The World Bank has confirmed it will serve as trustee and interim secretariat host for the Tropical Forest Forever Facility (TFFF), as Brazil prepares to launch the showcase investment-driven fund for rainforest protection at next month’s climate summit in the Amazon city of Belém.

With a proposed initial investment of $25 billion from donor countries and $100 billion from private capital, the TFFF seeks to leverage investments in financial markets and channel the returns to countries that can prove they have kept their forests standing.

CEO Ajay Banga announced in September the World Bank’s willingness to host the fund – a role it already fulfills for other climate funds such as the Fund for Responding to Loss and Damage. He said the bank’s role would be to “lay the rails and maintain them so the trains can run”, while beneficiary countries and donors should “focus on delivery”.

On Tuesday, the bank gave formal confirmation at a board meeting that it would take on most of the TFFF’s administrative workload – including initial operations and fiduciary reporting – while a permanent institutional home is established.

Brazilian Finance Minister Fernando Haddad said the World Bank’s decision transforms the TFFF “from an idea into a fully operational reality”, adding that “with this foundation in place, the TFFF is now ready for countries to follow Brazil’s lead by making their own pledges”.

Right way to plug forest finance gap?

The Brazilian initiative comes as developing countries have complained about being unable to access existing forest funds at the Global Environment Facility, while foreign aid budgets which have supported forest conservation shrink in the US and Europe.

Finance needs in developing countries are large and growing, with estimates ranging between $20 billion and $72 billion every year to protect forests. In contrast, in 2022, the total finance destined for forests was just $2.3 billion.

But while the fund has enjoyed expressions of support from both forest-rich and donor countries, it has drawn criticism from some sectors – including over the World Bank’s central role, and whether it has been overly optimistic in the returns it can expect from investing money in emerging economies.

Explainer: Brazil’s “right answer” to forest finance turns to markets to keep rainforest standing

The Global Forest Coalition (GFC) – an international coalition of Indigenous rights NGOs – has pushed back against the TFFF for its high reliance on private investments, urging the World Bank to step back from hosting the fund.

“All the financial schemes put in place for forest conservation supported by the World Bank continue to fail people. They are in place rather to favour capitalist investors instead of solving the deforestation issues,” said Kwami Kpondzo, executive director of Togo’s Centre for Environmental Justice, a member of the GFC alliance.

“TFFF is taking the same direction, where Indigenous peoples and local communities’ rights will be sacrificed once again in the name of conservation,” Kpondzo added in a statement.

Brazil first to pledge TFFF seed capital

The TFFF is being proposed as a blended finance instrument, with funding from both public and private sources. It would seek to directly pay tropical countries that can show effective forest protection.

On paper, the TFFF will get its money similarly to an investment fund. Donor countries and private investors put their money into the fund, which then invests the capital in financial markets. Part of the returns is used to pay back investors and what remains is allocated to forest protection in tropical countries.

In September, Brazil announced a $1 billion contribution into the fund. The starting capital from sponsor countries is seen as a key way of reducing the fund’s risk and improving its credit rating, which would allow for better market returns.

Brazil pledges $1bn in first contribution to COP30 rainforest fund

While no other pledges have been announced so far, donor countries including Norway, Germany, the United Arab Emirates and Britain have voiced support for the new fund and have been involved in its design. They and others are expected to contribute financially, with hopes high that new pledges will be announced at the launch of the TFFF on November 6 at the COP30 leaders’ summit in Belém.

The fund’s concept note proposes an interim hosting period of three years after which its board of directors will assess whether to keep the TFFF housed with the World Bank. It also sets out plans to establish an official secretariat for the fund, which the Brazilian government said would ensure the “TFFF operates with the highest standards of governance, accountability, and predictability”.

The TFFF is expected to be steered by a board of directors from 18 countries, equally split between donors and forested nations. It also foresees the creation of a scientific advisory panel and an advisory council of Indigenous people.

The post Brazil hails World Bank decision to host forest fund ahead of COP30 launch appeared first on Climate Home News.

Brazil hails World Bank decision to host forest fund ahead of COP30 launch