The Amazon is one of the most remarkable places on Earth, stretching across eight countries and home to 1.4 billion acres of thick forest – half of the planet’s remaining tropical forests – as well as 10 per cent of the world’s species. The world’s largest tropical forest is also a vital ecosystem both in terms of biodiversity and climate.

Rainforests are a massive carbon sink, absorbing a quarter of the CO2 absorbed by all the land on Earth. Tropical forests also cool the planet’s air by one-third of a degree through biophysical mechanisms such as humidifying the air.

Yet the combination of increased temperatures – there haves been severe droughts in 2005, 2010, and 2015 – and deforestation are creating adverse climate feedback loops. Increased warmer and drier conditions will result in more degradation and loss of ecological functions. Right now, 18 per cent of the Amazon basin’s forested area has been deforested, with an additional 17 percent undergoing degradation. 

The Green Climate Fund (GCF) aims to mobilize funding at scale to invest in low-emission and climate-resilient development activities. Established by the Parties to the UNFCCC in 2010, it is designed to be an operating entity of the Convention’s financial mechanism and receives guidance from the Conference of the Parties to the Convention (COP). It allocates its resources to low-emission and climate-resilient projects and programmes in developing countries, with a special focus on Least Developed Countries (LDCs), Small Island Developing States (SIDS), and African States.

GCF’s new Amazon Bioeconomy Fund aims to deliver sustainable solutions to reduce the impacts of climate change in the Amazon by prioritizing natural capital and delivering climate benefits, in six Amazon countries.

Biodiversity Role

The crucial role the Amazon plays cannot be understated, as GCF’s Veronica Galmez, makes clear. “The importance of the Amazon biome is rooted in its biodiversity, in the people and their Amazon territories, in the balance needed to cope with multiple external stressors, and in its role for climate change adaptation and mitigation,” she says.

“The capacity of the Amazon biome to cope with external factors – those influenced by human activity and related to climate change – is a function of its health and integrity conditions.”

Yet it is not just vital for local communities, the Amazon serves a much larger function, and one that is increasingly being threatened. “The Amazon biome plays as a giant planetary cooling system, that in turn can affect our global climate systems,” Galmez says. “Nevertheless, scientific evidence tells us that we are close to reaching a ‘tipping point’, a threshold that if surpassed, could permanently transform current dense forests into a savannah-type of ecosystem.”

A study published in Nature Climate Change earlier this year revealed that 75 per cent of the Amazon has become less resilient to problems such as drought. If this continues, there is a possibility that the Amazon’s forests die and are replaced by a sprawling savannah-like landscape, with huge consequences for biodiversity, agriculture, human health and the Amazon’s ability to absorb and store the world’s carbon.   

The Amazon Bioeconomy Fund is a $600 million programme, of which $279 million is an investment from GCF, and will be implemented with the Inter-American Development Bank. It will encourage private investment in six key areas of the bioeconomy: sustainable agroforestry, native palm cultivation, non-timber natural forest products, growing native species timber, aquaculture, and community-led nature tourism.

Breaking Barriers

It is hoped the fund will help alleviate some of the barriers – both real and perceived – to investment in the region. “Some of these risks relate to the lack of accurate information on productivity, financial track records, and creditworthiness of financial entities and investees,” Galmez says. “Other risks relate to the fact that returns are often low and long-term heavy, especially in natural forests where co-benefits are highest.”

There are also issues around unclear and conflicting legislation, tenure, and governance, all of which ensure many businesses see investing in the region too much of a risk. And “de-risking” investment is at the heart of the GCF’s fund. “GCF’s specialty is to use scarce public funds to crowd in private finance at scale,” Galmez says. “Under this programme, a mix of financial instruments - sovereign investment loans, green bonds, reimbursable investments grants, risk capital investments (equity), guarantees - and technical assistance will be used to de-risk bio-businesses in the Amazon,” she adds.

“The ambition of this programme is to create a new asset class for bio-businesses led by local communities to foster the protection and sustainable development of the Amazon region,” Galmez says.

There is a clear set of criteria for businesses to qualify for funding. They must be based in the pan-Amazon region of Ecuador, Peru, Colombia, Guyana, Brazil or Suriname. “Eligible investments will follow an Indicative Positive List of Activities, Investments and Use of Resources,” Galmez says. “These components were initially determined based on bioeconomy definitions and their relevance in terms of contribution of mitigation and/or adaptation benefits.” Galmez points out that the list is dynamic and may change as new business opportunities arise in the region.

It is also important to work with indigenous people in the region, given their importance in climate action. Indeed, the territories of the world’s 370 million indigenous peoples cover 24 per cent of land worldwide and contain 80 per cent of the world’s biodiversity. They have increasingly been seen as part of the solution to – rather than just victims of – the climate crisis.

“The fund has a Small Grants Programme for local communities, indigenous people, Afro-descendants and campesinos that aim to enable bio-businesses to enhance and influence development outcomes with a bioeconomy perspective,” Galmez says. “The Small Grants Programme also includes catalytic grants for community projects that focus on enabling tools and conditions to facilitate community participation in bioeconomy value chains.”

The first GCF disbursement of the programme is expected in the fourth quarter of this year.