Forests are the only natural, cost-effective, and proven carbon capture and storage technology we have. With Secretary of State Rory Stewart's pledge to put climate change at the heart of the UK's development work, Palladium's Katie McCoy explores this "forgotten solution", and what it will take to invest and rebuild.

When Swedish school strike activist Greta Thunberg addressed the world's business and political leaders at Davos this year, she said, "I want you to act as you would in a crisis. I want you to act as if our house is on fire. Because it is."

Some of the world's politicians have started to pay attention. In the UK, the new Secretary of State for International Development, Rory Stewart, echoed Ms Thunberg's sentiment, saying, "We are facing a climate cataclysm," and pledged to put climate change at the heart of the work of the Department for International Development.

According to the Intergovernmental Panel on Climate Change, we have fewer than 12 years to avert disastrous climate change - climate change that will hit the poorest and most vulnerable people hardest and fastest. In this context, words like 'crisis’ and ‘cataclysm' are entirely appropriate.

How, then, can we rise up to this challenge with the urgency required?

The “Forgotten Solution”

One way is to channel more investment into the world's forests. Some have dubbed nature-based solutions to climate change the 'forgotten solution,' and it's easy to see why - forest-related finance accounts for less than 3% of global climate mitigation-related development funding. Yet forests are a critical part of the solution, with the potential to contribute around a quarter of the climate mitigation needed by 2030. By some estimates, conserving forests could cut carbon emissions as much as getting rid of every car on Earth.

Forests are also one of the most cost-effective mitigation solutions available. They're currently the only major source of emissions that could become a sink: by curbing deforestation and investing in reforestation we can stop adding to global emissions and absorb carbon that's already in atmosphere.

Forests and sustainable land use therefore present a huge and currently undervalued opportunity to address the climate crisis and create positive impact for people, planet, and the private sector.

So, what needs to be done?

Leveraging Private Sector Finance

We need to invest in business models that have the potential to conserve our remaining forests while simultaneously providing decent livelihoods for neighbouring communities and prosperity in forested countries.

We need to transform production models so that they produce the food the world needs without driving further deforestation.

And we need to invest in forest landscape restoration. By improving those landscapes that have been deforested, degraded, or underutilised, we can boost their productivity and help relieve pressure on remaining forests.

Practical examples of this kind of transformation exist. For example, last year we saw the launch of a landmark USD 95 million Sustainability Bond in Indonesia – the first of its kind. The bond is providing much needed finance to sustainable rubber production and forest conservation in a threatened, high biodiversity value landscape in Sumatra (home to the critically endangered Sumatran tiger).

We also saw the giant agro-commodity trader Cargill committing 25 years of conservation finance through an innovative new mechanism that finances projects over a 25-year period. The mechanism also provides independent fiduciary oversight that ties payments to results on the ground, ensuring benefits to local communities, global climate, and biodiversity.

But we need to see much more scale up and replication of these kinds of approaches. In order to do this, forests need more investment from both public and private sources – and they need it soon.

Shifting the Trillions

Leveraging private finance and shifting the trillions tied up in sectors and activities that are not in line with limiting global temperature increase to 1.5C – as committed to under the Paris Agreement – is needed to bring the necessary change. This is where public and private finance can complement each other, as recently concluded by the UK Parliamentary International Development Committee’s report on UK aid for combatting climate change.

The report acknowledges that public sector funders have a key role in "mobilising more private sector finance towards climate activities, and into areas and markets where private capital is needed but would not ordinarily go." The UK has supported innovation in this area and has also provided some leadership. Around 20% of its International Climate Finance is focused on forests as a key theme, and this includes promoting private investments to address climate change.

But if we want to get serious about the climate change emergency, more money needs to shift to the sectors currently under-resourced but with the greatest potential to create the change we need to see – to those 'forgotten' nature-based solutions. We are losing 13 million hectares of forests every year, and since the 1960s we have lost over half of the tropical forests in the world.

The Stakes are High

The stakes are too high to lose our forests. Beyond being the only natural, cost-effective, and proven carbon capture and storage technology we have, forests provide a whole range of additional social and environmental benefits. There are approximately 1.6 billion people who depend on forests for their livelihoods, including 70 million indigenous people. Forests are also essential for water security - over a third of the world's cities rely on protected forest areas for their water supply. Forests mitigate flood risks, protect biodiversity, and more.

In focusing climate mitigation efforts on protecting our forests, we can also ensure these additional benefits. Only once we start investing in forests will we be responding fittingly to the crisis we are in. Only then will we start acting like our house is on fire, because it is.

Katie McCoy is a team member of the Partnerships for Forests (P4F) Program, which is funded with UK aid from the British people and managed by Palladium in partnership with McKinsey & Company and Systemiq.