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Financial support for global forests is not only falling short but actively fuelling deforestation, a new report has warned, as billions continue to flow into industries that drive environmental destruction.
A new report, Transforming Forest Finance, has revealed that global funding for forest conservation is severely inadequate, with much of the money actually contributing to deforestation instead of preventing it.
Released on March 20, 2025 by the Forest Declaration Assessment, supported by the United Nations Development Programme (UNDP), the Climate and Land Use Alliance and other partners, the report highlights a stark funding gap. The release is right ahead of International Day of Forests recognised on March 21 every year.
While an estimated $460 billion per year is required to halt deforestation, actual financial support falls far short. Worse still, for every $1 spent on forest protection, $6 is directed towards activities that drive deforestation, such as industrial agriculture and logging.
In 2023, private financial institutions invested $6.1 trillion in sectors linked to deforestation, while governments continued to provide $500 billion annually in subsidies that encourage environmental destruction rather than conservation.
Many developing nations are burdened with debt, collectively owing $11 trillion, which often forces them to exploit forests for short-term economic gain, the report noted.
Experts are calling for urgent financial reform. Imogen Long, lead author from Climate Focus, in a statement, said: “The current financial system rewards short-term profits over long-term sustainability. We need systemic changes to make forests a financial priority.”
Pablo Pacheco from WWF added: “Indigenous Peoples and local communities are the best forest stewards, yet they receive only a small fraction of climate finance. This must change.”
One of the report’s major criticisms was directed at the REDD+ programme, a global initiative that pays countries to reduce deforestation. However, it argued that payments under REDD+ are insufficient, ranging from $5–$10 per tonne of carbon dioxide, while the actual cost of reducing emissions is estimated at $30–$50 per tonne. This financial shortfall means forest-rich nations have little incentive to prioritise conservation over economic exploitation.
On the other hand, the report also highlighted successful funding models, such as the Mesoamerican Territorial Fund and the Podáali Fund, which have shown that direct funding to Indigenous communities leads to better conservation outcomes.
To address these challenges, the report outlines six key actions. It called for reforming public and multilateral finance so that institutions like the World Bank provide more funding for forest conservation. It also urged the overhaul of sovereign debt systems, as high debt levels push countries to exploit forests for economic survival.
Governments must also redirect harmful subsidies, shifting funds away from industries that drive deforestation and toward sustainable alternatives.
Another major recommendation was to increase direct funding for local communities, ensuring that Indigenous Peoples and local groups receive financial support to protect their lands.
The report further emphasised the need to strengthen financial regulations, requiring banks and investors to account for deforestation risks in their portfolios.
Lastly, it advocated for new financing models, such as the proposed Tropical Forest Forever Facility, which could provide long-term, stable funding for forest conservation.
With 30th Conference of Parties (COP30) to the United Nations Framework Convention on Climate Change approaching, these findings are expected to shape global discussions on forest finance and sustainability. The report stressed that without immediate financial reform, the world risks losing one of its most crucial natural defences against climate change.