Norway pledges $3B for forest fund, with conditions

Brazil’s main plan to protect the Amazon rainforest – the centerpiece of its COP30 climate agenda – is moving ahead, though initial funding falls well short of expectations.

The Tropical Forest Forever Facility, designed to support the conservation of endangered forests worldwide, will receive around $5 billion in pledged contributions – far short of its $25 billion target. Norway and France have agreed to join Brazil in investing in the fund.

On Friday, Germany’s Chancellor Friedrich Merz promised an investment of a “significant amount” during a speech in COP30 host city Belém.

He said the economy is not a hurdle to climate protection.

“For Germany, the decision at this crossroads is clear: We are focusing on innovation and technological openness to halt climate change. Our economy is not the problem, but rather the key to better protecting our climate,” he said.

The new fund “is an unprecedented initiative,” President Luiz Inácio Lula da Silva said Thursday at its launch. “Forests are worth far more standing than felled.”

The TFFF could play a pivotal role in forest protection as current climate policies and green finance remain insufficient to address the magnitude of the global challenge, said Lula, who is presiding over this year’s United Nations climate summit.

The fund is Brazil’s signature initiative at COP30, with initial ambitions for pledges of $25 billion that could be leveraged to create a $125 billion vehicle aimed at preserving tropical forests. Finance Minister Fernando Haddad said at the Bloomberg Green at COP30 conference in São Paulo on Tuesday that he believed the fund may raise $10 billion by next year.

The funds will be placed in a diversified portfolio designed to repay investors and to reward countries for conserving their forests. Under the plan, nations will receive a fee for every hectare of forest conserved. Brazil, Colombia, Indonesia and the Democratic Republic of Congo are among the countries that would benefit most.

“We achieved over 50% of what we had imagined for the end of next year, and we will keep working,” said Haddad in Belem. “The initial investment that’s being done is auspicious. You can anticipate that, after this first investment that we will have a very good start.”

President Lula was the first to announce an investment, followed by Indonesia’s Prabowo Subianto.

Norway pledged about $3 billion in loans over 10 years, which will be disbursed through 2035 and must be repaid by 2075, according to a government statement on Thursday.

The funding comes with conditions: the TFFF needs to secure at least $9.8 billion from other donors by 2026; Norway will not provide more than 20% of the total financing; and the funding model must be sustainable and maintain an acceptable level of risk.

More than 50 countries have endorsed the declaration of support for the launch of the fund. Other countries that have not announced investments are still engaged in conversations, including China, Netherlands and United Arab Emirates, according to Haddad.

The government never expected to raise $25 billion by COP30 and the summit will serve to introduce the TFFF to the world, he said.

“The backing from almost 50 countries is encouraging and marks an important start for the TFFF, reflecting growing recognition of the need for collective action to protect and restore tropical forests,” said Mirela Sandrini, interim executive director of WRI Brasil. “However, the pool of those that have actually committed funding so far remains limited. Broader support will be essential if the Facility is to become fully operational.”

Australia’s Minderoo Foundation also announced it will invest $10 million in the TFFF.

The contribution is intended to “catalyse support from other philanthropies, family offices, and private investors” in order “to accelerate the TFFF’s goal of making forests worth more standing than destroyed,” according to a statement by the foundation.

Challenges

Brazil’s efforts to convince developed countries to invest in the fund were made difficult in a moment when potential investors face budget constrains.

The absence of an announcement of investment from the U.K., for example, was noticeable in a time when the country is trying to tackle its surging debt burden.

The fund uses a blended finance model, seeking to invest its assets to generate a higher return than what it owes investors, and then using the difference to fund rainforest preservation.

That “spread is not a money faucet, but a risk premium,” BloombergNEF analysts wrote in a fact book about biodiversity finance published Thursday. “Poor performance of emerging market assets, which face a diverse host of economic and political risks, will not only nullify forest payments, but also see development finance absorb private investor losses.”

Experts say clarity on the fund’s governance and structure will be crucial to ease concerns about its ability to generate sufficient returns for investors while providing payments of about $4 per hectare to countries protecting their rainforests.

“Mobilizing resources alone is not enough,” said Sandrini in a note. “Its operation must be fail-safe – with transparent oversight and a focus on protecting intact tropical forests, while genuinely engaging Indigenous Peoples and local communities.”