Agriculture and forestry are vitally important to the economies of many developing countries, especially those in the tropics, and provide income and food security for billions of people. Sustainable Land Bonds: How Governments can Finance Climate Commitments and Strengthen Rural Economies shows how tropical forest countries can access large amounts of inexpensive capital through issuing Sustainable Land Bonds (SLBs) that can be used to finance the largescale transition to sustainable and low-carbon land management practices.
SLBs target institutional investors in mainstream capital markets and match with results-based payment agreements that pay countries for achieving emission reduction outcomes. As such, they build on the success of the Green Bond market, and go a step further by establishing a transparent link to outcomes in terms of national emission reductions. SLBs secure funding up-front so that governments can make large-scale interventions, while results-based payment agreements will lower the cost of borrowing—potentially to zero—so long as agreed emission reductions are achieved. SLB financing can help countries achieve their Nationally Determined Contributions (NDCs) under the Paris Agreement while, at the same time, protecting the environmental infrastructure that supports rural production. By doing this, governments can catalyze a virtuous cycle of inward investment, higher rural productivity and increased employment, as well as meeting their climate mitigation targets.