Forest Bonds

In 2006 the IFC commissioned EnviroMarket and Forum for the Future to undertake a scoping study to explore the alternative ways that capital markets might be used to finance a perceived funding gap for tropical sustainable forest management and conservation.

The study drew input from over one hundred finance, tropical forestry, timber and carbon trade professionals, and identified key opportunities and barriers to greater integration of tropical forests with capital markets.Four basic models of forest bond where identifed reflecting the scale and capital requirements of stakeholders engaged in forest management activity.

The biggest determinant of success is choice of location and asset origination is the biggest determinent of success; developers should seek out forest nations that offering economic and political stability, local demand for certified timber and ecosystem services and effective local forest governance.