This document is an outcome of a high-level workshop on innovative finance for tropical forests, specifically focusing on the development and introduction of forest bonds. Hosted by the WWF Forest & Climate Initiative, Global Canopy Programme (GCP) and Climate Bonds Initiative, the workshop aimed at identifying issues, obstacles and critical steps to making forest bonds work for all stakeholders, as well as discussing other ways of leveraging private sector investment in forest preservation.The document begins by demanding for a scaling-up of forest finance in the face of continuing deforestation and outlines the various elements that must be in place for the realisation of adequate and equitable access to funds. Recommendations for stakeholders are broken down under the following headings.

Buy-side perspective: access to deep pools of capital requires simple, transparent, comparable and liquid forest bonds, with initial bonds targeting investors with a socially responsible mandate.
Sell-side perspective: policymakers and financiers should look beyond carbon market revenues to a broader range of cash flows to back forest bonds. Public policy can stimulate early investment, though incentives should be phased out as forest preservation becomes more familiar to investors.
Risk mitigation: political risk is the primary concern for investors and forest bonds will require some degree of political risk insurance. Equally important to the success of forest bonds is the existence of external enabling conditions and a strong underlying bond structure.
Forest country perspective: effort to leverage private sector finance can be deemed legitimate only through the equitable distribution of the burdens and benefits of forest preservation. This balance is best achieved at the sub-national scale; with appropriate technical support sub-national governments could be an early issuer of forest bonds.
Donor country perspective: bilateral arrangements to use development aid as catalytic finance, leveraging private sector investment, can be achieved through either supply- or demand-side mechanisms or by providing direct risk mitigation.