As we continue to grapple with the urgent need to combat climate change and reverse biodiversity loss, the role of forests in mitigating these crises has never been more critical. Tropical forests, in particular, are essential not only for their biodiversity but also for their ability to sequester carbon and regulate the global climate. Despite their importance, many of these forests face threats across the tropical belt, from deforestation and illegal logging to unsustainable land-use practices.

To address these challenges, significant investment and innovation are required to embed sustainable practices, drive growth through forest-friendly businesses, create jobs and livelihoods, and build resilience in local communities.

From 2017 to 2024, Palladium—along with our partner Systemiq—implemented the UK Government’s Partnerships for Forests (P4F) programme, which successfully mobilised over £1 billion in private finance, brought 8.6 million hectares of land under sustainable management, and directly benefitted 326,000 people on the ground. Palladium and Systemiq have now been awarded the next phase of P4F.

Falling under the UK government’s Investments in Forests and Sustainable Land Use Programme (IFSLU), this new phase will mobilise private investment into inclusive sustainable businesses that protect and restore forests while supporting livelihoods and growth, ensuring value flows back to forest-based communities and smallholder farmers.

Over the next five years, the team will lead the programme to accelerate forest-friendly business models and inclusive land-use solutions across East Africa, West Africa, Central Africa, Southeast Asia, and Latin America – fostering sustainability, prosperity, and resilience in local economies. In addition, the programme will be expanding to the Congo Basin, one of the world’s most biodiverse yet underdeveloped regions, where the team will strengthen market systems that enable sustainable forest businesses and markets to thrive and protect this critical ecosystem.

“This work, spanning continents from Africa to Southeast Asia to Latin America, reflects Palladium’s commitment to developing market-driven solutions that promote sustainability and support the communities that depend on forests,” says Team Lead, Katie McCoy.

Building on a Proven Track Record

With this new phase, Palladium aims to accelerate efforts to reduce emissions, improve biodiversity, and create lasting change for communities across all five regions.

“The need for a second phase of P4F is clear,” adds McCoy. "Phase I successfully backed innovative prototypes that promoted a positive forest economy and supported over 100 sustainable businesses. However, there is still a shortfall in global capital flowing into the forest and sustainable land-use sector. This next phase gives us the opportunity to bring fresh thinking and proven approaches to scale, ultimately unlocking investment to drive real impact for forest-dependent communities, marginalised people and smallholder farmers across the tropical belt.”

In Phase II of P4F, Palladium will provide technical support, grants, and financial tools through locally-led teams to help forest-friendly businesses to scale. The programme will also continue creating the right conditions for sustainable businesses to grow by shaping national policies, strengthening local governance and fostering demand for sustainable forest products, with support from our partner, Efeca.

“This is about more than just addressing environmental issues,” McCoy adds.

“It’s about transforming entire industries and supply chains by supporting businesses that unlock the economic, environmental and social potential of forest landscapes. We’re focused on creating long-term, systemic change by ensuring that businesses have the necessary resources to thrive in the green economy.”

Recognising the increased vulnerability of smallholder farmers due to climate change, this phase will prioritise support to them, especially vulnerable women farmers. In the next phase, Palladium will work through expert partners to drive interventions that increase smallholders’ access to finance, resources and markets, helping them to build more secure, and sustainable livelihoods.

Empowering Communities in the Congo Basin

The next phase of P4F brings a new regional focus to the Congo Basin, which spans Cameroon, the Republic of Congo, Gabon, and the Democratic Republic of Congo. Home to some of the world’s most critical forest ecosystems, this region plays a crucial role in global climate stability.

“The Congo Basin is essential to the global climate system, yet it remains historically underdeveloped in terms of market infrastructure,” explains Andrew Sutherland, Head of the Environment team at Palladium. “Our work here will centre on establishing the market conditions needed for forest-friendly businesses to succeed, ensuring smallholder farmers and cooperatives have access to financing and sustainable markets.”

Initially, leveraging technical expertise and an extensive regional network, the programme will focus on improving the capacity of local organisations and making connections with market actors to establish demand and boost supply.

In the longer term, the programme aims to create thriving local and regional markets for forest-friendly products, strengthening the region’s ability to protect and restore its forests while providing sustainable livelihoods for local communities. This component of the programme is delivered in partnership with CrossBoundary, The Policy Practice, The Canopy Lab, and Trias.

Transforming the Landscape for Sustainable Finance

“Palladium’s ability to drive large-scale, impactful change in the tropical forest sector is rooted in its strong local presence, financial innovation, and public-private partnerships,” adds Sutherland. The programme’s approach emphasises the critical role of private finance in building sustainable and resilient forest economies. This is particularly important in underdeveloped markets like the Congo Basin, where access to investment has been a persistent challenge.

“Our experience with P4F has shown we need to address the barriers that can unlock private sector engagement.” says Sutherland. “This is particularly true in the Congo Basin, where the market is early-stage and there are limited livelihood opportunities. To address this, we’re helping to lay the foundations for sustainable private-sector-led growth by working with cooperatives and pioneering companies, providing incubation support and helping them to grow their businesses and attract investment. We are also empowering forest-dependent communities to lead and benefit from sustainable forest economies.”

Paving the Way for Climate-Positive Transformation

The success of these initiatives will have ripple effects across local economies, helping to create sustainable jobs, protect critical habitats, and mitigate the impacts of climate change.

Looking ahead to the next phase, Palladium’s work will continue to evolve, building on the strong foundations of P4F, its global experience and local expertise to foster resilience and growth in tropical forest landscapes. As McCoy notes, “The future of our forests and our planet depends on the ability to bring sustainable solutions to scale. These new programmes bring opportunities to do just that, and we are proud to be part of that transformation.”