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Beware the ‘financialisation of the forest sector’

The IUFRO report argues that the growth in instruments such as forest-related green bonds and forest carbon markets risk ‘further financialisation of the forest sector’ © REUTERS/Karen Toro
The IUFRO report argues that the growth in instruments such as forest-related green bonds and forest carbon markets risk ‘further financialisation of the forest sector’ © REUTERS/Karen Toro

Shareholders are potentially more interested in short-term profits than sustainable forest governance

A report unveiled at the UN Forum on Forests on May 6 has cautioned against the “financialisation of the forest sector” and advocated for community-led finance mechanisms.

Authored by scientists at non-profit the International Union of Forest Research Organizations, the report notes an increase in the complexity of forest-related finance instruments. These mechanisms purport to be aimed at improving “international forest governance”, says the report, but it argues that the growth in instruments such as forest-related green bonds and forest carbon markets risk “further financialisation of the forest sector”.

These mechanisms “follow the ‘economic growth’ paradigm, with financial actors and shareholders more often interested in short-term profits than long-term, just and sustainable forest governance”, the report warns.

It cautions that this focus on profits risks “perpetuating inequalities and producing perverse effects on sustainable forest management”.

The report proposes “philanthropic and community-led finance mechanisms” as an alternative to existing financial instruments and laments that they have so far “played a limited role”.

You can read the full report here.

A service from the Financial Times