First introduced at COP28, the TFFF proposes raising $125 billion in capital. The fund’s core objective is to reward tropical forest countries that are already maintaining or reducing deforestation rates but require ongoing financial support to continue doing so. Although more than 140 countries pledged at COP26 in Glasgow to end deforestation by 2030, current deforestation rates show that we are not on track to meet this goal. The TFFF seeks to address this shortfall by offering a long-term, performance-based funding model that rewards forest conservation.

Under the proposed model, tropical forest countries can receive annual payments of $4 per hectare of preserved forest. However, payments are subject to deductions:

• $400-$800 are deducted per hectare deforested.
• $140 per hectare degraded.

The TFFF is proposed to be structured as a two-arm facility, most likely managed by the World Bank:

1. The Tropical Forest Investment Fund (TFIF): will serve as the financial engine, which will mobilize capital through a blended finance model and invest it in low-risk, fixed-income instruments such as government bonds.
2. The Tropical Forest Facility (referred to simply as “the Facility”): will oversee the implementation of the reward system that channels payments to eligible tropical forest countries (TFCs).

These two arms will be coordinated by a central secretariat that ensures coherence between fund management and conservation outcomes. Each arm will be managed by separate trustees to maintain independent financial oversight, though a single institution may perform both roles if strict separation of accounts is upheld

The TFFF is intended to operate as a blended finance model, with two parts:a $25 billion sponsor tranche and a $100 billion senior debt tranche.

• The $25 billion sponsor tranche will consist of long-term loans, guarantees, or grants provided by high-income countries and other supporters, with repayment terms tied to the yield of long-term US Treasury notes.
• The remaining $100 billion senior debt tranche will be raised by issuing bonds to institutional investors. It aims to offer returns similar to those of multilateral development banks (MDBs). The fund will be independently managed and will engage The World Bank as its treasury and financial manager.

TFIF proposes to adopt an investment strategy that primarily seeks climate and sustainability-related investments in ODA-eligible countries (e.g., green, blue, or sustainable bonds) to qualify under NCQG criteria, secondarily prioritizes ODA-eligible vanilla sovereign debt excluding items on a negative exclusion list, and may also invest in instruments issued by non-ODA eligible countries and developed market economies.

The TFFF represents a major shift in how the global community approaches financing for forest conservation. Its simplicity—offering a flat payment per hectare for preserved forests—and its strong penalty mechanism (with a 100:1 ratio for deforestation losses) provide clear and transparent incentives for forest countries. This contrasts with more complex mechanisms like REDD+, which rely on intricate carbon accounting, or payment for ecosystem services (PES) schemes that focus on specific management practices.

The TFFF has the potential to become the largest single source of conservation finance in history. Its expected contributions to global climate stability, biodiversity protection, and improved livelihoods for forest-dependent communities mark it as a potentially transformative model.