JAKARTA, Indonesia—Establishing finance mechanisms by which the private sector can invest in sustainable development was a prominent theme on the first day of the two day Tropical Landscapes Summit 2015 – with the rapid growth of green bonds mooted as a possible solution.

Speaking at the plenary session “Understanding the Strategic Value of Forest Assets”, Ben Ridley, director of sustainability at Credit Suisse, told the panel that currently only $10bn of the $52bn that is spent on conservation globally every year comes from the private sector — mostly from certified sustainable commodities.

“So the private sector needs to pull its weight,” Ridley said.

According to research conducted by Credit Suisse, McKinsey and the World Wildlife Fund, presented by Ridley, investment in conservation suffers from a $250-300bn spending shortfall.

Ridley pointed to green bonds as a key solution to meeting the financing gap.

“The green bond market is expected to reach $60-80 billion in new issuances this year, yet the first corporate green bond in Asia was just issued last year, so the growth potential in these market instruments in this sector is absolutely massive,” he told delegates. “If you really want to hit the big time with this then I think you need to be looking at the bond markets.”

Green bonds are issued by a company to raise money to implement climate change mitigation policies. Some of these policies may also serve conservation goals. For example, a palm oil company might issue green bonds to bankroll a transition to certification by the Round Table on Sustainable Palm Oil.

Forward Focus:

Forum on Forests

“So instead of having 2-3 years of residual habitat degradation while a company finds money to meet its sustainability policy, with the issuance of green bonds you could get money faster and condense that timescale,” Ridley told Forest News, on the sidelines of the event.

Ridley however noted that regional differences in consumer attitudes towards sustainability might compromise the value of green bonds. Underpinning their value is a consumer desire to buy a sustainable product, but for companies exporting to markets in India and China — where consumers are not so concerned about sustainability — there may not be an incentive to become sustainable.

“I think one of the challenges is that companies, or corporates, have the option of getting cheaper financing, because they can get away with borrowing from local or regional banks, which have lower standards, and this is a big risk,” Ridley said. “The capacity building requires that you get local and regional banks at the table as well.”

While the diversity of global consumer attitudes towards the value of forests may pose an obstacle to creating green finance solutions, delegates also underlined the diversity of values and benefits that need consideration when legislating for forest use.

“When we’re going to talk about values, or strategic values, we have to ask first whose values do we mean?” Dr. Peter Holmgren, Director General, Center for International Forestry Research (CIFOR) told the audience.

“There are many different stakeholders, on different levels, with different power relations and situations, and what we end up with is perhaps the question: how can we integrate all these different value systems, and make sense of it.”

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Holmgren cautioned against a too economically focused valuation of the forest ecosystem, highlighting the less easily quantified value of the services provided by the forest — including clean drinking water, flood protection, and animal habitats.

“We must acknowledge the values that are beyond the monetary measurement or calculation are there and take them into account when we make decisions. And we need to develop the methodologies and the processes to make this happen. This is a necessary compliment to the financially valued propositions to invest in forests.”

Holmgren also questioned the ability of green bonds — that are only issuable by a large corporate entity — to provide benefits to smallholders, who already suffer difficulties in accessing credit.

In identifying the multiple services provided by forests the delegates repeatedly stressed the need to harmonize economic, social and conservation values in the management of land and forest assets.

“The forests are a strategic asset to the nation,” said Siti Nurbaya, Minister of Environment and Forestry. “But the economical purposes must not decrease the ecological function, or conservation must not inhibit economic utilization.”