The World Bank and Forests: Four Questions about the Forest Action Plan

April 14, 2016

Last week, the World Bank released a new Forest Action Plan (FAP) following presentation to the Board’s Committee on Development Effectiveness.  And the tagline for a high-level event during the Spring Meetings is “Think Forests: Why Investing in Forests is the Next Big Thing.”

In light of the inextricable linkages among forests, climate, and development, it’s great that the Bank is stepping up to put its considerable weight behind forests.  The FAP recognizes the role of forests in providing livelihoods for the poor, and the need to manage both trade-offs and synergies between forest protection and other sectoral objectives. 

But I do have a sense of déjà vu as this is the Bank’s third forest commitment in three decades.  Seeking reassurance that this one will be sustained, I have four questions for the Bank’s senior management.

 1. Will this time be different?

Over the years, the Bank has serially announced its commitment to integrating forests – and environmental concerns more generally – into its development agenda.  In the late 1980s, the Bank promised to intensify its engagement in the Tropical Forestry Action Plan, an initiative co-sponsored with UNDP, FAO, and WRI to respond to the “crisis” of tropical deforestation.  In 2002, the Bank rolled out a forest strategy, appropriately named Sustaining Forests: A Development Strategy.  But each time, follow-through failed to live up to initial aspirations.  Risk aversion stemming from sharp NGO criticism of the impacts of Bank operations on forests and forest peoples is no doubt part of the explanation.

The launch of the FAP provides a welcome opportunity to press the reset button.  For the last several years, the forests agenda at the Bank has been in limbo, following a critical evaluation by the Independent Evaluation Group in 2013, gradual erosion of forestry sector lending, and limited high-level leadership on forests in relevant policy arenas inside and outside the Bank.  It’s wonderful that the Bank is once again re-committing to the forests agenda, and attention from senior managers is to be celebrated.  But it’s also worth asking what will be different this time to ensure that investing in forests will indeed be the Next Big Thing, and that institutional mechanisms are in place to guarantee that renewed attention will be sustained.

2. Will the Bank’s new structure help?

One of the reasons that forests have gotten lost within the Bank is that they merit attention in multiple places:  as a productive sector (the focus of forestry sector lending and private sector investment and guarantees from the IFC and MIGA), as a safeguard issue (the focus of policies and procedures to protect forests and forest peoples from the negative consequences of Bank lending), as a target for climate finance (for reducing emissions from deforestation and forest degradation, or REDD+), and as an important (if often invisible) contributor to other sectors, including agriculture, water, energy, health, and disaster risk management. 

In 2006, then Bank President Wolfowitz abolished the Vice Presidency for Environmentally and Socially Sustainable Development, prompting me to express concern in a policy brief that mainstreaming the environmental agenda would be difficult without an advocate in senior management. (The bad news is that much of my analysis remains remarkably robust a decade later.)  Responsibility for forest-related issues was spread across units focused on agricultural and rural development, biodiversity conservation, and social protection, to which were added new trust funds focused on forests and climate change.

Forests now have a home in the Bank’s Global Practice on Environment and Natural Resources.  The FAP asserts that the Bank’s new organizational structure “can enable effective delivery of multi-sectoral solutions tailored to country-specific needs” and that a new “programmatic” business model will replace the current fragmentation across multiple instruments. Presenting client countries with a coherent menu of forest financing options would be a huge step forward.

3. Where’s the budget?

As with other parts of the Bank’s agenda, austerity has led to an excessive reliance on trust funds to pay for work related to forests.  A multi-donor trust fund called PROFOR established in 2002 to support analysis and knowledge-sharing is now providing a lifeline to an astonishing array of interesting initiatives within the Bank to advance the objectives now articulated in the FAP.  (Full disclosure:  I serve as an observer on PROFOR’s board.)  PROFOR-supported analyses focus on such issues as the contributions of forests to poverty reduction, the potential to minimize the impacts of mining on forests, and how to mainstream forests into disaster risk management.

While trust funds are an appropriate source of funding for global public goods and for pioneering new areas of work, they shouldn’t be used to subsidize activities central to the Bank’s core operations.  An indicator of the seriousness of the FAP will be the degree to which regular budgets are deployed to finance the analytical work needed to integrate forests into the “Systematic Country Diagnostic” documents that inform policy dialogues and development of lending programs.  The FAP suggests that Country Forest Notes will be financed with trust funds, as well as through Bank budget “when available.”  If such funds are not available when forests are critical to a country’s development trajectory, something is terribly wrong.

4. Why so little attention to REDD+?

The FAP devotes a total of three paragraphs to “Performance-based payments under REDD+,” with text sandwiched within ten other approaches to “sustainable forestry.”  There’s one more reference in the context of Climate Change and Resilience as a cross-cutting theme.  Yet the Bank is sitting on some $2 billion of REDD+ trust fund money among the Forest Carbon Partnership Facility, the Forest Investment Program, and the BioCarbon Fund. 

The FAP notes that REDD+ was enshrined in the Paris climate agreement last December, and that more than 90 countries have included actions related to forests and land-use change in their Nationally Determined Contributions to reduce emissions.  So one of the most important outcomes of the FAP would appear to be matching the supply of the Bank’s forest-climate finance with the demand from client countries in ways that meet both climate and development objectives.

CGD analysis (on Guyana, Brazil, and Indonesia) suggests that performance-based payments to reward conservation and sequestration of forest carbon can help governments to make the difficult policy changes necessary to reverse deforestation-as-usual.  Further, forest carbon payments may well be necessary to “top up” the financial return from other approaches to “sustainable forestry” in order to make it profitable to continue to manage forests as forests rather than convert them to other uses. 

Worryingly, last week Bank President Jim Kim left forests off the list of things that the Bank will finance as part of a new commitment to spend 28 percent of the Bank’s lending on climate change projects.  Let’s hope REDD+ is not on its way to being the Last Big Thing before it’s even been tried at scale.

Third time’s the charm? 

In short, Development World and Climate World alike should welcome the Bank’s re-commitment to the forest agenda, and hope that it can deliver on the objectives of the FAP.  Integrating currently fragmented forest-related structures will likely add up to more than the sum of the parts.  Allocating regular budgets toward implementation of the FAP will signal that forests are central to the Bank’s core agenda rather than an optional add-on.  And assisting client governments to integrate REDD+ finance into broader climate-friendly development strategies is a role the Bank is uniquely positioned to play.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.