Brazil’s TFFF offers a way to link environmental stewardship with macroeconomic stability and for the UK, supporting the facility could provide a fiscally efficient way of delivering against key international climate and nature finance goals, write Elena Almeida and Daisy Jameson.
At COP30 in Belém, Brazil is expected to launch an ambitious environmental finance mechanism named the Tropical Forest Forever Facility (TFFF). The TFFF aims to reward countries that maintain or expand their forest cover by providing long-term, predictable finance for doing so. Countries that keep deforestation below 0.5% of their forest area per year will be eligible to receive payments.
With this design, the TFFF will help address the difficult trade-off between economic growth and environmental sustainability that many forest-rich nations face. For the international development strategies of donor countries like the UK, the facility’s design will support goals to end deforestation without relying on additional grant funding: the result being minimal or no impact on the UK’s fiscal position.
How exactly will the TFFF operate?
The TFFF is structured as a dual-arm financial architecture, consisting of (1) its investment arm, the Tropical Forest Investment Fund (TFIF) and (2) its results-based payment arm, the Tropical Forest Forever Facility. Both will be coordinated by a dedicated Secretariat (the World Bank for now).
The TFFF borrows money through the investment arm, which combines public and private capital. The investment fund is intended to operate much like a sovereign wealth or endowment fund, investing an initial capital of US$125 billion (through a blended finance mechanism comprising US$25 billion in concessional public finance and US$100 billion from private investors) into a diversified portfolio of long-dated bonds and other fixed-income assets from emerging and developed markets.
Around one-fifth of the capital is expected to be provided by high-income countries, multilateral organisations such as the World Bank, international non-governmental organisations (NGOs) and philanthropic organisations, who are expected to make single, fully repayable investments through low-interest, long-term concessional loans or investments. The remaining four-fifths are due to be mobilised from private institutional investors by issuing market bonds. The estimated cost of capital from both sources is 4.9%. Together, these resources will form an investment portfolio, with returns from that portfolio (predicted to be 7.6% on average, leaving a profit of 2.7%) used to provide payments to eligible recipient countries, rewarding them for each hectare of forest maintained.
TFFF investments will likely exclude those that cause significant environmental impact, specifically those linked to coal, peat, oil or gas. The fund’s investment income will be used to generate stable annual returns, first servicing its debt and initial capital provided by contributing countries and then aiming to provide up to US$4 billion per year in ‘forest payments’ to eligible tropical forest countries. Nevertheless, as with any investment, returns are not guaranteed.
Much like a permanent endowment, the TFIF is designed to preserve its principal and use only the investment returns to fund ongoing payments. Participating countries will receive payments of US$4 per hectare of conserved forest (monitored via satellite), adjusted downward if deforestation or degradation occurs. Beyond a threshold of 0.5% annual deforestation, countries will become ineligible for payment.
Why the TFFF matters for forest-rich nations and the world
Tropical forests provide a multitude of ecosystem services that contribute to economic and financial stability as well as societal wellbeing. Forests are the second-largest source of carbon sink, absorbing one-third of anthropogenic carbon emissions; they regulate rainfall across continents; they house half of the world’s terrestrial biodiversity; and they are also home to and sources of livelihood for 300 million people. However, the funding available for forest conservation falls short of what is needed to achieve global deforestation targets.
Funding for forest conservation has relied to date on short-term donor cycles or project-based aid that is subject to changing political priorities in high-income countries. The TFFF is different as it intends create a self-sustaining, perpetual finance mechanism akin to a ‘sovereign endowment’ for the planet’s forests. By investing in global capital markets and using the profits to fund forest conservation, the TFFF aims to create a stable, independent stream of income that rewards tangible outcomes.
Importantly, the initiative has been designed by the Global South, led by Brazil, in collaboration with other tropical forest nations including Colombia, the Democratic Republic of Congo, Ghana, Indonesia and Malaysia. This signals a new model of equitable climate partnership, where forest-rich countries co-design global solutions instead of simply receiving aid. Moreover, at least 20% of TFFF reward payments must flow directly to Indigenous Peoples and Local Communities through dedicated national or global finance windows.
Four reasons why the UK should support the TFFF
As a longstanding leader in climate diplomacy and development finance, the UK is well positioned to champion the TFFF and there are four key reasons why it should do so ahead of COP30:
- Supporting international climate finance and development goals. The TFFF aligns directly with the UK’s International Climate Finance (ICF) strategy, offering a mechanism to curb emissions from deforestation, one of the largest and most cost-effective mitigation pathways. In focusing on emerging economies, the TFFF also aligns with the UK’s International Development strategy’s primary ambition to tackle climate change and protect nature internationally. Given the Fund will also aim to mobilise private finance, it will help to achieve its ambition of deploying the private sector’s financial capacity to advance its climate and nature goals.
- Building on biodiversity and global nature commitments. The UK was instrumental in securing the Global Biodiversity Framework and promoting the Taskforce on Nature-related Financial Disclosures (TNFD). UK engagement with the TFFF would translate the country’s high-level pledges from the Glasgow Leaders’ Declaration and the Kunming–Montreal Global Biodiversity Framework into visible, lasting outcomes.
- Opportunity to be a global leader in supporting key partners in the fight against deforestation. Brazil’s own US$1 billion seed contribution and additional contributions from Indonesia underscore tropical forest countries’ commitment to this initiative and represent a clear demonstration of shared risk and ownership. Investment in the TFIF provides the opportunity for renewed UK influence in shaping fair, transparent and effective climate finance structures, while strengthening diplomatic ties with Brazil and other forested nations ahead of COP30.
- Providing fiscally efficient climate and nature finance. A leverage ratio of 1:4 (every US$1 in public or philanthropic capital mobilises US$4 in private investment) makes the TFFF a high-impact model, in line with the UK’s emphasis on blended finance. Additionally, under the UK’s fiscal rules, provided that the TFFF makes a return higher than the rate at which the UK borrows, the financial asset created when the loan is deployed to the facility can be netted-off under the UK’s new Financial Transaction Control Framework, which sets out when government will use financial transactions (like issuing loans or investment in financial assets like equity) and the controls around their use. Only if the UK were to commit more than the difference between its gilt yield and the returns the Fund makes would the difference between the two rates score against the fiscal rules.
A significant step forward in reimagining how tropical forest conservation is financed
For Brazil and many forest nations that hold the responsibility of maintaining forests as global public goods, the TFFF offers a way to link environmental stewardship with macroeconomic stability. If successful, the TFFF could set a precedent for how developing economies can mobilise long-term finance for global environmental assets. International support from countries like the UK will be essential to ensure its credibility and impact, underscoring the principle of shared responsibility for maintaining the planet’s critical ecosystems.
The authors thank Isabel Lara Miranda, Sini Matikainen and Georgina Kyriacou for reviewing a draft version of this commentary.