Forestry carbon: mission critical for climate change
– how do we create the momentum needed? – Initiative Overview

The situation

Forestry is critical in its importance to climate change actions. It is one of the most important if not “the most important” strategic element in fighting global warming. Forestry receives broad and increasing support as a „key initiative“. This includes IPCC, UNEP, FAO, Vattenfall/McKinsey, The London Accord, WWF, Various Governments (e.g. Germany) – or to put it in the words of Sir Nicholas Stern. „… any climate change deal that does not fully integrate forestry will fail to meet necessary targets.“  (Key Elements of a Global Deal on Climate Change, 2008).

IMG_0036.jpgForestry is a valuable and scalable asset, and has made its way on the agenda at COP 15 in Copenhagen - both avoided deforestation (REDD) as well as aforestation/reforestation (A/R). Forestry for climate needs further public awareness, but even more action from the private sector as well as the policy makers. There is a lot of activity from “green and public” money in many regions of the world. But we need additional private capital and risk transfer mechanisms to generate the volume needed, and the environmental clock is ticking. So far, institutional for profit capital in forestry (about USD 30 bn) is mainly focused in the US and rarely has a carbon focus. Limitations in the Kyoto markets exist for various historic reasons and forestry still is not eligible under the major mandatory carbon trading market EU-ETS.


We need private capital and/or financing mechanisms to generate capital flows into the “attraction area”, in forests and projects that generate attractive carbon profiles. Forestry can offer carbon storage and profitability, and it is proven for many hundreds of years. Action can be in voluntary actions without crediting, in voluntary markets and in the mandatory segment. We should aim for profitable investments, investments co-financed by carbon credits or similar funding mechanisms and capital allocations that may only work with public carbon funding.

In any case, it seems mission critical to generate financial and carbon profile risks estimates to make a greater private capital involvement feasible – be it investments, risk taking capacity or transfer. All the elements and the willingness to contribute seem to be there, we “just have to make it happen”.


The challenge

However, we face a gap. The current setup does not generate the momentum needed. In global climate related initiatives forestry often is only one of many, and so far the financial relevance is only minor. Based on a multi-stakeholder-approach and low financial market participation in forestry aspects, it lacks a systematic link IMG_0138.jpgbetween carbon, forestry and the financial and risk transfer market. For leading risk managers and risk transfer agents, the forestry market today is not strategically relevant and priorities are given to other sustainability concepts. Forestry expertise typically is scarce in these organizations and institutional investors have not yet integrated the potential that forestry gives to the investment portfolio and the carbon balance (setting aside the financial focused US investments). Linking investment and carbon activities remains an organizational challenge. Academic forestry research traditionally does not have a strong financial element; carbon is hardly a part of an integrated forestry/finance research. Risk related research focuses mainly on specific locations, risk factors and tree species. The link to financial risk as investment markets is (e.g. portfolio management view) has traditionally not been an area of focus.

What is most critical for forestry and its carbon component today is that professional foresters, investors, and risk managers create an integrated quantitative framework generating risk, financial and carbon estimates. The private capital and financial markets needs quantitative measures and/or estimates to enter the market in larger scale. It needs to be shown, that forestry can be “operated” in a way that suits private capital market standards. We need pilots and then a broader use of risk management and transfer in the forestry market to establish a common ground and language to clearly communicate in terms of expected, estimated and realized risk, financial performance and carbon profile. However, from our experience this will not develop organically. It needs facilitation.


The initiative

The Initiative is designed to fill the gap described. We propose a market driven “hands on” 4-step approach to make forestry for climate happen. While the four steps build on each other, they should also be complimentary and interdependent. run in parallel. Awareness is needed by top management of large and influential corporations, including large institutional investors who can quickly make a difference. Capacity building is needed, especially with financial and risk management institutions to leverage the potential of the investment, capital and risk markets. There seems to be the methodology to generate integrated performance, risk and carbon estimates for forestry. Pilots for both A/R and REDD projects can lead the way and build the basis for the next step. Quantitative portfolio modeling, financial and carbon estimates will be a “translator” between foresters, forest managers, forestry research and climate change experts working with risk managers, investors and other private capital. It may provide policy makers the “data” needed for decisions and the appropriate guidance and cost/benefit for resource allocation. The understanding of investment and risk appetite of private capital and the public call for action need to connect via “risk transfer” mechanisms and what we call the risk operating model: what are the key risks to be managed, what is the financial and carbon relevance, how can they be managed on a portfolio level and who is willing to bear them – investors, risk managers or public institutions? The policy guidance is a condition sine qua non, to ensure the size and speed needed. This includes appropriate incentives in any segment of action, be it non market based, voluntary market based or in mandatory markets.


What we need?

butterfly2.jpgWe need collective action in an “impact approach”. We feel that a results driven structure including a dedicated core work group that combines the skills of forestry (biological growth), carbon forestry, forestry risk and portfolio modeling and risk transfer/insurance can drive the process efficiently. Other stakeholders need to be integrated for success and should get involved along the working path appropriately to ensure the results needed. Based on suitable funding and an “A-Team” leading the way, the awareness and publicity needed will be ensured. Senior management involvement and public communication are important contributors to success.


We encourage you to join this proposed initiative in one of the needed roles

-               Co-initiators

-               Funding sponsors

-               Working team members and

-               Others who want to help to make the initiative a success.

This includes corporate and institutional investors, industry, private individuals, risk experts, supra-national organizations as well as think tanks, research organizations, and private and public foundations.


For further information and support please contact


Judith Alt

c/o First Forest GmbH
Elisabethstraße 25
80796 Munich

Telefon +49 (89) 3270 897 – 0
E-Mail: judith.alt(at)




Impressum: – An initiative proposed by

First Forest GmbH
Elisabethstraße 25
D-80796 München
Telefon +49 89 32 70 89 7-0
Telefax +49 89 32 70 89 7-11
E-Mail info(at)

Geschäftsführer: Dr. Christian Röckemann
HRB 160266, Amtsgericht München



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