Forests at the heart of sustainable development - Investing in forests to meet biodiversity and climate goals

Forests protect livelihoods, communities and infrastructure. They contribute to the sustainable development of rural economies, which promotes integrated territorial development and economic and social cohesion, and is vital to the well-being of rural communities. Forests provide subsistence, employment opportunities and income to about 25% of the world’s population.

The multifunctional role of forests is strengthened by the production of renewable wood materials in the (circular) forest-based bioeconomy. Renewable wood materials substitute for fossil-based alternatives, thus also contributing to climate neutrality and environmental sustainability.

As governments face intensifying funding shortages and as development cooperation has limited growth margins, long-term financing solutions may increasingly rely on the private sector and on instruments enabling self-sustained financing such as environmental funds. Private sector investors are key to long-term primary forestry sector finance, whether as social investors in the framework of corporate social responsibility or as impact investors looking for a mix of social and financial returns. According to the Global Partnership on Forest and Landscape Restoration, more than 2 billion ha of the world’s deforested and degraded landscapes have potential for forest landscape restoration than enhances climate change mitigation and adaptation. Continued landscape degradation poses serious obstacles to eliminating poverty and hunger, and maintaining biodiversity. It also makes it difficult for farmers and local communities to adapt to climate change that increases competition for scarce natural resources. This threatens livelihoods, well-being, food, water and energy security, our living environment and natural ecosystems.

This paper provides an overview of sustainability in the forestry sector and how this sector is crucial for adaptation to climate change. It sets out the benefits for society, describes the regulatory environment and examines the challenges encountered by companies and investors operating in this sector. Finally, it addresses the role of public banks in helping to develop the sector.