IFC and Sustainable Forestry: Supporting Jobs and Securing a Renewable Resource
Three hundred fifty million people around the world depend on forests for their subsistence and income. Many more enjoy the environmental benefits of forests, which cover a third of the planet and protect watersheds, provide fuel and other necessities, trap carbon, contribute to soil fertility, and reduce the risks of natural disasters like floods and landslides.
Yet despite their tremendous value to society, forests are shrinking. FAO estimates the world loses about 13 million hectares of primary forest annually. The gap between supply and demand for wood products has increased incentives for illegal logging and the associated trade.
Sustainable forestry management strikes a balance between demand for forest products and the preservation of healthy forests over the long term. It is crucial for maintaining the economic and environmental benefits of forests during an era of rapid climate change and growing global population. Ensuring that forest products and services are priced correctly strengthens incentives for sustainable management.
IFC is working with companies who recognize that sustainable forestry is can open new markets, generate attractive long-term financial returns, and secure a dwindling natural resource. Private finance, $15 billion annually, is the most significant source of financing in the forestry industry in developing countries.
Over the past decade, IFC has invested in 56 sustainable projects along the forest product supply chain worth $1.5 billion. These include paper and board production, mechanical wood production, processing in pulp mills, and primary production of wood. During the same period, IFC Advisory Services supported 44 projects worth $30 million in spending, mainly on land and social and environmental-related issues with upstream activities like timber plantations.
A review by the World Bank’s Independent Evaluation Group, published earlier this year, found that IFC’s forestry projects have helped developing countries produce higher value-added products, improved efficiency and yielded strong rates of financial return.
For example, IFC’s investment in pulp and paper mill in Uruguay, which started in 2007, helped contribute to a one percent annual increase in the country’s gross domestic product and a nine percent increase in exports. Although extremely controversial at the time it was established, IEG said the project had met environmental standards for pollution and that forestry plantations were well-managed and made productive use of what was previously degraded pasture land.
Worldwide, IFC forestry clients employ about 85,000 people. Their spending contributes over $3 billion to local economic activity. Biomass is an important source of renewable energy and on average, every cubic meter of wood produced sequesters about one tonne of carbon annually. Wood products produced by IFC clients are responsible for sequestering about five million tonnes of carbon per year.