About

The Forest Bond Scoping Study

In 2006 the IFC commissioned EnviroMarket and Forum for the Future to undertake a scoping study to explore the alternative ways that capital markets might be used to finance a perceived funding gap for tropical sustainable forest management and conservation.

The study drew input from over one hundred finance, tropical forestry, timber and carbon trade professionals, and identified key opportunities and barriers to greater integration of tropical forests with capital markets.Four basic models of forest bond where identifed reflecting the scale and capital requirements of stakeholders engaged in forest management activity.

The biggest determinant of success is choice of location and asset origination is the biggest determinent of success; developers should seek out forest nations that offering economic and political stability, local demand for certified timber and ecosystem services and effective local forest governance.

Key recommendations include:-

• Improve acess to cost effective third party credit enhancement to manage high political risk.
• Improve access to predictable long-term demand for products and (ecosystem) services generated by sustainable forest management e.g. through secure off-take agreements for timber and non-timber forest services with credit worthy buyers
• Undertake a pilot forest bond to demonstrate the concept to investors, and establish a framework for validating the environmental, social and governance performance of subequent issues.

The Study concluded in August 2007 (see draft report).

The team behind the Study

The success owed a great deal to the excellent work of project manager Alice Chapple, the Director of Sustainable Financial Markets at UK-based Forum for the Future, the insight and support of the Steering Committee, chaired by financier Mark Campanale, and including Jon Williams of HSBC and Matthias Rhein of the UK Department for International Development, and finally to Juan Jose Dada of International Finance Corporation (IFC) whose commitment and enthusiasm kept us moving forward.

EnviroMarket Ltd continues to support the commercialisation of forest bonds, contributing to seminal programmes such as HRH Prince’s Rainforests Project (PRP) and the Eliasch Review Climate Change: Financing Global Forests commissioned by the Prime Minister in late 2007.

About EnviroMarket Ltd

EnviroMarket provides information analysis and advice with a single vision in mind: radically enhanced access to capital for the sustainable management of forest and marine ecosystems. Its clients are leading financial, government and civil society groups with the capacity and commitment to make this vision a reality.

EnviroMarket was co-founded in 2005 by two former-City financiers, Simon Petley and Jon Grayson, who met as postgraduate students of Environmental Technology at Imperial College, London. Over the past five years the firm has contributed to numerous conferences and workshops at the request of organisations including the ITTO, World Bank, UNFFF, IQPC and GreenPower Conferences – presenting on subjects ranging from SFM, conservation finance, ecosystem services, risks and capital markets.