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The world’s forests are significantly underfunded. A gap of $216 billion each year in forest finance needs to be filled between now and 2030, according to the first edition of the State of Finance for Forests (SFF) 2025 report titled Unlock. Unleash. Realising forest potential requires tripling investments in forests by 2030.
Public investment dominates, with less than 1 in every 10 dollars for forests coming from private investors.
This funding is required to achieve the Rio Convention targets to reduce global warming due to climate change, halt biodiversity loss and achieve neutral land degradation by 2030. It aims to reduce global greenhouse gas emissions to limit global temperature rise to well below 2 degrees Celsius, striving for 1.5 degrees Celsius.
To achieve the same, the annual forest investments need to more than triple by almost 3.6 times — from $84 billion invested in 2023 to $ 300 billion annually by 2030. Further, the investments need to be scaled up to $498 billion annually by 2050.
The forest finance gap needs to be closed with both public and private sources of capital.
“Achieving global climate, biodiversity and land degradation targets requires a significant expansion of the area under nature-based solutions (NbS) and a scaling of forest-related investment. The area under protection and other types of NbS needs to expand by an additional 1 billion hectares by 2030 and 1.8 billion hectares by 2050,” the report said.
It noted that in 2023, governments were the main source of forest funding amounting to 91 per cent of the total money directed. Of this, more than 96 per cent (accounting to $75 billion of public investment) was sourced from domestic government spending, while international public finance contributed to only four per cent ($2.9 billion).
Approximately 80 per cent of public international forest finance was offered on concessional terms, primarily through official development assistance (ODA) grants, it said.
India was among the top 15 recipients of public international forest finance in 2023, receiving a sum of $81 million.
Despite the international forest finance, India’s expenditure accounted to $7.1 billion outweighing external support. India ranked third, followed by China and the United States with $19.4 and $11.7 respectively.
“India’s public domestic spending is primarily allocated to the agriculture and forestry sector. As a tropical forest country, India's domestic expenditure highlights the critical role of internal public finance in forest-rich countries,” the report said.
Only 17 per cent of total global domestic government spending on forests ($75 billion) was allocated within 31 tropical forest countries, the report noted.
The country received $11.3 million in 2023 as international public finance meant to be spent on indigenous peoples and local communities.
The report projected that by 2030, tropical forest countries will require an estimated $67 billion annually, allocated across six complementary NbS — avoided deforestation, reforestation, agroforestry (silvoarable and silvopastoral systems), protected forest areas and avoided forest peatland conversion.
Additionally, $16 billion annually will be needed to protect existing tropical forests from deforestation, protected forest areas and forest peatland conversion.
The report noted that protection of intact forests in these countries is among the most cost-effective climate mitigation strategies, delivering immediate emission reductions while contributing directly to the global objective to halt and reverse deforestation by 2030.
“Restoration efforts will demand around US$ 33 billion annually to regenerate millions of hectares of degraded land in tropical landscapes, thereby enhancing carbon sequestration, biodiversity connectivity, and the provision of ecosystem services. Agroforestry will require roughly US$ 18 billion per year to integrate trees into agricultural systems, strengthening rural livelihoods, diversifying incomes, and reducing supply chain risks in forest-dependent economies,” the report said.
The report said the voluntary carbon market (VCM) has seen volatility in recent years. The total value of VCM transactions has seen a meteoric increase — from $320 million in 2019 to $2.1 billion in 2021. It however saw a steep decline to $755 million by 2023.
However, despite these fluctuations, forest-related carbon projects contribute to a significant share of VCM contributing to half the VCM transaction value.
For the same year, finance flows from the voluntary market and compliance forestry-related crediting programs reached a combined total of $1.3 billion. “Of this total, the VCM specifically attracted approximately US$ 355 million,” the report said.
“Credit transactions involving REDD+, Afforestation, Reforestation and Revegetation (ARR), and Improved Forest Management (IFM) made up roughly 56 per cent in 2021, 42 per cent in 2022 and 46 per cent in 2023,” it noted.
Despite all the measures, detrimental financial flows continue to threaten forest conservation efforts. “In terms of financial flows which potentially harm forests, private financial institutions provided US$ 8.9 trillion in active financing to companies with the highest deforestation risk as of November 2024 (Global Canopy 2025). In addition, environmentally harmful agricultural subsidies reached approximately US$ 406 billion in 2023,” the report said.