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Forest livelihoods

FAO Qiang Ma

Forest finance 

Financing the transition to sustainable forestry, agroforestry and the restoration of degraded and deforested areas has gained increasing attention in recent years. Forest finance comprises the instruments and actions needed to mobilize resources for all stakeholders involved in forest management and value chains and to strengthen their financial viability. This website showcases FAO’s work on forest finance, including projects, guidance and capacity-development efforts that support investment in sustainable forest management, restoration and forest-based value chains, as well as the ecosystem services forests provide. It also highlights how FAO helps scale up investments that build inclusive and sustainable agrifood systems, including forestry.

Overview

Forest finance supports a broad set of needs, from sustainable forestry production and management, forest restoration and conservation to forest-based value chains development. It also enables key functions such as governance, policy development, institutional strengthening and capacity building. A wide range of actors is involved: small-scale producers, communities, MSMEs, corporates, financial institutions, public-sector bodies and third-sector organizations. Financing comes from diverse public and private sources and is delivered through various instruments, intermediaries and risk-mitigation tools. This creates a complex and fragmented landscape with significant overlap across sectors.

 

Challenges of forest finance

Mobilizing finance for forests and sustainable forest landscapes faces several interconnected challenges:

  • Large finance gaps relative to what is required for achieving climate, biodiversity and restoration goals
  • Misaligned incentives and fiscal structures, with existing subsidies or policies that reinforce business-as-usual rather than sustainable practices.
  • Limited and fragmented data on forest and landscape finance flows, which reduces transparency, constrains investor confidence, and limits development partners’ ability to design effective interventions.

  • Weak or uncertain revenue models for sustainable forest management and restoration, undermining commercial viability.
  • A limited pipeline of bankable projects, particularly in early-stage or low-capacity contexts.

  • Significant barriers to accessing finance for smallholders, MSMEs, communities, Indigenous peoples, women and youth—despite their central role in sustainable forest landscapes.
  • High transaction costs and small deal sizes for rural lending, which makes it unattractive to many financial institutions.

  • Mismatch between financing terms and forest investment cycles, which are long and capital-intensive.
  • Structural limits of results-based finance, especially where upfront investment needs are high or enabling conditions are weak

How can we address forest finance challenges?

Addressing forest finance challenges requires coordinated action by international development partners, national and local governments, the finance sector, private-sector actors (from small-scale producers to large companies), civil society and community organizations to improve enabling conditions, business models, local capacities and financial systems. Priority areas include:

  • Improve policies, governance, secure tenure and regulatory clarity to reduce risk and attract investment.
  • Align fiscal incentives and subsidies with sustainable forest management and restoration and phase out incentives that reinforce business-as-usual.
  • Improve data on forest and landscape finance flows to support stronger investment decisions by investors and development partners.

  • Develop viable and diversified revenue models for sustainable forest management, restoration and forest-based value chains.
  • Support incubation and business acceleration to help early-stage enterprises and community initiatives become investment-ready.
  • Enhance technical, managerial and financial planning capacities to build a stronger pipeline of bankable projects.

  • Organize producers and small-scale operators into cooperatives, associations and federations to increase scale, bargaining power and financial discipline.
  • Strengthen value-chain integration by fostering partnerships between companies and smallholders - such as out-grower schemes, contract farming and off-take agreements - that improve market access and unlock opportunities for finance and technology transfer.
  • Empower local intermediaries - producer organizations, community forest enterprises and local financial institutions - to aggregate demand, reduce transaction costs and manage risk.
  • Promote inclusive financial approaches tailored to women, youth, Indigenous peoples and community-based enterprises.

  • Support local financing pathways by strengthening producer savings and investment mechanisms, engaging national financial institutions, and encouraging local and regional investors - helping to shift gradually from informal to more formal financing systems.
  • Deploy blended finance, guarantees, concessional finance and public–private partnerships to crowd in corporate, institutional and impact investors with varying risk appetites.
  • Adapt financial products to the long-time horizons and risk profiles of forest and landscape investments.
  • Encourage performance- or results-linked mechanisms where appropriate, complemented by upfront support where capacities or cash flow are limited.

  • Improve cross-sector coordination among government agencies, financial institutions, investors, development partners and civil society.
  • Strengthen transparency and reporting on financial flows, performance and impacts to build trust and guide investment planning.

FAO's work on forest finance

FAO supports countries and partners to mobilize and improve finance for sustainable forest management, restoration and inclusive forest-based value chains. As a neutral facilitator and technical agency, FAO helps strengthen enabling conditions, improve bankability, expand access to finance for small-scale producers, mobilize diverse sources of capital and generate better data and tools for decision-making.

FAO’s current operational work on forest finance focuses on three core areas:

FAO supports producer groups, SMEs and community enterprises to develop viable business models and strengthen forest and restoration value chains. This includes advisory support, investment readiness, incubation and acceleration, market access and business planning.

FAO works with producer organizations, community groups and local financial institutions to enhance financial literacy, strengthen internal finance mechanisms and foster inclusive company–smallholder partnerships. FAO also facilitates targeted matchmaking between small-scale restoration enterprises and financial institutions.

FAO contributes to the design and application of blended financing models, de-risking approaches and catalytic structures that crowd in private and public investment for sustainable forestry and restoration. FAO also supports the capitalization and strengthening of local and national financing mechanisms that benefit small-scale operators.

Beyond these core areas, FAO also contributes more broadly to strengthening enabling conditions through work on governance, tenure, policy support and climate and landscape programmes, and to enhancing coordination and transparency by convening international, regional and national platforms where forest finance issues are discussed. The emphasis of FAO’s Forest Finance work may evolve over time, and additional core areas may be developed as needs and partnerships grow.

 

Events

1/7

2026

3/7

2026

Global Conference on Smart Farming: Leveraging data and technology for sustainable agrifood systems
01/07/2026 - 03/07/2026

FAO is organizing the Global Conference on Smart Farming: Leveraging data and technology for sustainable agrifood systems from 1 to 3 July 2026 at its headquarters in Rome, Italy, and online. The three-day conference will explore ways of scaling smart farming systems while showcasing practical innovations that promote youth and women’s entrepreneurship, and digital skills. It will also identify...

25/2

2026

26/2

2026

Matchmaking Tanzania
Tanzania (Tanzania), 25/02/2026 - 26/02/2026

A high-level matchmaking event held in Arusha, Tanzania, in February 2026 connected forest and farm producers with financial institutions and investors, fostering partnerships and financing opportunities to support sustainable forest management, landscape restoration and resilient rural livelihoods.

News
European Forest Institute and Italy host high-level discussion on forest finance at COFO28
30/09/2026

How can public and private finance work together to accelerate forest restoration and biodiversity conservation? At #WorldForestryWeek and #COFO28, the European Forest Institute (EFI) and the Government of Italy brought together experts to explore financing solutions, market-based incentives a...

New release: FAO report identifies methodology to improve global agroforestry monitoring
30/09/2026
Monitoring global agroforestry extent: An analysis of methodological approaches and data sources – part A reviews the principal methods currently used to estimate areas under agroforestry across global, regional and national scales, while exploring how the FRA RSS can strengthen the collection of internationally comparable data.  
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Publications
Enhancing the sustainability and financing of forest-based value chains
2026

Value chain analysis offers a critical lens to understand the actors and activities connecting production to consumption, revealing market access pathways,...

The State of the World’s Forests 2024 Forest-sector innovations towards a more sustainable future
2024

This edition of The State of the World’s Forests (SOFO) provides highlights on the state of the world’s forests and explores the transformative power...

Taking stock: what we grow together counts
Taking stock: what we grow together counts
2023

A practical guide for family farmers and producers to develop a planted forest inventory.

A guide to multiple-use forest management planning for small and medium forest enterprises
2023

This publication discusses the concept, evolution, and requirements of forest management planning, focusing on multiple-use forest management and small...

Occupational safety and health in the future of forestry work
2023

This report identifies trends and opportunities as well as challenges to promote safe and healthy working conditions in the forest sector.

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