’s new US$125 billion rainforest trust fund revives a 1990s idea

A US$125 billion rainforest fund is being hailed as a flagship announcement from the 2025 UN climate summit in Belém, Brazil. The goal is noble: this is essentially a trust fund that will pay countries to keep their tropical forests standing. But its core idea was tried 30 years ago, and the results weren’t great.

Brazilian president Luiz Inàcio Lula da Silva suggests the so-called Tropical Forests Forever Facility (TFFF) is innovative because it is “an investment fund, not a donation mechanism”. This, in theory, means investors can benefit too, providing a long-term stability that isn’t affected by political cycles.

Turning to private markets is not in itself all that innovative. But years of efforts to mobilise private finance for climate action have routinely failed to attract sufficient investment.

The reasons for this are pretty simple. Many necessary activities simply aren’t “good” investments. Even commercial renewable energy projects often struggle to offer returns high enough to compete with other assets.

All of these problems are particularly pronounced for forest conservation. There aren’t many ways to generate income by leaving forests alone, and clearing them for timber or agriculture is generally more profitable. Indeed, this is one of the key drivers of deforestation in the first place.

Back to the future?

The TFFF is designed to work around these constraints. Rather than investing directly in conservation projects, it functions like a large endowment or trust fund. It aims to raise US$25 billion in “sponsor capital” from government and philanthropic donors.

Brazil has pledged US$1 billion. Norway followed suit, promising about US$3 billion. The fund also plans to sell US$100 billion in bonds to private investors.

Eventually, the full US$125 billion will be invested in financial markets. After paying interest to investors and sponsors, the remaining returns will be used to pay participating countries around US$4 per hectare of standing tropical forest, minus penalties for forest loss.

By separating investors’ returns from conservation success, the TFFF does potentially create a more appealing offer for private investors than previous climate finance schemes.

However, this model has been tried before.

Trust funds for conservation

In the early 1990s, around the time of the first global negotiations on climate change, the World Bank’s Global Environment Facility financed a trust fund for biodiversity conservation in the Himalayan kingdom of Bhutan. It was followed by similar projects in Uganda, Mexico, Peru, Brazil, and Poland, Slovakia and Ukraine.

These funds were justified in terms very similar to Lula’s pitch for the TFFF. Private finance was needed, wrote one World Bank official in 1993, “because it is impossible to predict whether the current ‘boom’ in international [government] financing for conservation will last”.

Yet evaluations of these conservation trust funds highlighted recurring problems.

Returns on investment were often lower than anticipated, delaying projects sometimes by years, including the very first one in Bhutan. (And quite how much revenue the TFFF’s investments will actually generate is uncertain.)

The money was tied up in investments and only a small amount was available for conservation. And, while a trust fund can generate a steady trickle of revenue to pay operating costs, it’s much harder to use this model to start new projects.

In Bhutan, the managers of the trust fund struggled with how to finance start-up costs for establishing new conservation areas without eating into the fund itself. Eventually they received a separate grant from the World Wildlife Fund. The TFFF would likely face similar difficulties funding initiatives such as returning farmed land to indigenous communities.

The TFFF inherits these issues, and adds a new one. To attract private investors, interest payments will be prioritised over conservation spending. The TFFF’s concept note is explicit that payments to participating countries will fall if investment income can’t cover payments to bondholders. In other words, there is a real risk that reassuring investors may come at the expense of the fund’s ability to actually protect forests.

There are bigger questions to ask, too. For instance, a coalition of civil society organizations from across the Amazon, as well as Africa and Asia, have already rejected the initiative. They argue it risks turning forests into commodities with a price tag, and that despite claims of centring Indigenous communities, it actually allocates them a paltry amount of money in top-down fashion.

The revival of a mechanism first tried in the early 1990s should give us pause. If private capital can only be mobilised on terms that weaken climate action, then perhaps there’s no longer any alternative to greatly increased public funding and much stronger redistributive measures. Rich countries, corporations, and individuals will need to shoulder more of the cost of mitigating a crisis they’ve played a disproportionate role in creating.

In recent years activists and researchers have proposed a long list of alternative options. These include diverting some of the trillions currently spent on the world’s largest militaries, reforms to reduce corporate tax avoidance, and debt relief for climate vulnerable countries.

We can debate whether any all of these specific options is effective or appropriate. The TFFF and its limits are a sign that it’s well past time to take such measures seriously.

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This article is republished from The Conversation, a nonprofit, independent news organization bringing you facts and trustworthy analysis to help you make sense of our complex world. It was written by: Nick Bernards, University of Warwick

Read more:

• The UN climate talks have become too big for their own good
• What would happen to the climate if we reforested the entire tropics?
• Why small climate-vulnerable island states punch well above their weight in UN climate talks

Nick Bernards has previously received funding from the Social Sciences and Humanities Research Council of Canada and British International Studies Association.