Over the years sustainable solutions in forest management and preservation in tropical regions have been primarily developed by non-governmental and local associations. In emerging and developing countries, such projects aim at halting deforestation and empowering local communities to preserve native forests while creating sustainable livelihoods.1  But even though deforestation rates have been declining in the past decade, the fundamental flaw of a linear model where economic development is opposed to forest preservation has not been fully addressed. In order to create a virtuous cycle where forests are essential to sustainable economic growth both for local communities and markets, private investors need to be both catalysts for existing best practices and sources of new forms of sustainable investing initiatives, aiming to preserve and restore the world’s native forests.

Transparency over existing practices is a prerequisite for the much needed transition to a sustainable system that simultaneously promotes economic growth and sustainable forestry. A new initiative by Google, the World Resource Institute (WRI), and more than 40 other partners provides a welcome solution to this challenge. The Global Forest Watch (GFW) is a dynamic online forest monitoring and alert system that unites satellite technology, open data, and crowdsourcing to provide “near-real-time” information about forests around the globe2. For the first time governments, companies, NGOs, and the public will have access to a free and robust data platform that not only encourages the sharing of best practices by significantly increasing the transparency of the industry, but also raises the accountability of businesses operating in forests around the world.

As the GFW tool allows for local communities and users to upload alerts, photos, and even contribute data, forestry operations can now be closely monitored in order to hold governments and companies accountable for forest related commitments. Private businesses have recognized the tremendous value of the GFW tool, which can help analyze the compliance of suppliers and supply chains in order to help guarantee the sustainable sourcing of raw materials. Ensuring that the raw materials used in a product are sustainably sourced is essential in mitigating the material risk that deforestation poses to products dependent on forest linked products.

While halting deforestation through initiatives such as the GFW is the first step towards the long term sustainability of rainforest ecosystems, the next step is to have the private sector invest in the rainforest to ensure its long-term protection. This allows for the transformation of the initial unsustainable model of felling forests to create economic activity into a new model, where forests stand and economic activity develops in and around them.  A recent publication by the Global Canopy Programme, The Little Forest Finance Book3 ,analyzes the various aspects of the embedded value of forests. Beyond its carbon value4 ,agriculture, and wood, forests provide resources for the pharmaceutical and cosmetics industries, non-timber forest products, and also new sources of revenue such as ecotourism, which is estimated to have an annual value more than five times that of agriculture and wood harvesting combined5. Most of the activities actually responsible for deforestation and forest degradation can be converted to more sustainable practices that do not endanger forests, while promoting sustainable economic development. Agriculture, wood harvesting, and non-timber forest products collecting are examples of practices that can be conducted in ways where forest degradation is minimized or prevented altogether through the use of sustainable farming practices, better land management, and sustainable harvesting. The role of private investors in transforming these practices into mainstream sustainable and responsible economic activities—by increasing standards, requesting certifications, or supporting sustainable initiatives—is paramount. The rationale behind this necessary transition is simple: the value of forests is greater than just the sum of the land and wood. As such, it is imperative that the various economic activities financed by investors and supported locally should be incorporated into the investment decision-making process.

Over the long term, what the market cannot value today but could reward, at least indirectly, is the pledge to preserve cultures, languages, ancestral knowledge, and ethnodiversity. Such things may not have monetary value, and probably should not, but do have reputational added value for those who choose to protect them. Indeed, investing in the rainforest for all of these reasons is a credible engagement towards global sustainability, and the ultimate investment for very-long term oriented investors looking to place capital in what nature holds most precious, and most valuable.

Margarita Pirovska PhD, Policy & Sustainability Analyst at Cornerstone Capital Inc. and former Project Manager at GDF SUEZ at the Sustainable Development Division.
Juan Lois,  Director Business Development Cornerstone Capital Inc.

To view the full issue of the JSFB click here.

1 See example of Amazonas Sustainable Foundation, aiming to make “forests worth more standing than felled” through their “Bolsa Foresta Program”. http://fas-amazonas.org/?lang=en

4 See article in this Journal on The real value of the rainforest

5 Little Forest Finance Book, op. cit.

http://www.globalcanopy.org/materials/little-forest-finance-book

4 See article in this Journal on The real value of the rainforest

5 Little Forest Finance Book, op. cit.