Innovative bond structures for forest climate finance

To meet the commitments set out in the Paris Agreement, new and creative sources of finance will need to be mobilised behind activities to support sustainable land use and forest management.

Vivid Economics worked with the World Bank to explore the potential of innovative bonds linked to results-based finance in the forest sector to provide a more attractive form of finance to achieve the objectives of investors, issuers and donors.

The report provides a review of the available financial instruments in the forest sector and describes ways to enhance bond structures to improve upon the status quo. A variety of potential bond structures are set out in a longlist, with a subset tested through stakeholder engagement with international agencies and with practitioners in Brazil. The report concludes with three recommended structures to develop further – using REDD+ performance based finance flows to enhance national, regional, or corporate issued sustainable forestry management bonds.