Forests are vital allies in tackling the environmental and climate crises. Not only do they act as carbon sinks, helping to stabilise the climate, but they are also crucial to the global water cycle. However, deforestation remains a growing threat to these ecosystems, driving discussions and practices around climate financing.
Deforestation Data in Brazil
According to data from Global Forest Watch, in 2024 alone, 6.7 million hectares of primary forests and original vegetation in Brazil, including the Amazon, Cerrado, and Pantanal, were lost. This figure is twice as large as the previous year and covers an area larger than the Federal District.
It is important to highlight that deforestation is a double-edged sword: while it destroys green areas that absorb CO2, it also releases large amounts of this gas into the atmosphere, particularly through wildfires.
Data from IPAM (Institute of Environmental Research of the Amazon), for instance, estimates that the fires in the Amazon rainforest between June and August 2024 emitted 31.5 million tonnes of CO2 – nearly as much as Norway’s annual emissions of 32.5 million tonnes.
Climate financing: a beacon of hope
Given the worrying situation, Brazil, a key player in this issue due to its vast forest coverage and the significant challenges it faces in tackling deforestation, has introduced a climate fund aimed at forest conservation – the TFFF (Tropical Forests Forever Fund).
Interestingly, Kenneth Lay, the World Bank’s treasurer, had proposed a similar initiative in the 2000s, known as the Tropical Forest Finance Facility.
Tropical Forest Finance Facility
This fund would serve as a payment mechanism for countries that could demonstrate effective results in forest protection and meeting sustainability targets for these biomes. The funding would come from developed countries, which could either use their own resources at low interest rates or turn to international loans to create and ensure the growth of the fund.
Initially, the goal was to ensure a return within 20 years. The annual profit generated would be directed to the countries actively preserving their forests, ensuring a continuous flow of resources for those with large forested areas to invest in conservation projects. At the end of the two decades, the investment would be repaid to the developed countries. In this way, risks would be shared between nations, providing greater credit security.
The idea, which ultimately didn’t materialise, inspired Brazil. Marina Silva, the Minister of the Environment, and Fernando Haddad, the Minister of Finance, presented the proposal at COP28 in Dubai, United Arab Emirates, in 2023.
How will the TFFF work?
The initial plan is to mobilise $125 billion to allocate resources to countries that preserve their forests. However, there are conditions for a country to be eligible:
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It must have significant areas of tropical rainforest within its territory.
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It must maintain a deforestation rate below 0.5%.
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It must not have a high income.
Currently, 70 countries are eligible to receive the funds, the majority of which are in the Global South, including Brazil, Colombia, the Democratic Republic of the Congo, Indonesia, and Malaysia.
The confirmation of forest preservation by countries will be carried out through satellite monitoring. For every hectare of intact forest, the country will receive $4, while for each hectare of deforestation, there will be a deduction of $400.
Additionally, it is crucial that 20% of the allocated resources be directed towards financing projects that support the development of local communities, fostering social and environmental progress in the region.
The aim is to ensure forest preservation with the active participation of society, particularly historically marginalised groups, who are often excluded from these discussions yet are directly impacted by them.
Behind climate financing
As with the original concept proposed by Kenneth Lay, investments would come from the governments of countries and private sector institutions, helping to reduce risks and ensure greater predictability, given that the stakeholders have robust economies. The fund, in turn, would be managed by the World Bank.
Several countries around the world have already expressed support for the project, including governments such as those of the United Kingdom, Germany, and Norway – all of which have been implementing environmental conservation and energy transition investment policies for decades. Among the initiatives are the Nature Recovery Green Finance Standard (UK), the Climate and Transformation Fund (DE), and the Climate Investment Fund (NO).
Another key point is the presence of investors willing to take on the initial risk and provide primary funding to kick-start the project. According to a report by Capital Reset, strong economies like China, the United Arab Emirates, and Saudi Arabia are said to be ready to assume this role as “sponsors.”
The United States – the world’s largest economy – during Joe Biden’s visit to Brazil in 2024, also supported the idea, while announcing an investment of over $50 million in sustainability projects in the Amazon. However, with the change of government in January 2025, the US stance on the fund is expected to shift, as the current president, Donald Trump, has been known for his reluctance to support climate financing projects.
COP 30 as a platform
Everything points to the Brazilian government announcing the fund, along with the first participants – investors and beneficiaries – during COP 30, which will take place in Belém in November 2025.
The symbolism of making this announcement at the event is significant, as Belém is located in the Amazon, the world’s largest tropical rainforest, which faces constant threats to its preservation, in a country that is taking the lead in this important initiative.
The stage where this will take place is also worth noting. With high-level representatives from governments around the world, alongside significant participation from organised civil society and major global economic players, presenting the success of this project at COP could serve as inspiration and encouragement for the creation and prosperity of climate financing mechanisms.
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