Forests and finance: insights from a CETEx roundtable at London Climate Action Week

At this year’s London Climate Action Week CETEx convened a closed-door roundtable on Forests and Finance: Driving Ambition in the COP30 Roadmap, co-hosted with the COP30 Presidency and Ruth Davis OBE, UK Special Representative for Nature. The event brought together senior representatives from finance ministries, environment ministries, central banks, financial institutions, international organisations and academia to explore how economic and financial systems can better support efforts to halt and reverse deforestation and forest degradation.

Held under the Chatham House Rule, the session was designed to inform the ongoing development of the COP30 Presidency’s Roadmap for Halting and Reversing Deforestation and Forest Degradation by 2030. The Roadmap aims to identify the main drivers of forest loss, propose practical policy and financial solutions, and highlight areas where international cooperation remains inadequate.

Why financial systems matter for forests

A central theme of the roundtable was that financial systems are far from neutral in shaping forest outcomes. Participants explored how current macroeconomic frameworks systematically undervalue what forests contribute to economies and societies – from water security and food system resilience to climate regulation and disaster risk reduction – and how, as a consequence, forest clearance continues to register as economic growth rather than as the erosion of a long-term capital stock.

This misalignment is not incidental. It is reinforced by harmful subsidies, by an international financial architecture that places structural pressure on forest-rich economies to prioritise short-term revenue generation, and by debt obligations that leave countries with little practical alternative to monetising their natural assets. Large global financial institutions, meanwhile, continue to channel capital towards deforestation-linked commodity supply chains, reflecting a broader failure to price nature-related risks in lending and investment decisions. The discussion deliberately focussed on systemic and policy levers for change, rather than on the role of private finance alone: finance will not flow differently until the structural conditions within which it operates are reformed.

Four structural levers for change

Drawing on the experience of central bankers, finance ministry officials, and international policymakers around the table, the conversation examined where the rules of the game themselves need to change. The roundtable was structured around five areas in which reforms to economic and financial systems could help reduce pressure on forests and support more sustainable land-use outcomes, particularly (1) macroeconomic frameworks, (2) tax and fiscal policy – including agricultural subsidies, (3) international debt architecture, and (4) financial regulation.

Together, these levers underscored the importance of looking beyond individual forest-finance mechanisms alone. While instruments such as carbon markets and results-based finance have an important role to play, participants explored the wider systemic reforms needed to reduce the financial and economic pressures that contribute to deforestation.

Emerging insights from the discussion

Several themes emerged from the roundtable.

Macroeconomic frameworks. Participants highlighted the need to address the underlying financial and economic incentives that drive forest loss. Halting and reversing deforestation requires surfacing what forests actually contribute, and what is lost when they are gone. Forests can no longer be treated as an externality in our macroeconomic frameworks. They are assets whose loss carries costs that are already materialising, and until that is reflected in how we measure economic performance, manage risks and set the rules within which finance operates, incentives for deforestation prevails.

Tax and fiscal policy. The outsized role of fiscal policy in driving perverse outcomes for forests was highlighted. A significant share of global agricultural subsidies was designed with food security goals in mind, but their current design makes commodity expansion into forest frontiers the rational economic choice for producers, effectively transferring the costs of deforestation onto public balance sheets and vulnerable communities. The discussion recognised, however, that the politics of subsidy reform may be more tractable than they appear, and require alignment with economic self-interest. Approaches include redirecting support towards regenerative practices and verified land stewardship as ways of giving producers opportunities in the transition, rather than simply penalising the status quo. To shift subsidies meaningfully, a credible ecological transition plan that considers implications for producers, particularly smallholders, is necessary to get right.

International debt architecture. The structural relationship between sovereign debt and deforestation was examined: new research finds that countries receiving IMF loans experience around 9% more deforestation per year than they might otherwise. This does not point towards bad intent, but to a debt architecture that systematically pushes forest-rich economies towards monetising natural assets to service hard-currency obligations. Debt-for-nature swaps, drawing on lessons from ocean conservation, have demonstrated what is possible, and the Bridgetown Initiative offers a broader architecture for reform. Participants agreed, however, that swaps alone are insufficient and that more fundamental reforms to how international institutions assess sovereign risk and condition their lending are necessary if debt is to stop functioning as a structural driver of forest loss.

Financial regulation. When forests are cleared, the firms that banks lend to in those regions face rising costs and disrupted operations that eventually materialise as impaired loans and weakened collateral. Despite this, prudential frameworks have not yet caught up, and deforestation is not yet being treated as a financial stability issue, and the absence of complete tools cannot justify the absence of any action. Supervisors can move now by shifting disclosure requirements towards the pressures firms exert on nature through land use and supply chains, setting clear expectations that deforestation risk falls within the scope of prudential concern, and ensuring that bank-level deforestation policies are operationally enforced rather than merely aspirational.

Participants also emphasised the need for practical policy options that can be pursued in the near term, while also supporting longer-term systemic change. The Forest Roadmap provides an opportunity to identify concrete reforms that can help move international commitments towards implementation.

Finally, the roundtable highlighted the importance of international cooperation. Countries face different economic, fiscal and environmental contexts, but there is significant value in sharing experience, identifying common challenges and building capacity across jurisdictions.

Supporting the COP30 Forest Roadmap

The discussion reinforced the importance of ensuring that economic, fiscal, monetary and financial frameworks recognise the long-term value of healthy forest ecosystems and the communities that depend on them. As the COP30 Presidency continues to develop the Roadmap, discussions such as this can help identify practical policy options capable of bridging the gap between ambition and implementation. Insights from the roundtable will contribute to ongoing international conversations on forests, finance and nature in the lead-up to COP17 in Armenia and COP31 in Turkey.