Key points:
- At COP30 in November, Brazil will formally launch the Tropical Forest Forever Facility (TFFF), which hosts the Tropical Forest Investment Fund (TFIF). It aims to raise an initial USD 25 billion in start-up capital, with a longer-term target of USD 125 billion.
- The fund aims to give tangible financial value to standing forests – providing long-term, reliable and results-based payments for developing countries to protect their forests. Estimates suggest it could nearly triple international non-reimbursable finance for forests, which could supplement eligible countries’ environment and forest ministries budgets by several times over.
- In contrast to typical conservation funds, TFFF is a forest-funding mechanism that generates returns for its investors.
- The TFIF’s investment criteria aim to allocate capital away from high-emissions activities and support the energy transition using a diversified investment portfolio that excludes fossil fuels and deforestation-linked activities. This means that as well as paying for tropical forest protection, the fund also helps to accelerate the energy transition, while generating returns for investors.
- The TFFF was developed in close collaboration with Indigenous Peoples and local communities and commits at least 20% of forest payments to them, ensuring benefits reach those who safeguard forests on the ground.
Brazil’s forest finance plan advances towards COP30 launch
Forests are critical natural infrastructure for climate stability, water security, biodiversity and rural communities. But despite this, ongoing deforestation and degradation in an economic system that incentivises extractive industries puts these ecological services at risk. Forests receive less than 4% of international climate finance, a figure at odds with their value when protected. The Tropical Forest Forever Facility (TFFF) aims to tackle the conditions that encourage deforestation by providing tropical forested countries with long-term, reliable and results-based payments for protecting their forests. Initially presented by the government of Brazil at COP28, the TFFF will be formally launched at COP30 in Belém, Brazil.
How it works
Unlike typical conservation funds that rely on temporary grants or project-based funding, the TFFF is an investment fund designed as a permanent, self-financing vehicle, positioning forests as a global asset class which forested nations are compensated for preserving. While this idea might be new to conservation funding, the use of an investment portfolio to generate returns for investors is a very common finance mechanism.
The TFFF aims to attract USD 125 billion in blended finance: USD 25 billion of this is sponsor capital from governments and philanthropies that acts as insurance for private investors by absorbing any early losses.1The TFFF Concept Note 3.0 states that “The model assumes that all sponsor funds are received at the beginning of the life of the TFIF, although it may be that certain sponsors wish to make contributions over a few years. This would be acceptable if the commitment to fund were made via a legally binding pledge.” This implies that not all financing is needed upfront for the launch of the facility. This helps give major investors, such as pension funds, insurers and sovereign wealth funds, confidence to purchase up to USD 90-100 billion in bonds from the fund.2The TFFF uses a credit enhancement mechanism that includes a ‘two-tranche structure’ to achieve AAA ratings (the highest credit rating) and attract investors. The USD 25 billion ‘junior tranche’ from governments and philanthropies acts as a protective buffer that absorbs first losses, while the USD 90-100 billion ‘senior tranche’ raised through bonds is shielded from risk. Using statistical simulations to model thousands of investment scenarios, the TFFF found that with at least 18% junior capital, senior investors face less than 1% probability of losses. The contribution by governments and philanthropies is used as insurance to mobilise USD 90-100 billion from pension funds and investors, while the AAA rating ensures the fund can borrow at the lowest possible rates. The combined capital will then be invested by the Tropical Forest Investment Fund (TFIF), the investment arm of the facility.
TFIF will manage this capital through a diversified portfolio of investment vehicles – mainly Emerging Market Developing Economy (EMDE) bonds, with a sustainability focus – targeting a 5.5% return on average over 20 years. This 5.5% return will go back to investors every year, and anything above this will be used to finance annual performance-based payments to up to 74 developing countries that hold over 1 billion hectares of tropical and subtropical forests.3If there is positive cash flow beyond the payment outflows, the extra capital will be retained in the fund and used to build its asset base.
Estimates suggest the fund could generate cashflow of USD 3.4 billion each year after costs and provisions – enough to pay eligible forested countries USD 4 for every hectare of protected tropical forest annually.4To put this number into perspective, the Amazon has 650 million hectares of forest. Payments under the TFFF are “expected to nearly triple the current volume of international non-reimbursable finance for forests”, representing multiple times the current national budgets of environment and forest ministries in some countries.
To put the numbers into perspective, Congo Basin countries received a total of USD 40 million for forest and environment protection between 2017 and 2021, mostly through official development assistance (ODA) grants and loans. With a forested area of 200 million hectares, this works out to around USD 0.04 per hectare per year. Under the TFFF’s model, Congo Basin countries would have instead received USD 4 per hectare per year – or 100 times the value of these interventions. Unlike ODA loans, these TFFF payments would not create debt and would provide predictable, ongoing compensation for forest stewardship conditional on preservation. Moreover, whereas past financial flows often included support for activities such as timber production, which are not necessarily sustainable, the TFFF is explicitly tied to keeping forests standing.
Criteria for funding
To be eligible to receive funding, countries must have a deforestation rate of less than 0.5%.5Because key datasets show deforestation rates of roughly 0.3-0.6%, the TFFF will set an initial entry cap of 0.5% as a representative midpoint. This is intended to prioritise countries with below-average deforestation. The cap will be reviewed after the first three years. Recipients of forest payments must also demonstrate that these payments will not replace existing budgets or programmes already dedicated to forest conservation. Monitoring will be conducted using satellite data to assess canopy cover, with areas that have over 20-30% tree canopy cover eligible for Forest Payments.6As loss rates surge as canopy cover drops – rising from ~0.3% overall to ~2-3%/year below 50% – a 20–30% canopy-cover threshold targets areas that still qualify as forest but are at demonstrably higher risk of rapid loss, where incentives can have the biggest impact. Additionally, money will be deducted from payments in the case of forest loss and degraded forests, in proportion to the amount of damage and in the case of wildfires.7The TFFF Concept Note 3.0 writes that these guidelines “may be reviewed and refined over time to reflect improvements in scientific understanding and technical capacities.”
Concerns have been raised that 20% canopy cover remains too low as a threshold, especially for regions with historically high canopy density of 60% or higher, as it is far below typical definitions of dense forest. For example, the TREES (Tropical Ecosystem Environment Observations by Satellites) project defines >70% canopy cover as dense forest and 40-70% as ‘fragmented’ forest – that is, forest that is partly deforested, broken into patches. UNEP (2001) uses a 40% threshold for closed forests and 10-40% for open or fragmented forests. Setting the threshold to 20% effectively counts fragmented, partly deforested landscapes as ‘forest’, meaning logging could continue while still meeting the threshold.
Further, the selected threshold can drastically change the area mapped as forest, particularly in forest-savanna transition zones. When the FAO lowered the forest definition to at least 10% forest cover in its Global Forest Resources Assessment 2000, Australia gained about 118 million hectares of ‘forest’ overnight.
The WWF recommends setting a threshold of 50% for full payment and partial payments between 20% and 50% to better incentivise maintenance and restoration of dense forests.
Contributing USD 125 billion to financing the transition
The fund aims to invest USD 125 billion (including the initial capital investment of USD 25 billion and USD 90-100 billion in market borrowing) in bonds that align with environmental and social safeguards and contribute to the sustainable transition. Its exclusion criteria, which avoid activities related to coal, peat, oil and gas8The TFFF Concept note 3.0 writes that “the full exclusion list for TFIF’s investment universe and the respective monitoring mechanism are currently under discussion with the rating agencies. go beyond standard multilateral development bank policies, setting a higher bar for transition-aligned investing.9For example, while the World Bank has ended coal and upstream oil and gas finance, it continues to finance “certain gas projects in the poorest countries in exceptional circumstances”.
The TFFF’s ambitious financing targets are well-supported by market capacity. There is ample capacity in financial markets for the TFIF to invest its capital within the guidelines of its sustainable investment strategy. In its latest briefing note, the TFFF estimates that there is “close to USD 1.9 trillion in outstanding hard-currency emerging-market papers” – that is, USD- or EUR-denominated bonds issued by emerging or developing sovereigns and companies. With investment capital of USD 90-100 billion, the TFIF would be targeting only 4.7–5.3% of this market. Further, the World Bank reported that “the cumulative amount of green, social, sustainability, sustainability-linked, and transition bonds issued in the market reached USD 6.3 trillion as of June 2025”, highlighting the significant pool of instruments that can meet TFIF’s key investment criteria.
There are also signals that markets are open to large emerging market issuance: emerging market hard currency bond gross issuances in January this year were the highest they’ve been since 2011, at USD 58.3 billion, signalling strong investor demand.
Banks and companies in emerging markets (excluding China) have sold international bonds at the fastest rates since 2021, issuing at least USD 250 billion in bonds between January and July.
Set against the new collective quantified goal on climate finance (NCQG) of USD 300 billion minimum climate finance for developing countries by 2035, the TFFF is significant but not sufficient, prompting some stakeholders to suggest that the TFFF financing should be additional to the USD 300 billion floor.
How does the TFFF compare to other conservation finance frameworks?
The TFFF complements credit- and project-based funds by providing annual payments to countries for keeping forests standing, channelling finance through country-led budgets and programming rather than one-off projects. It has prioritised simplicity and readiness in its design, including by using established technologies, institutions and policies, to avoid the pitfalls of complex programme design and methodologies that have slowed payment processes for other conservation programmes. To make monitoring accessible to forested countries, the need for high-cost approaches is avoided by using widely available satellite-based data.
The TFIF does have some similarities with other nature-based funds and financing mechanisms, for example:
- Environmental impact bonds (EIBs) are a pay-for-success debt financing mechanism that limits risk for project operators and rewards investors by linking repayment to the achievement of a desired environmental outcome. EIBs have been used, for example, to finance the construction of infrastructure to manage stormwater runoff in the US.
- Debt-for-nature swaps may also contribute to financing nature conservation; however, these instruments only make economic sense in a limited number of cases, according to the International Monetary Fund (IMF).
- Crop Trust uses a similar endowment fund structure, with a blended finance base, to provide payments earmarked for crop diversity conservation activities.
- Legacy Landscapes Fund provides predictable, long-term payments for nature conservation. It uses a blended finance approach to source funding for “a diverse portfolio of 30+ outstanding protected areas by 2030.” Grants are provided to support the conservation of specific protected areas instead of as a results-based payment.
Returns on investment: Why investing in forests matters
Forests are largely undervalued for the benefits they provide. Global forests are estimated to be worth as much as USD 150 trillion, almost twice the value of global stock markets and over 10 times the worth of all the gold on Earth. While carbon sequestration accounts for a substantial portion of this value, forests are invaluable beyond this – from regulating both local and regional temperature and rainfall, to the provision of natural products used in treating cancer and other illnesses.
Protecting intact forests holds much higher value than the commodities that can be exploited from cutting them down. A recent World Bank report suggests that continued deforestation in the Amazon could cost Brazil alone USD 317 billion each year – seven times more than the profits that could be generated from commodities taken from the rainforest.
Built with Indigenous Peoples and local communities front and centre
Indigenous Peoples manage or hold tenure rights to around a third of the world’s intact forest landscapes, yet they receive little recognition or support for their actions. Centring Indigenous Peoples and local communities (IPLCs) in the TFFF is essential for its success.
At the Brazilian government’s request, a technical working group was established in early 2025 to lead global engagement with IPLCs in co-designing the TFFF’s dedicated financial allocation. Additionally, a Global Steering Committee composed of 17 IPLC organisations was established to guide the design process. The TFFF also commits to establishing robust grievance and redress mechanisms to improve accountability of its operations.
The TFFF commits to channel a minimum of 20% of forest payments to the Indigenous Peoples, local communities, and other forest owners and stewards that protect the forest, which recognises these critical contributions.
Forest payments will be disbursed either to national treasuries or to designated public funds of participating countries, depending on each country’s institutional arrangements. However, some groups argue that this funding should be channelled directly to those responsible for forest stewardship.
Global Witness highlights that “the TFFF can only truly respect the long-term interests of forest communities if it treats them as more than beneficiaries and includes roles for their direct decision-making and leadership in the broader fund.” It adds that the TFFF should also support the legal recognition and formal land rights tenure of Indigenous communities.
A work in progress
Crucial steps remain before the facility can get off the ground. Details of the TFIF shadow credit rating are expected to be finalised in September, and a decision will be made on whether the World Bank will serve as the host of the Secretariat following a meeting in October. A CEO also needs to be appointed to head the TFFF Secretariat.
The WWF has voiced support for the “establishment of a Technical and Scientific Advisory Panel to further refine monitoring and reporting systems” and for the TFFF Board to address this in a timely manner.
Discussions with forest countries, potential sponsor countries, IPLCs, and investors are ongoing. The legal and operational structure of the TFFF is expected to be well advanced for the anticipated launch of the facility at COP30 in Belém. This will be the key moment for tropical forest countries to commit to the TFFF and for investors to pledge financial support.
As a permanent and long-term financing vehicle, the TFFF will need time to get off the ground. Financial returns and payments to countries will not be immediate. Leonardo Sobral, a forestry director at the Brazilian NGO Institute for Forest and Agricultural Management and Certification (Imaflora), told Mongabay that the TFFF’s “permanent” nature, alongside clear and transparent monitoring methods, could help avoid future setbacks.
