We’ve all noticed the sharp uptick of catastrophic wildfires in recent years; California’s 2018 wildfire season involved the biggest loss of lives and homes ever, and is estimated to cost the state billions. In a warming climate, fire conditions are only expected to get worse.
That’s why we teamed with the Biodiversity Funders Group to explore how to use investment to catalyze forest health. Dan Winterson of the Gordon and Betty Moore Foundation moderated a conversation between a diverse group of experts working on financial instruments to protect our ecosystems.
Putting forest health in perspective
Tommie Herbert, the National Conservation Finance Lead at US Forest Service, described the scale of the problem. She reminded participants that the Forest Service has restored 193 million acres of critically important forests and grasslands, and supports the sustainable management of forests across the urban-to-rural spectrum.
“Our forests are under increasing pressure—and one of the key pressures is catastrophic wildfire,” said Herbert. Low-level fires are normal in many landscapes, helping with seed germination and other processes. But catastrophic wildfire can contaminate critical water supplies with soot and ash while simultaneously exacerbating climate change—which has already rendered the fire season an astonishing 78 days longer than it was in 1970.
“While multiple stakeholders feel the impact of these fires,” says Herbert, “the Forest Service alone shoulders the cost of proactive restoration work to reduce susceptibility to them.” Because the Forest Service is dependent on annual appropriations, it’s challenging to plan restoration in longer than one-year increments. The agency simply can’t work at a pace and scale that will prevent fires: “California alone is facing a 30-year backlog of restoration projects.”
However, as businesses, municipalities, and utilities become more aware of risks related to unhealthy forests, they are looking for innovative ways to address the problem. The Forest Service is working with partners to figure out how to diversify financial flows, create saleable market credits on forestland, and manage forests to reduce risks and costs.
The Forest Resilience Bond
One new financial instrument is the Forest Resilience Bond. The bond is a public-private partnership that enables private capital to finance much-needed forest restoration across the western United States. Leigh Madeira, a co-founder and partner at Blue Forest Conservation, shared some history about the Forest Resilience Bond and how it works.
First, she said, beneficiaries of a project determine who the stakeholders are, and then work with them to figure out what success looks like. Depending on the context, “success” could mean everything from habitat restoration to an increase in water supply.
The beneficiaries then sign contracts in which they agree to make payments when success is achieved. The project only takes on investor capital when it is shovel-ready. Typically, partners carry out the restoration work, then evaluators measure the project’s success. Once that’s done, the beneficiaries pay the Forest Resilience Bond, which passes those funds back to investors. All of this happens, said Madeira, over the course of 4-5 years.
The Forest Resilience Bond isn’t just a theory; it’s currently being put into practice in California. Todd Gartner of the World Resources Institute (WRI) said the Forest Resilience Bond is being pioneered in the Tahoe National Forest on 15,000 acres of the North Yuba watershed.
The risk of a catastrophic wildfire in this watershed, said Gartner, has tripled in the last ten years. WRI and partners worked with downstream beneficiaries, including the Yuba Water Agency, to determine the potential costs of another wildfire. They found that for a moderate level of investment, they could restore the forest and realize a massive return in the form of both revenues and cost avoidance, so they worked with the National Forest Foundation to make the project happen.
The results from the pilot project have been encouraging, but Madeira is realistic. “One $4 million dollar project isn’t going to address the scale of this problem,” she said. Gartner echoed her concerns: “How do we get large-scale restoration accomplished across the landscape? And what benefits will the downstream entities recognize if this is done?”
Scale is key, says Madeira. “This is just a fraction of the watershed, and all the beneficiaries want to see this happen on a much larger scale. We’re looking to implement more Forest Resilience Bond pilots across the Western United States—both in other states and in California.”
It’s a model that could be replicated elsewhere. Madeira said that there’s no reason why this model has to be specific to wildfires. “We could see a rangeland resilience bond, riparian restoration, fish habitat… There are lots of investors looking to get involved.”
To close the session, the panelists answered questions from participants. One participant asked how effective forest management is in fighting fires.
“It’s absolutely critical,” said Todd Gartner. “You need to have forest management to reduce biomass.” The less fuel and material available, the less likely it is that a fire will get to a level of damaging intensity, he explained.
“Forest management,” he said, “can reduce the potential impact of a wildfire event, and keep it from going catastrophic.” In fact, he said, “A lot of fire is really helpful. Many forests are adapted to fires of low intensity but frequent return intervals. We just want to reduce the intensity and scale, and forest management is effective in doing that.”
