The fund intends to combine financial returns for investors with the allocation of a portion of the profits to countries that protect their forests. The financing model proposes that 20 percent of the resources will be subsidised by the governments of participating countries while the remaining 80 percent will be raised from financial markets.
The TFFF aims to raise US$125 billion from international sources at market interest rates, positioning itself as a low-risk asset. This money will be invested in projects with higher rates of return thus generating profits. Part of this profit will be returned to investors while the balance will go to countries that preserve their tropical forests in proportion to the area conserved.
This model ensures that investors recover their resources with a return aligned with regular market rates while also contributing to environmental preservation and the reduction of carbon emissions.
In addition to supporting conservation efforts the TFFF is expected to stimulate demand for sustainable debt instruments such as green and blue bonds. The fund will not compete with the carbon credit market but act as a complementary mechanism.
The TFFF has gained momentum, especially following a technical partnership with the World Bank and the Interim Advisory Committee countries, which include Germany, Colombia, the United Arab Emirates, France, Norway, and the United Kingdom. These countries have committed to supporting the development of the financial mechanism to provide financial compensation for tropical rainforests conservation.
For both investor countries and private investors, the model presents a more advantageous alternative to traditional environmental donations, as invested resources will be repaid within 30 to 40 years, with interest.
