TFFF has $7.8bn sovereign backing for $125bn target

The Tropical Forest Forever Facility has $7.8 billion in sovereign commitments against a $125 billion target, with $100 billion of that total meant to come from private bond investors, according to Net Zero Investor. The fund launched less than a year ago at COP30 in Belém, Brazil, and is making its case at COP17, the UN biodiversity conference under way in Yerevan, Armenia.

The Netherlands is the most recent sponsor to sign on, announcing a $500 million pledge at the conference. The design places sovereign money in a first-loss position beneath private bondholders, a cushion meant to let the fund issue debt rated comparably to multilateral development bank bonds. Proceeds go into a diversified emerging market debt portfolio, and the spread between what that portfolio earns and what the fund pays bondholders is used to reward countries for keeping forests standing.

For fixed-income allocators, the pitch is emerging market debt exposure with a sovereign first-loss cushion of about 8 cents for every dollar of the $100 billion sought from private investors. The $7.8 billion pledged so far provides that cushion. The rating the bonds can carry, and the coupon the fund must offer, depend on how much more sponsor capital arrives.

At PRI in Person, 34 fixed income investors signed a statement backing the facility, including Allianz Global Investors, Amundi, Deutsche Bank, Pictet Group, PIMCO and Schroders. The signatories stopped short of a firm commitment to invest.

Jan-Erik Saugestad, chief executive of Storebrand, said: "The idea is that investors could invest through familiar bond instruments, while part of the returns generated would help finance forest protection." Signing the statement, he added, was intended to show governments that investors are genuinely interested in exploring the mechanism.