Why in the News?

Brazil, the host of COP30, has proposed the Tropical Forest Forever Facility (TFFF) to finance conservation of standing forests.

What is Tropical Forest Forever Facility (TFFF)?

Nature: A global blended finance fund that pays Tropical Forest Countries (TFCs) per hectare of forest conserved.
Adjustments: Deductions made for deforestation or degradation.
Equity Provision: At least 20% of payments reserved for Indigenous Peoples & Local Communities (IPLCs).
Monitoring: Payments tracked via satellite systems and managed by a TFFF Secretariat.
Relation to REDD+: Complements but does not replace REDD+; no carbon credits or project-based offsets.

Core Instrument: Tropical Forest Investment Fund (TFIF) under a Multilateral Development Bank (likely World Bank).
Funding Sources:
- Sponsors (20%): High-income countries and philanthropies, via concessional loans/grants.
- Market Investors (80%): Institutional investors, sovereign wealth funds, university endowments.
Investment Strategy: Invests in liquid public bonds (US Treasuries), corporate bonds (Apple), green/blue bonds; excludes fossil fuels.
Returns & Payments: Earnings from investments fund result-based payments to TFCs, with 2% annual increase for inflation.

Financing Burden: Global South may indirectly finance its own conservation as TFIF invests in their markets with higher borrowing costs.
Credit Rating Dependence: Returns hinge on ratings by Fitch, S&P, Moody’s.
Geopolitical Risk: Reliance on World Bank (US dominance) may skew control.
IPLC Gap: Despite pledges, historically Indigenous Peoples & Local Communities (IPLCs) receive <1% of climate aid.
Forest Definitions: Disputes over canopy thresholds (20–30%) may disadvantage sparser forest nations.

Launch: 2008 as a UN collaborative initiative (FAO, UNDP, UNEP); now >65 partner countries.
Framework: Under UNFCCC; incentivizes developing nations to cut emissions and improve forest carbon stocks.
‘+’ Component: Adds conservation, sustainable management, and carbon stock enhancement.
Objectives: Financial incentives for verified actions in (1) reducing deforestation, (2) reducing degradation, (3) conservation, (4) sustainable management, (5) carbon enhancement.
Mechanism: Countries prepare national strategies, monitor/report, and get results-based payments for verified emission reductions.

[UPSC 2025] Which one of the following launched the ‘Nature Solutions Finance Hub for Asia and the Pacific’?

(a) The Asian Development Bank (ADB)*

(b) The Asian Infrastructure Investment Bank (AIIB)

(d) The International Bank for Reconstruction and Development (IBRD)