rethink sustainability
Five reasons why forest investment is an urgent climate imperative
As the world strives for a net-zero, nature-positive economy, forests stand out as one of the most critical, yet often overlooked, foundations of sustainable progress. Forests cover nearly 31% of the world’s land area, delivering powerful benefits across environmental, social and economic dimensions. It is easy to forget how deeply they are woven into our everyday lives and the economy: The paper in your notebook, the timber in your homes, and the clean water in your glass, all trace back to healthy forest ecosystems. Forests regulate rainfall, filter water, and stabilise soils, providing essential services that underpin agriculture, urban infrastructure, and even the air we breathe. On a macro scale, they absorb up to a third of global CO₂ emissions annually and are home to over four-fifths of terrestrial biodiversity.
From safeguarding food and water security to buffering climate extremes, forests are essential to economic resilience and human well-being. Yet, they are facing mounting threats. The Amazon, for instance, is under increasing pressure as destruction and global heating risk a tipping point, beyond which damage will be irreparable. A 2025 study further underscores this trend in other regions, revealing that temperate and boreal forests in the northern hemisphere have shifted from carbon sinks to carbon sources since 2016, highlighting a broader disruption in the global forest carbon balance.1
Continued deforestation is accelerating this shift, weakening forests’ ability to act as carbon sinks and intensifying climate risks. Since 2000, approximately 517 million hectares of tree cover have been lost, equivalent to over 13% of global tree cover that year. In 2024 alone, total global tree cover loss reached nearly 30 million hectares, continuing an upward trend in recent years, according to Global Forest Watch.2 Agricultural expansion is the primary driver behind almost 90% of global deforestation.3
With the climate crisis intensifying, and the Sustainable Development Goals off track, forests stand as the bedrock of a global effort towards a climate-resilient future. While COP26 in Glasgow pledged USD 19.2 billion towards ending and reversing deforestation by 2030, follow-up action lagged until COP 28 in the United Arab Emirates, where forest finance regained momentum through new pledges and partnerships.4 Now, all eyes are on Brazil, host of COP30 and home to nearly 60% of the world’s tropical rainforests, as it prepares to champion the development and financing of a circular bioeconomy centred on the restoration, protection and sustainable use of natural capital. In this economy, nature-based solutions, combined with advanced technologies for producing bio-based materials, are used to transform value chains that currently rely on fossil-based and non-renewable resources, contributing to both nature-positive and net-zero targets.
Now is the time to scale up investment, not only to halt forest loss and restore degraded ecosystems, but also to unlock the full potential of a circular bioeconomy. Here are five compelling reasons why:
- Forests are natural carbon sinks
- Forests protect biodiversity and human well-being
- We are running out of time
- The economic case is stronger than ever
- Forest finance is undervalued
1. Forests are natural carbon sinks
Forests absorb roughly one-third of global CO₂ emissions each year, making them among the most powerful and cost-effective natural carbon sinks on the planet. They sequester up to 7.6 billion tonnes of CO₂ annually, roughly twice the total yearly emissions of the European Union.5 But this vital service is rapidly eroding. According to the United Nations Environment Programme (UNEP), deforestation and land degradation now emit more CO₂ than the entire global transport sector.6
Forest ecosystems harbour some 80% of land-based biodiversity, from plants to bacteria, which all depend on one another for life.7 Global wildlife populations have declined by an average of 73% over the past 50 years, according to a scientific assessment as humans continue to push ecosystems to the brink of collapse.8 Deforestation is causing dramatic losses in biodiversity and pushing more than a quarter of the world’s known species toward extinction. The International Union for Conservation of Nature and Natural Resources puts that number at more than 45,000 species.9
Enhancing forest protection and reforestation projects can lock away billions of tonnes of carbon, buying critical time for the transition to clean energy. A report from the UNEP10 highlights that halting deforestation, restoring degraded land, and better managing ecosystems globally could reduce emissions by 10-18 Gt CO₂ per year by 2050. With global CO₂ emissions estimated at 40 Gt annually, that’s at least 25% of the cuts needed to limit global warming to 1.5°C.
Read also: Ants: the hidden multi-trillion-member workforce that support multi-trillion dollar industries
2. Forests protect biodiversity and human well-being
Home to most of the world’s terrestrial biodiversity, our forests house millions of species of plants, animals, fungi and microbes that maintain the world’s economic balance. This biodiversity underpins critical ecosystem services which are essential for global food production, resilient supply chains and clean water. Healthy forests act as water filters, removing pollution and preventing sediment from flowing into streams. It is estimated that 75% of the fresh water available for human use comes from forests, with more than one-third of the world’s cities reliant on forested areas for their drinking water.
Forests are critical to human health and prosperity. They provide food and shelter for 1.6 billion people, including over 300 million Indigenous Peoples and Local Communities (IPLC). Numerous studies have found that forests that sit within the territories of IPLCs are better managed than forests in other areas.11 In the Amazon, forests within indigenous territories see deforestation at just one-fifth the rate seen elsewhere. These forests also absorb and store more carbon, and are managed more cost-effectively than centralised forest management schemes.12 As such, these communities are increasingly being recognised as essential to global forest preservation, providing ecosystems services that bestow a benefit far beyond their borders.
Forests also serve as buffers against natural disasters, reducing the risk of floods, landslides, and droughts, making them integral to climate adaption. Mangrove forests, for example, currently reduce annual expected flood damages from tropical cyclones by USD 60 billion and protect 14 million people. Medical science also depeneds on forests, with 25% of modern pharmaceuticals derived from rainforest plants.13
Recognising forests as natural infrastructure and financing them as such is critical to safeguarding long-term human well-being and global economic stability.
Read also: Tracking timber: scientific and digital innovations promise wood supply chain transparency
3. We are running out of time
The planet is approaching critical ecological tipping points, and forests are among the most vulnerable systems. Alarmingly, parts of the southeastern Amazon, particularly in Brazil, have already become net carbon sources, releasing more CO₂ than they absorb.14 Research published in Nature shows that between 10% and 47% of Amazonian forests could face cascading disturbances such as droughts, fires, and deforestation, that could trigger systemic collapse.15
This has real-world urgency: continued degradation could lock in irreversible changes in rainfall patterns, biodiversity loss, and carbon release, all within our lifetime. As we approach COP30 in the Amazon, the global community faces a pivotal decision: Invest in forests protection and restoration now, or face irreversible consequences later.
Read also: Reforesting the planet using seed-spitting drones from the air
4. The economic case is stronger than ever
The financial rationale for investing in forests has never been more compelling. Forests offer investors a dual pathway: they mitigate climate risk while unlocking long-term, sustainable financial returns. Forests are among the largest untapped natural asset in the global economy, representing a major economic opportunity. According to the United Nations Development Programme, over 50% of the global economy, equivalent to USD 44 trillion annually, is moderately or highly dependent on ecosystem services, such as carbon sequestration, freshwater regulation and pollination.16 While this figure encompasses a wide range of ecosystems, it underscores the foundational role that nature, including forests, plays in supporting the global economy.
The World Economic Forum estimates that investing directly in nature-positive business models, for example in ecosystem restoration, regenerative agriculture, sustainable forest management, transparent and sustainable supply chains, represents an opportunity of up to USD 3.5 trillion per year by 2030. Investing more broadly in circular bioeconomy solutions to transform other sectors, including infrastructure, energy, and extractive sectors, will require the development of new processes and bio-based products, for example natural fibres, synthetic bio-based fibres and wood building products, represents an even bigger opportunity, worth up to additional USD 6.5 trillion by 2030.17
Forest-based solutions stand out as a strategic, regenerative investment opportunity which can generate long-term financial returns, create jobs, and support sustainable rural economies.
Forests are among the world’s most valuable natural assets, vital for carbon sequestration, water regulation, biodiversity, and livelihoods
Read also: Trigger warning: five ways to buy time for net zero and prepare for net negative
5. Forest finance is undervalued
Forests are among the world’s most valuable natural assets, vital for carbon sequestration, water regulation, biodiversity, and livelihoods. Yet paradoxically, they receive only 3% of global climate finance according to the Climate Policy Initiative.18 This mismatch represents one of the most pressing gaps in the climate investment landscape.
Forest finance presents rare opportunities:
- To unlock long-term value
- Hedge against systemic climate risk
- Contribute meaningfully to global sustainability, nature-positive and net-zero goals
The first step and most important step toward unlocking the full value of forests lies in developing a circular bioeconomy, one that transforms supply chains to prioritise the restoration, protection, and sustainable use of natural capital. By shifting away from fossil-based and extractive models, this approach enables the creation of regenerative, low-carbon value chains that align economic growth with ecological integrity.
Emerging tools such as high-integrity biodiversity and carbon credits, along with innovative financial mechanisms like the Tropical Forests Forever Facility (TFFF), offer complementary pathways to raise capital for forest conservation and restoration, extending beyond value chain mitigation. The TFFF, set to launch at COP 30 in Brazil, is a multilateral fund still under development aiming to mobilise USD 125 billion in support of tropical rainforest countries. Designed to reward measurable reductions in deforestation rates, the facility is expected to generate USD 4 billion per year in returns for participating nations. With the goal of aligning capital flows with ecological performance, the TFFF has the potential to become a transformative model for financing nature-based solutions at scale.
Read also: Reforesting the planet using seed-spitting drones from the air
Investor considerations
Our ability to thrive as a species depends on Nature’s resources – geology, soil, air and water, all of which converge in forest ecosystems. At Lombard Odier, we believe that rethinking sustainability requires rethinking how and where we invest. Forests are not a sideline in this transition, they are foundational to rebuilding a net-zero, nature-positive economy.
As vital infrastructure for a stable climate, resilient economies, and thriving communities, forests must be allowed to prosper. The window to reverse decades of degradation is rapidly closing. Today, forests remain undervalued and underfunded. Their loss threatens more than biodiversity. Imagine a world without orangutans, white rhinoceroses, or the red wolves. These are just three of the many species at risk. Investors have an opportunity to change that, and play a pivotal role in the global system change towards a regenerative, nature-positive future. As we look ahead to COP30 in Brazil, the urgency is clear: the time to realign financial flows with natural capital is now.
1 Li, X., Ciais, P., Fensholt, R. et al. Large live biomass carbon losses from droughts in the northern temperate ecosystems during 2016-2022. Nat Commun 16, 4980 (2025). https://doi.org/10.1038/s41467-025-59999-2
2 https://gfr.wri.org/forest-extent-indicators/forest-los
3 https://unstats.un.org/sdgs/report/2024/extended-report/Extended-Report_Goal-15.pdf
4 COP26: World leaders promise to end deforestation by 2030 - BBC News)
5 www.unep.org/news-and-stories/story/rooting-sustainable-future-how-forest-resources-can-help-tackle-climate
6 https://www.unep.org/news-and-stories/story/how-halting-deforestation-can-help-counter-climate-crisis?utm
7 English (United Kingdom)_Brochure-sensibilisation-OK.indd (reforestaction.com)
8 www.worldwildlife.org/press-releases/catastrophic-73-decline-in-the-average-size-of-global-wildlife-populations-in-just-50-years-reveals-a-system-in-peril
9 https://iucn.org/
10 https://wedocs.unep.org/bitstream/handle/20.500.11822/35851/DF.pdf
11 Enhance Livelihoods of Forest Communities (worldbank.org)
12 Walker, et al 2019. “The role of forest conversion, degradation, and disturbance in the carbon dynamics of
Amazon indigenous territories and protected areas.”
13 Tropical Rainforests Are Nature's Medicine Cabinet (thoughtco.com)
14 Gatti, L. V., et al. (2021). Amazonia as a carbon source linked to deforestation and climate change. Nature, 595, 388–393. https://www.nature.com/articles/d41586-021-01871-6
15 https://amazonfrontlines.org/chronicles/the-tipping-point-is-the-amazon-rainforest-approaching-a-point-of-no-return
16 www.undp.org/blog/destruction-nature-threatens-world-economy-its-time-outlaw-it-serious-financial-crime
17 https://www3.weforum.org/docs/WEF_Finding_Pathways_Financing_Innovation_2023.pdf
18 Global maps of twenty-first century forest carbon fluxes | Nature Climate Change
Important information
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