WRI partnered with Blue Forest Conservation and Encourage Capital to help secure $4.6 million to restore 15,000 acres in California’s Tahoe National Forest. To raise the money, partners used an innovative financial tool called the Forest Resilience Bond which provides up-front private capital to reduce the risk of severe wildfires and associated environmental and human costs.

The Challenge

In 2018, wildfires in the United States caused an estimated $24 billion in economic losses—a record-high—claiming human lives, damaging property, releasing greenhouse gases, contaminating water supplies and harming the forest products and tourism industries. This could be a sign of things to come, as climate change raises temperatures and exacerbates drought conditions and forest degradation in the American West. The U.S. Forest Service has responded by increasing its firefighting budget at the expense of activities that lower the risk of catastrophic fires, such as forest thinning and prescribed burns.

WRI’s Role

The Institute’s report Protecting Drinking Water at the Source showed how investing in natural infrastructure such as forests can help reduce wildfire risks, protect water quality and make communities more resilient if disaster strikes. WRI collaborated with Blue Forest Conservation and Encourage Capital, two environmentally-minded investment firms, to develop a way to proactively finance forest restoration. To help make the financial case for the first Forest Resilience Bond transaction, WRI provided economic analysis to beneficiaries, investors and partners including the U.S. Forest Service, the state of California, Yuba Water Agency, and the National Forest Foundation. Communities in the area were consulted to make sure stakeholders understood the bond’s benefits, including the protection of recreational resources, less exposure to smoke and more forest-related job opportunities.

The Outcome

In 2018, the first Forest Resilience Bond secured $4.6 million in blended private finance for the upfront costs of forest restoration and to provide flexibility to accelerate restoration as needed. The bond will fund the restoration of 15,000 acres of forest in the North Yuba River Watershed in the Sierra Nevada. WRI and Blue Forest Conservation are preparing for future Forest Resilience Bond transactions to benefit other at-risk landscapes across the American West. WRI is also working with development agencies, investors and conservation partners to explore similar finance mechanisms for flood risk reduction and community resiliency in the developing world. This financing solution breaks new ground by making the link between forests, climate, water, and engaging new partners, private and public, in landscape restoration and disaster risk mitigation efforts.