Supporting banks for the financing of the sustainable management of tropical rainforests

The Brazilian Amazon Basin, Congo Basin and Indonesia house the three main tropical rainforest areas in the world. The substantial needs for natural resources brought about by growth and globalization and the pressure on the environment of these regions have been particularly acute over the past 40 years. Deforestation is the main cause of greenhouse gas emissions in countries in these three regions. Transcribing environmental issues into economic data is one of the major challenges of a transition towards a more sustainable development model.  

In the Congo Basin, the priority area targeted by the project, operators in the sector have difficulties in accessing bank credit. Some have already made the ambitious choice of sustainable development and, in certain cases, certification, which lead to heavier and different investment needs. Yet the loans offered by local banks are inappropriate. The banking sector in these regions has difficulties mobilizing expertise able to combine the fields of finance and sustainable development, in order to reduce its perception of the risk of such activities. Local banks, which are lagging behind in terms of the Social and Environmental approach, sometimes continue to finance unsustainable economic activities. With a better knowledge of the issues and the advantage of sustainable forest exploitation, they could choose to give priority to financing companies which conduct it and thereby create a knock-on effect. 
 

The project has five components:

• Taking the notions and implications of sustainable development into account in the financing decisions of banks;
• Improving the knowledge of the forest sector by banks;
• Promoting a better integration by banks of carbon finance applied to the forest sector, which is one of the most dynamic segments of carbon markets, but remains underexploited in the subregion;
• Increasing the capacity of banks and operators in the sector to prepare, appraise and finance high-quality projects.  

Following the program, participating banks will: 

• Launch the implementation of environmental and social upgrading programs and the integration of the basic notions  of sustainable development in their commercial teams and financial analyses.
• Integrate the main characteristics of sustainable forest management, as well as those of tropical wood industries.
• Have in-depth knowledge of the economic situation of companies in the sector and of strategic issues for the sustainable development of this industry. 

Partner banks develop an operational knowledge of carbon finance. 
Finally, they are able to appraise financing requests and have appropriate financing instruments to finance high-quality projects.