WWF: Responsible forest finance can help stop climate change

Buenos Aires, Argentina — Failure by the world’s financial leaders to support responsible forest finance will allow rampant deforestation to continue and contribute to the disastrous effects of climate change.

WWF’s Global Forest & Trade Network (GFTN) and the Finance Alliance for Sustainable Trade (FAST) on Thursday asked global financial institutions to take a leading role in stopping climate change during the XIIIth World Forestry Congress, taking place this week in Buenos Aires, Argentina.

WWF’s GFTN also announced that it will launch Investment Screening Guidelines for Financial Investors in coming months to encourage support for responsible forest finance.

This innovative resource will identify key environmental and social principles and criteria that need to be considered in all investment decisions pertaining to the forest sector, such as timber, pulp and paper, and other sectors whose activities impact forests, including palm oil cultivation and mining.

“For WWF, the flipside of encouraging investment in good forestry is discouraging banks from financing unsustainable operation,” said Rodney Taylor, WWF International’s Forest Director.

Taylor also said this tool can help the financial community differentiate between good and bad forestry practices.

In addition, financial leaders must recognize the monetary value of natural standing forests, WWF said.
“Financial institutions must recognize the business opportunities in the responsible forestry sector,” said Noemi Perez, FAST’s Executive Director. “FAST is working together with the GFTN to link like-minded financial institutions with responsible producers, creating investments that are not only sound for business, but also contribute to the conservation of the world’s forests.”

Though investors see a huge potential in a forest carbon market — as recently identified in WWF’s 2009 Forest Carbon Investor Survey — recent studies by the GFTN have identified an wariness by financiers to invest in forestry because they believe it involves too much risk and volatility. Studies also showed that investors thought the forest sector lacks suitable collateral from small- to medium-sized businesses.

As a result, there is limited access to money to finance the efforts of responsible forest producers. For example, 69 per cent of responsible forest producers surveyed felt that it was difficult to secure adequate financing, particularly in South America where companies heavily rely on informal investment sources.

To bridge this divide between the needs of responsible producers and the lack of financial capital for this sector, GFTN and FAST, together with the Forest Stewardship Council and the International Finance Corporation co-hosted a special meeting at the Congress.

Responsible forest finance is the support by financial institutions for sustainable business practices in the forest sector.