Forestry* Criteria
Development of Eligibility Criteria
under the Climate Bonds Standard & Certification Scheme

November 2018

Prepared by Dr. Christine Negra (Versant Vision LLC), Tanja Havemann(Clarmondial), Katie House (Climate Bonds Initiative), Ujala Qadir (Climate
Bonds Initiative) and Chris Moore (Climate Bonds Initiative)* These Criteria also cover theconservation and restoration of non-forested land

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Definitions
Climate Bonds Initiative (CBI): An investor-focused not-for-profit organisation, promoting large-scale
investments that will deliver a global low carbon and climate resilient economy. The Initiative seeks to develop
mechanisms to better align the interests of investors, industry and government so as to catalyse investments
at a speed and scale sufficient to avoid dangerous climate change.
Climate Bond: A climate bond is a bond used to finance – or re-finance - projects needed to address climatechange. They range from wind farms and solar and hydropower plants, to rail transport and building sea walls
in cities threatened by rising sea levels. Only a small portion of these bonds have been labelled as green or
climate bonds by their issuers.
Certified Climate Bond: A Climate Bond that is certified by the Climate Bonds Standard Board as meeting therequirements of the Climate Bonds Standard, as attested through independent verification.
Climate Bonds Standard (CBS): A screening tool for investors and governments that allows them to identify
green bonds where they can be confident that the funds are being used to deliver climate change solutions.
This may be through climate mitigation impact and/ or climate adaptation or resilience. The CBS is made up of
two parts: the parent standard (Climate Bonds Standard v2.1) and a suite of sector specific eligibility Criteria.
The parent standard covers the certification process and pre- and post-issuance requirements for all certified
bonds, regardless of the nature of the capital projects. The Sector Criteria detail specific requirements for
assets identified as falling under that specific sector. The latest version of the CBS is published on the Climate
Bonds Initiative website
Climate Bonds Standard Board (CBSB): A board of independent members that collectively represents $34
trillion of assets under management. The CBSB is responsible for approving i) Revisions to the Climate Bonds
Standard, including the adoption of additional sector Criteria, ii) Approved verifiers, and iii) Applications for
Certification of a bond under the Climate Bonds Standard. The CBSB is constituted, appointed and supported
in line with the governance arrangements and processes as published on the Climate Bonds Initiative website.
Climate Bond Certification: allows the issuer to use the Climate Bond Certification Mark in relation to that bond.
Climate Bond Certification is provided once the independent Climate Bonds Standard Board is satisfied thebond conforms with the Climate Bonds Standard.
Green Bond: A Green Bond is where proceeds are allocated to environmental projects. The term generally
refers to bonds that have been marketed as “Green”. In theory, Green Bonds proceeds could be used for awide variety of environmental projects, but in practice they have mostly been the same as Climate Bonds, withproceeds going to climate change projects.
Technical Working Group (TWG): A group of key experts from academia, international agencies, industry andNGOs convened by the Climate Bonds Initiative. The TWG develops the Sector Criteria - detailed technicalcriteria for the eligibility of projects and assets as well as guidance on the tracking of eligibility status during theterm of the bond. Their draft recommendations are refined through engagement with finance industry experts
in convened Industry Working Groups and through public consultation. Final approval of Sector Criteria isgiven by the CBSB.
Industry Working Group (IWG): A group of key organisations that are potential issuers, verifiers and investors
convened by the Climate Bonds Initiative. The IWG provides feedback on the draft sector Criteria developedby the TWG before they are released for public consultation.

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The Climate Bonds Initiative gratefully acknowledges the Technical and Industry Working Group
members who supported the development of these Criteria. Members are listed in Appendix 1.
Special thanks are given to Dr. Christine Negra, the lead specialist coordinating the development of
the Criteria through the Technical Working Group.

Table of Contents
Definitions................................................................................................................................................ 0
Table of Contents .................................................................................................................................... 1
1

Introduction ..................................................................................................................................... 1
1.1
Overview ................................................................................................................................... 1
1.2
Funding needs of a low-carbon and climate resilient economy .............................................. 1
1.3
Green bonds are critical to mobilising the capital required ..................................................... 2
1.4
Introduction to Climate Bonds Initiative and the Climate Bonds Standard ............................. 3
1.5
Process for Sector Criteria Development ................................................................................ 4
1.6
Revisions to these Criteria ....................................................................................................... 4

2

Sector Overview .............................................................................................................................. 5
2.1
What are Forestry assets? ....................................................................................................... 5
2.2
Forestry and climate change .................................................................................................... 6
2.3
Climate targets and transition trajectory .................................................................................. 8
2.4
Investment need ....................................................................................................................... 8
2.5
Bonds in the sector................................................................................................................... 93

Principles and Boundaries of the Sector Criteria ......................................................................... 11
3.1
Guiding principles ................................................................................................................... 11
3.1.1 Eligibility based on interventions ............................................................................................ 12
3.1.2 Technology agnostic .............................................................................................................. 12
3.1.3 Prioritization ............................................................................................................................ 13
3.2
Assets in Scope ...................................................................................................................... 13
3.3
Assets out of Scope ............................................................................................................... 16
3.3.1 Reforestation or restoration of former mined land ................................................................. 16
3.3.2 Fertiliser production ................................................................................................................ 16
3.3.3 Aircraft .................................................................................................................................... 16
3.4
Alignment with other Sector Criteria ...................................................................................... 16
3.4.1 Bioenergy feedstock and facilities.......................................................................................... 17
3.4.2 Watershed management or improvement ............................................................................. 17
3.4.3 Agroforestry or silvopastoralism............................................................................................. 18
3.4.4 Water transport....................................................................................................................... 18
3.4.5 Land transport ........................................................................................................................ 18

4

Discussion and Eligibility Criteria .................................................................................................. 18
4.1
Overarching considerations ................................................................................................... 18
4.1.1 The overarching principles of the Forestry Criteria ............................................................... 18
4.1.2 Assets that mitigate GHG emissions ..................................................................................... 19
4.1.3 Greenhouse gas calculations for Forestry ............................................................................. 19
4.1.4 Definitions and key terms ....................................................................................................... 21
4.1.5 Disclosure ............................................................................................................................... 22
4.1.6 Leveraging existing best practice standards ......................................................................... 22
4.1.7 National legislation and regulation ......................................................................................... 23
4.1.8 Soil carbon.............................................................................................................................. 23

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4.1.9 Genetically Modified Organisms (GMO) ................................................................................ 23
4.1.10 Fire management................................................................................................................ 23
4.1.11 Protection of water resources............................................................................................. 24
4.1.12 Illegal logging ...................................................................................................................... 24
4.1.13 Application of the Forestry Criteria to different issuer types .............................................. 25
4.1.14 Evidence using satellite imagery ........................................................................................ 25
4.2
Mitigation Requirements ........................................................................................................ 26
4.2.1 Plantation Forestry ................................................................................................................. 26
4.2.2 Sustainable Forest Management ........................................................................................... 28
4.2.3 Non-Timber Forest Products (NTFP) ..................................................................................... 30
4.2.4 Conservation & Restoration of Forests and Non-forested Land ........................................... 31
4.2.5 Supply Chain and supporting infrastructure .......................................................................... 34
4.2.6 Forest roads ........................................................................................................................... 36
4.3
Adaptation & Resilience Requirements ................................................................................. 38
4.4Management plan................................................................................................................... 40
4.5
Free, Prior & Informed Consent (FPIC) Requirement ........................................................... 41
4.6
Leveraging Existing Certification Schemes ........................................................................... 424.7High Conservation Value-High Carbon Stock Assessments (HCV-HCSA) .......................... 44
4.8Best Practice for Disclosure ................................................................................................... 44
4.9
Reporting requirements.......................................................................................................... 45
Appendix 1: TWG and IWG members .................................................................................................. 46
Appendix 2: Evaluation of best practice standards .............................................................................. 47
Appendix 3: Summary of public consultation ....................................................................................... 66
Appendix 4: References ....................................................................................................................... 71

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1 Introduction
1.1

Overview

This Background Document serves as a reference document to the Criteria Document for Forestry
Criteria. The purpose of the Background Document is to provide an overview of the key
considerations and issues that were raised during development of the Forestry Criteria.
The Criteria are developed through a consultative process with Technical Working Groups (TWGs)and Industry Working Groups (IWGs), and through public consultation. The TWGs compriseacademic and research institutions, civil society organizations, multilateral banks and specialist
consultancies whereas IWGs are represented by industry experts including potential bond issuers
and investors. A period of public consultation offers the opportunity to any member of the public tocomment on the Criteria. This document aims to capture these various dialogues and inputs andsubstantiate the reasoning behind the Forestry Criteria.
This Background Document begins with an introduction to the challenges in financing a low carbon
and climate resilient world and the role that bonds can play in meeting this challenge, particularly
through the standardization of green definitions. This is followed by Section 2, which introduces theforestry sector and the implications of climate change on the sector in terms of both emissions andclimate risks. Section 3 explains the principles and boundaries of Forestry Criteria development.
Section 4 synthesizes the discussions arising from the TWGs, IWGs, and public consultation andpresents the resulting Criteria.
Supplementary information available in addition to this document include:
1. Forestry Criteria Brochure: a 2-page summary of the Forestry Criteria.
2. Forestry Criteria Document: the complete Criteria requirements.
3. Climate Bonds Standard V2.1: the umbrella document laying out the common requirements that
all Certified Climate Bonds need to meet, in addition to the sector-specific Criteria (V2.1 is themost recent update version).
4. Climate Bonds Standard & Certification Scheme Brochure: an overview of the purpose, context
and requirements of the Climate Bonds Standard & Certification Scheme.
For more information on the Climate Bonds Initiative and the Climate Bonds Standard & Certification
Scheme, see https://www.climatebonds.net/standard. For the documents listed above, see
https://www.climatebonds.net/standard/forestry

1.2

Funding needs of a low-carbon and climate resilient economy

The current trajectory of climate change, expected to lead to global warming of 3.1-3.7°C by 21001
poses an enormous threat to the future of the world’s nations and economies. The effects of climatechange and the risks associated with a greater than 2ºC rise in global temperatures by the end of the
century are significant: rising sea levels, increased frequency and severity of hurricanes, droughts,
1

According to Climate Tracker, under current policies we could expect 3.1-3.7ºC: http://climateactiontracker.org/global.html

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wildfires and typhoons, and changes in agricultural patterns and yields. Avoiding such catastrophic
climate change requires a dramatic reduction in global greenhouse gas emissions.
To ensure sustainable development and halt climate change, all future infrastructure, both built andnature-based, needs to be low-carbon and resilient to climate change, without compromising thekind of economic growth needed to improve the livelihoods and wellbeing of the world’s mostvulnerable citizens. Global infrastructure investment is expected to amount to USD 90 trillion overthe next 15 years, which is more than the entire current infrastructure stock.2
Ensuring that the infrastructure built is low-carbon raises the annual investment needs by 3–4%.3
Climate adaptation needs add another significant amount of investment, which is estimated at USD
280–500 billion per annum by 2050 for a 2ºC scenario.4
According to the Task Force on Climate-related Financial Disclosures (TCFD), there are two broadchannels through which climate change can present risks to business activities and assets5:
1. Physical risk: the risk of impacts from climate- and weather-related events, such as floods
and storms that damage property or disrupt supply chains and trade;
2. Transition risk: the financial risks that could result from the process of adjustment towards alower-carbon economy. These include sudden shifts in demand; legal risk due to parties who
have suffered loss or damage seeking compensation; and changes in policy favouring lower
carbon technologies.
These could prompt a reassessment of the value of a large range of assets as costs andopportunities become apparent, and widespread inadequate information on these risks could eventhreaten the stability of the financial system. Risks to financial stability will be minimised if thetransition to a low carbon and climate resilient economy begins early and follows a predictable path,thereby helping the market anticipate a smooth transition to a 2ºC warming world.

1.3

Green bonds are critical to mobilising the capital required

Traditional sources of capital for infrastructure investment, such as governments and commercial
banks lending, are insufficient to meet capital requirement needs to 2030. Institutional investors,
particularly pension and sovereign wealth funds, are increasingly looked to as viable actors to fillthese financing gaps.
Capital markets enable issuers to tap into large pools of private capital from institutional investors.
Bonds are appropriate investment vehicles for these investors as they are low-risk investments withlong-term maturities, making them a good fit with institutional investors’ liabilities (e.g. pensions to be
paid out in several decades).

New Climate Economy (2016). Better Growth, Better Climate.
New Climate Economy (2016). The Sustainable Infrastructure Imperative: Financing for Better Growth and Development.
4 UNEP (2016). The Adaptation Finance Gap Report.
5 TFCD’s ‘Recommendations of the Task Force on Climate-related Financial Disclosures’: https://www.fsb-tcfd.org/publications/finalrecommendations-report/
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Bond financing works well for low-carbon and climate-resilient infrastructure, particularly forrefinancing projects and assets post-implementation, as capital markets also facilitate risk
management. Across investors and financial markets, different entities face different types andseverities of risks related to climate change, depending on many factors including degree of longterm exposure, likelihood of negative climate impacts, and ability to mitigate impacts or shift
positions.
Bonds offer relatively stable and predictable returns, and long-term maturities. This makes them agood fit with institutional investors’ investment needs. Labelled green bonds are bonds with proceeds
used for green projects, mostly climate change mitigation or adaptation projects, and labelledaccordingly. The rapid growth of the labelled green bond market has shown in practice that the bondmarkets provide a promising channel to finance climate investments.6
The green bond market can reward bond issuers and investors for sustainable investments that
accelerate progress toward a low carbon and climate resilient economy. Commonly used as longterm debt instruments, green bonds are issued by governments, companies, municipalities,
commercial and development banks to finance or re-finance assets or activities with environmental
benefits. Green bonds are in high demand and can help issuers attract new types of investors.
Green bonds are regular bonds with one distinguishing feature: proceeds are earmarked for projects
with environmental benefits, primarily climate change mitigation and adaptation. A green label is a
discovery mechanism for investors. It enables the identification of climate-aligned investments withlimited resources for due diligence. By doings so, a green bond label reduces friction in the markets
and facilitates growth in climate aligned-investments.
However, currently green bonds account for less than 0.2% of the global bond market, with approx.
USD 380 billion7 of green bonds outstanding, compared to the global bond market of USD 100
trillion. The potential for scaling up is tremendous. The market now needs to grow much bigger, andquickly.

1.4

Introduction to Climate Bonds Initiative and the Climate Bonds Standard

The Climate Bonds Initiative is an investor-focused not-for-profit organisation whose goal is topromote large-scale investments through green bonds and other debt instruments to accelerate a
global transition to a low-carbon and climate-resilient economy.
Activating the mainstream debt capital markets to finance and refinance climate-aligned projects andassets is critical to achieving international climate goals, and robust labelling of green bonds is a key
requirement for that mainstream participation. Confidence in the climate objectives and the use offunds intended to address climate change is fundamental to the credibility of the role that green
bonds play in a low carbon and climate resilient economy. Trust in the green label and transparency
to the underlying assets are essential for this market to reach scale but investor capacity to assess
green credentials is limited, especially in the fast-paced bond market. Therefore, the Climate Bonds
Initiative created Climate Bonds Standard & Certification Scheme, which aims to provide the green
bond market with the trust and assurance that it needs to achieve scale.
The Climate Bonds Standard & Certification Scheme is an easy-to-use tool for investors and issuers
to assist them in prioritising investments that truly contribute to addressing climate change, both fromSee Climate Bonds Initiative’s ‘State of the Market’ Report for more information: https://www.climatebonds.net/resources/reports/bondsand-climate-change-state-market-2017
7 Source: Climate Bonds Initiative (June 2018)
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Climate Bonds Initiative Forestry Background Documenta resilience and a mitigation point of view. It is made up of the overarching Climate Bonds Standard
detailing management and reporting processes, and a set of Sector Criteria detailing therequirements assets must meet to be eligible forcertification. The Sector Criteria covers a range of sectors including solar energy, wind energy,
marine renewable energy, geothermal power, low carbon buildings, low carbon transport, and water.
The Certification Scheme requires issuers to obtain independent verification, pre- and postissuance, to ensure the bond meets the requirements of the Climate Bonds Standard.

1.5

Process for Sector Criteria Development

The Climate Bonds Standard has been developed based on public consultation, road testing, review
by the assurance roundtable and expert support from experienced green bond market actors. The
Standard is revisited and amended on an annual basis in response to the growing green bondmarket. Sector specific Criteria, or definitions of green, are developed by TWGs, made up of
scientists, engineers and technical specialists. Draft Criteria are presented to IWGs before being
released for public comment. Finally, Criteria are presented to the Climate Bonds Standard Board forapproval (see diagram below).

TWG
establishedIWG
established

Research & Development Phase

Draft Criteria released
for public consultation

Climate Bonds Standard
Board reviews

Review Phase

TWG & IWG
meetings to discussand advise on criteria

Approval

TWG revisit criteria
in light of public
consultation

Climate Bonds
Certifications
Market Use

Criteria approvedby the Board andreleased

Regular TWG
review of Criteria

Figure 1: process for developing Climate Bonds Standard Sector Criteria

To date, Sector Criteria for wind, solar, geothermal, marine renewables, road transport, water andbuildings are available for certification. Sector Criteria for hydropower, bioenergy, fisheries, coastal
infrastructure, waste management, agriculture, protected agriculture and shipping are underdevelopment. Working groups for energy distribution & management, ICT and industrial energy
efficiency will be launched soon.

1.6

Revisions to these Criteria

As part of the Climate Bonds Initiative's goal to accelerate a global transition to a low-carbon,
resilient economy, the Forestry Criteria seek to maximize viable bond issuances with verifiable
environmental outcomes. This guidance should be recognised as the first set of sector-specificguidance for land use. All groups and individuals involved recognise the breadth and complexity ofthis sector and emphasise that this guidance should be a foundation on which to encourageincreased transparency and consistency in application of scientific best practices and data in thecontext of bond issuances. Note that Climate Bonds Initiative expects that the Forestry Criteria may
be refined over time, however any approvals given will not be removed or changed retroactively.
These eligibility criteria should be recognized as a starting point.
These Criteria will be reviewed two years after launch, or potentially earlier if the need arises, at
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which point the TWG will take stock of issuances that arise in the early stages and any
developments in improved methodologies and data that can increase the climate integrity of futurebond issuances. After the first review, the Criteria will be reviewed again periodically on a needs
basis as technology and the market evolves. As a result, the Criteria are likely to be refined overtime, as more information becomes available.

2 Sector Overview
2.1

What are Forestry assets?

Investments in the forestry sector are ‘real asset’ investments (i.e. they are physical assets that havea value due to their substance and properties). Forestry related assets are featured in institutional
investor allocations. These types of investments occur globally but are particularly essential
components of most emerging economies where land use related sectors are key contributors tonational economies, state budgets, employment, and resource security. Appropriate and responsible
investments in the forestry sector can help developed and emerging economies transition to moresustainable growth pathways, especially where these investments help to increase adaptive capacity
and resilience to climate change. Generally, investor interest in these sectors is likely to increase
due to fundamental drivers such as the need to meet demands for forest products from a growing
global population with a fixed land base.8
The three broad categories that the Forestry Criteria includes in its scope are; (i) assets and projects
related to commercial forestry, (ii) conservation and restoration forestry and (iii) the necessary
supporting infrastructure to both. Within each of these categories, the actual assets and projects that
we expect to see as use of proceeds in green bonds seeking Certification are:
•
•
•
•
•
•
•
•
•
•

Plantation forests
Sustainably managed natural forests
Conservation forests
Land under reforestation or restoration
Protected lands
Equipment for the management and maintenance of all forests
Equipment for harvesting timber
Timber storage facilities
Supply chain facilities, such as nurseries, panel production and pulp and paper production
Monitoring facilities, such as weather stations and warning systems for fire, illegal incursion,
epidemics, floods or droughts

The scope of the assets covered by the Forestry Criteria is fully discussed in section 3.2.

According to the Global Impact Investing Network, “impact investments are investments made into companies, organizations, and fundswith the intention to generate a measurable beneficial social or environmental impact alongside a financial return.”
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2.2

Forestry and climate change

The forestry sector plays a critical role in the global carbon cycle. Forests have the potential to belarge carbon sinks but deforestation and forest degradation cause significant global GHG emissions.
This sector offers opportunities for both GHG emission reductions and carbon sequestration. If theworld is to limit global warming to 2C or 1.5C, large-scale capture and storage of carbon invegetation and soil is essential and forestry is one tangible way to achieve this.
Research by the United Nations Food and Agriculture Organization (FAO), published in April 2014,indicates that GHG emissions from agriculture, forestry, and fisheries have nearly doubled over the
past 50 years and could increase a further 30% by 2050 in the absence of greater reduction efforts.9
However, the IPCC indicates that the economically feasible mitigation potential for the land use
sectors in the year 2030 is expected to be 7.2 to 11 GtCO2eq/year.10 Mitigation measures in the land
use sectors can take the following major forms:•••

Carbon sequestration (e.g., carbon uptake in plants and soils);
Reduced GHG emissions, and;
Increased GHG emission efficiency (i.e., fewer GHGs emitted per unit of production).11

Substantial effort and investment must go into ensuring the forestry sector is a net carbon sink rather
than a GHG emitter. Net reduction of GHG emissions in the forestry sector is an essential part of the
global response to climate change. There are several features that differentiate the forestry sector
from other arenas for climate bond issuance, specifically:12
•
•
•
•
•

•
•

9

Forest systems can act as both sources of or as sinks for GHGs
Stocks vs. flows: some approaches measure GHGs from forests by estimating the difference incarbon stocks (‘stock-difference method’), instead of looking directly at fluxes (measurement ofemissions over intervals of time, which is common in other sectors).
Impacts of natural events on rates of GHG emissions can be large (e.g., fires) and it may bedifficult to separate ‘natural’ and anthropogenic impacts.
Temporal cycles in GHG emissions, linked to management (e.g., harvesting) and other factors(e.g., drought), occur at multiple scales (e.g., annual, inter-annual).
Issues of permanence and legacy of activities are complex: different carbon pools may bevulnerable to future release to the atmosphere. Land management activities may have long-term
impacts on emissions (e.g., deforestation in peatlands may influence GHGs for many decades).
Saturation of GHG uptake will also vary due to management practices, and over time.
Spatial variation in GHG emissions is very high, influenced by inherent landscape characteristics(e.g., different types of above- and below-ground carbon pools) and management decisions(e.g., tree composition; harvest frequency).13
Emissions and sequestration potential is highly heterogeneous in nature. This means that
uncertainty around net emissions from this sector is high.14 The UNFCCC (and associated IPCC
guidance) therefore encourages improving methodologies over time, while also stressing thattime-series information must be comparable

Tubiello et al., 2014.
IPCC, 2014b.

10

11 See http://www.fao.org/docrep/015/an112e/an112e00.pdf and examples of Walmart’s efforts to reduce supply chain

GHGs can be found in Plambeck, 2012.
12 Many of these are modified from Iversen et al., 2014.
13 Another spatial issue for land use sectors is leakage, however this affects all sectors.
14 Met Office Hadley Centre. 2012.

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Forestry activities, projects and assets have high relevance for adaptation and resilience efforts
and importance for rural livelihoods and environmental integrity (e.g., biodiversity, watershedfunctioning, energy security)

Afforestation, reforestation, and forest management to maximize carbon sequestration arerecognized as key strategies for climate mitigation by the Paris agreement because they are
expected to slow global warming by removing CO2 from the atmosphere. However, the actual
mitigation effect of forestry activities will be influenced by many factors such as location, scale, andmanagement effectiveness. In Europe for example, 250 years of land use change has increased
forested areas by10% and put over 85% of forests under management, yet this has not resulted in
net CO2 removal from the atmosphere because wood extraction released carbon stored in biomass,
litter, dead wood, and soil carbon pools.15 In addition, converting deciduous forests into coniferous
forests has resulted in changes in albedo, canopy roughness, and evapotranspiration from the land
surface, which contributed to warming rather than climate change mitigation. Peat fires are a major
contributor to GHG emissions in Indonesia (40% of the total in 2005 and, in 2015, rivalling daily
emissions in the U.S.) and could add an estimated 1 billion tons to the country's carbon footprint.16
Table 1. Sources of variation among forestry interventions.

Sources of variation
Complexity

•
•
•
•
•

Financialviability andcosteffectiveness

•
•
•
•

Evidence base••

Essential components such as management practices, training, infrastructure(e.g., storage, processing), information systems (e.g., weather), inputs (e.g.,
fertilizers, irrigation), and technologies (e.g., equipment, improved genetics)
Experience, capability, and suitability in different regions
Heterogeneity of stakeholders
Potential impacts on social issues (in particular land tenure) and biodiversity
Reliance on public support or policy changes
Execution costs, including design and impact monitoring
Ease and costs of monitoring activities, outcomes, and revenue and benefit
flows
Reliance on carbon offsets or Payments for Ecosystem Services (PES)
schemes for revenue generation (as opposed to initiatives that can marshal
multiple potential revenue streams)
Financial viability under different commodity market conditions and payback
periods
Available scientific information about the anticipated GHG reduction and cobenefits for different land use interventions
Varies widely among Non-Annex I countries, and even within Annex I
countries

While global and regional projections of forest-based mitigation opportunities are available, theseopportunities need to be calibrated to specific geographic as well as sector-wide contexts withconsideration for intervention success factors such as socio-economic conditions, tenurearrangements,17 and commodity market access.18 Companies and other entities that seek to achieve
15 Naudts K et al. 2016. Europe’s forest management did not mitigate climate warming. Science, 351(6273):

597-600.
16 https://forestsnews.cifor.org/37016/clearing-the-smoke-the-causes-and-consequences-of-indonesiasfires?fnl=en&utm_source=early+May+2017&utm_campaign=NEWS+UPDATE+English+v2&utm_medium=email
For example, social forestry has been tested in Indonesia and elsewhere. https://forestsnews.cifor.org/52241/lampung-indonesiasmodel-province-for-social-forestry?fnl=en&utm_source=General+contacts&utm_campaign=afc14dd7caCIFOR_News_Update_November_early_2017&utm_medium=email&utm_term=0_282b77c295-afc14dd7ca-117330269
18 Examples of useful guides include Uprety et al. 2012. and Dickie A. 2014.
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net reduction in forest-related emissions will be interested to generate reasonably accurate
estimates of GHG emissions reductions that are likely to result from changes in land and water
management and supply chain processes. Various tools have been developed for estimating
mitigation impact in the land use sectors to support regulated and voluntary GHG offset programs
and supply chain approaches.19

2.3

Climate targets and transition trajectory

Climate mitigation in the forestry sector is strongly linked to avoiding deforestation and land usechange. The total carbon content of forests has been estimated at 638 Gt for 2005, which is morethan the amount of carbon in the entire atmosphere.20 According to the IPCC in its Fourth
Assessment Report, reducing and/or preventing deforestation is the mitigation option with the largest
and most immediate carbon stock impact in the short term.21
Frontrunner companies have committed to zero deforestation supply chains. Studies suggest thatsignificant, relatively low-cost mitigation potential exists in the forestry sector, and that some of theseopportunities may have significant economic and financial benefits for producers and nations.
Many companies have begun to invest in adapting their businesses to make them more resilient toclimate change.22 For example, forest products company, Sveaskog AB, is establishing a Green
Bond Framework focused on investments in sustainable forestry projects and assets that promote
low-carbon and climate resilient growth.23 However, it is generally recognised that investment
mechanisms for climate change adaptation and resilience are at an earlier stage of development
than mitigation mechanisms, which have been tested in a broader range of sectors and geographies.

2.4

Investment need

The UNFCCC has estimated that, globally, an additional USD 14 billion in financial flows will be
required to address climate impacts in agriculture, forestry, and fisheries by 2030.24 In the context ofthe forestry sector, estimates vary:25••••

The International Institute for Applied Systems Analysis (IIASA) suggests USD 30–53 billion are
required per year to achieve zero net deforestation and degradation by 2020;
UNEP estimates that USD 17-33 billion per year is required to achieve a 50% reduction in
deforestation by 2030, and;WWF estimates that a minimum of USD 42 billion per year is needed by 2020.
Restoration of peat forests and other burned areas in Indonesia is projected to costs USD 5.5
billion over five years26

Several UNFCCC mechanisms have stimulated limited funding for mitigation and adaptation in theland use sectors including through the UNFCCC Clean Development Mechanism (CDM) and Joint
There include; The Cool Farm Tool, CALM Calculator, COMET-Farm, EX-ACT Carbon Balance Tool, Carbon Benefits Project toolbox,
FullCam, CAR livestock tool, LCA tools
20 https://unfccc.int/files/press/backgrounders/application/pdf/fact_sheet_reducing_emissions_from_deforestation.pdf
21 https://unfccc.int/files/press/backgrounders/application/pdf/fact_sheet_reducing_emissions_from_deforestation.pdf
22 Several examples are presented in the UNFCCC Private Sector Initiative database on actions on adaptation:
http://unfccc.int/adaptation/workstreams/nairobi_work_programme/items/6547.php
23 https://www.sveaskog.se/Documents/Om%20Sveaskog/Finansiering/Sveaskog_Opinion%20final.pdf
19

24 https://unfccc.int/files/cooperation_and_support/financial_mechanism/application/pdf/adaptation.pdf
25 WWF. March 2012. WWF submission on finance to AWG LCA. http://unfccc.int/resource/docs/2012/smsn/ngo/201.pdf
26 https://forestsnews.cifor.org/44299/tax-amnesty-the-green-economy-and-peat-

restoration?fnl=en&utm_source=early+May+2017&utm_campaign=NEWS+UPDATE+English+v2&utm_medium=email

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Climate Bonds Initiative Forestry Background Document
Implementation (JI) mechanism, which sought to support the creation of a global voluntary carbon
market, and the Adaptation Fund. More than USD 6 billion – primarily from donor governments
including Norway, Germany, the UK and the US – has been provided for REDD+27 activities indeveloping countries and additional funding is anticipated through the Green Climate Fund, which
will support REDD+ readiness and diverse activities on previously forested lands, managed forests,
and primary forests.28 The World Bank's Forest Carbon Partnership Facility (FCPF) focussing on
reducing emissions from deforestation and forest degradation, forest carbon stock conservation, thesustainable management of forests and the enhancement of forest carbon stocks in developing
countries (REDD+). It has two separate funding mechanisms, the Readiness Fund and the Carbon
Fund.29
While REDD+ has received significant attention in policy dialogues such as the UNFCCC, the UN
Convention on Biological Diversity (CBD), the Convention to Combat Desertification (UNCCD), andthe post-2015 Sustainable Development Goals (SDGs), private finance has been modest anddemonstration of emission reduction at scale is pending.30 At a global level, sales of voluntary or
government-sanctioned carbon offset credits are unlikely to generate sufficient funding to meetforestry sector mitigation and adaptation needs.31
Efforts to avoid deforestation through investments in sustainable intensification of agriculture include
the recent international commitment, anchored by a USD 100 million contribution from Norway, for a
USD 400 million fund intended to catalyse protection of 5 million hectares of forests and peatlands
through increased productivity of smallholder farmers. 32
The objective of the Forestry Criteria is not to specify eligibility criteria for receiving offset credits thatcan generate revenue through sale of credits in carbon markets. Offset (carbon credit) based
revenue streams are only likely to be considered relevant by investors where there is robust market
demand for purchase of offset credits (e.g., geographies where there is a clear policy framework
such as in the US State of California). To mobilize investment in sustainable forestry from large
pools of global capital, bond issuers will need to repay bond debt by generating revenues in more
traditional ways such as through sale of forest products or revenue streams related to production(e.g., inputs, trade finance).

2.5

Bonds in the sector

Research conducted by Climate Bonds Initiative has identified up to USD 8.5 billion33 in outstanding
bonds clearly aligned with the land use sector, representing 1% of the total universe of climatethemed bonds.34 Paper and pulp manufacturers were responsible for the majority of the 63 land use
related bonds identified. For example, Swedish forest products company SCA issued a green bondin 2014, which included a commitment to increase forest cover by 1% each year. Table 2 provides
recent examples of bonds in the forestry sector.
27 REDD+ refers to reducing emissions from deforestation and forest degradation and conserving, sustainably managing

and enhancing forest carbon stocks.
28 https://forestsnews.cifor.org/50548/green-climate-fund-steps-up-to-reduce-deforestation-and-forestdegradation?fnl=en&utm_source=General+contacts&utm_campaign=d4fff2fd6dCIFOR_News_Update_31_July_20176_7_2017&utm_medium=email&utm_term=0_282b77c295-d4fff2fd6d-117330269
https://www.forestcarbonpartnership.org/about-fcpf-0
https://forestsnews.cifor.org/50326/redd-results-based-finance?fnl=en&utm_source=General+contacts&utm_campaign=b3b797da64CIFOR_News_Update_July_20176_7_2017&utm_medium=email&utm_term=0_282b77c295-b3b797da64-117330269
31 See http://www.forest-trends.org/documents/files/doc_4841.pdf
32 https://innovation-forum.co.uk/analysis.php?s=drive-for-deforestation-jurisdictional-approach-continues
33 State of the Market in 2017, Climate Bonds Initiative
34 See http://www.climatebonds.net/files/post/files/cb-hsbc-15july2014-a3-final.pdf
2930

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Climate Bonds Initiative Forestry Background Document

Table 2. Examples of recent bonds in the forestry sector.

IssuerSkandinaviska
Enskilda
Banken AB(SEB)
KlabinYear
2017

International
Finance
Corporation
Poland2016

Eco
Securitizadora

2016

Svenska
Cellulosa
Aktiebolaget(SCA)
Ontario,
Canada2014

Sumitomo
Forestry

2013

35
36

2017

2016

2014

Description
USD 531mn bond, eligible projects for funding:renewable energy, energy efficiency, clean transport,
pollution prevention / control, and sustainable forestry(FSC or equivalent required)35
USD 500mn bond, eligible projects for funding:
Sustainable Forest Management (FSC-certified newplanting and replanting activities; native forest
restoration), renewable energy, energy efficiency, cleantransport, waste management, water management,
circular economy, adaptation (biological pest control, firerisk prevention)36
USD 152mn bond to support management of 500,000
acres of dryland forest. Investors choose repayment ineither cash payments or carbon credits 37€750mn bond, linked to national climate mitigationcommitments, eligible projects for funding: renewableenergy, clean transport, sustainable agriculture,
afforestation, parks conservation, land remediation38
BRL 1bn (USD 294mn) 8-year green securitization (CRA,
Agribusiness Receivables Certificates) issued withbacking of 100% export credit receivables from Suzano
Pulp & Paper. Use of proceeds presumed to be alignedwith Suzano’s sustainable forestry strategies 39
SEK 1.5bn (USD 232mn) bond, eligible projects forfunding: renewable energy, fuel-switching to bio-fuels,
biofuels from forest waste, energy efficiency, water andwaste management, sustainable forestry 40
CAD 500mn 4-year bond, eligible projects for funding:clean transport, green buildings, clean energy, forestry,
agriculture, land management, adaptation 41

JPY 20bn to pay back first series of unsecured corporate
bonds, invest in wood construction material businesses
and other businesses

Credentials
Cicero second
opinionSustainalytics
second opinion

Sold to major
global institutional
investors
Sustainalytics
second opinion

Cicero second
opinion

Cicero second
opinion; 83%purchased by
Canadianinvestors
N/A

https://www.climatebonds.net/2017/03/first-gbs-slovenia-and-argentina-new-securitisations-mta-gb-going-retail-quebec-nab
https://www.climatebonds.net/2017/10/icbc-biggest-bank-world-issues-certified-green-ireda-issues-certified-green-india-austrian

37 https://www.climatebonds.net/2016/11/morocco-gbs-india-sweden-and-spain-china-france-work-gbs-boc-nrwbank-and-lots-interesting;
http://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/first-forestsbond-on-the-lse
38 https://www.climatebonds.net/2016/12/poland-wins-race-issue-first-green-sovereign-bond-new-era-polish-climate-policy
39 https://www.climatebonds.net/2016/11/1st-green-bond-brazilian-currency-suzano-papel-celulose-brl1-bn-usd-294m-no2suzano
40 https://www.climatebonds.net/2014/05/swedens-sca-issues-sek15bn-232m-5yr-green-bond-2nd-viking-corporate-greenbond-issuer
41 https://www.climatebonds.net/2014/10/ontario-issues-long-awaited-inaugural-green-bond-cad-500m-4481m-175-4yrsaa2e-mixed

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Climate Bonds Initiative Forestry Background Document
IssuerNord-Pas deCalais, France
Inversiones(Empresas
CMPC
subsidiary)

Year
2012

Description€80mn, 12-year bond, eligible projects for funding:transport / infrastructure (70%), energy (20%),
biodiversity (10%: regional forest development etc.) 42
USD 500mn, 10-year bond, eligible projects for funding:sustainable forest management for plantations (certified
by FSC, CERTFOR (PEFC) or equivalent), biodiversity
preservation restoration of HCVF, sustainable water
management, pollution prevention and control, energy
efficiency43

Credentials
facilitated by
Credit Agricole
Sustainalytics
second opinion

3 Principles and Boundaries of the Sector Criteria
3.1

Guiding principles

The Climate Bond Standard needs to ensure that the forestry assets and projects included in
Certified Climate Bonds are low carbon and climate resilient, in line with best available scientificknowledge and compatible with the goals of the Paris Agreement. At the same time, the Forestry
Criteria need to be pragmatic and readily usable by stakeholders in the market, to maximise
engagement and use. High transaction costs run the risk of reducing uptake of the Standard.
Keeping the costs of assessment down while maintaining robust implementation of the criteria is
important. Table 3 sets out the principles guiding the development of the Forestry Criteria to meetand balance these two goals.
42 https://www.climatebonds.net/2014/05/new-%E2%82%AC80m-12yr-french-enviro-bond-90-over-subscribed-calais-

shows-way
43 https://www.climatebonds.net/2017/08/april-market-blog-inaugural-gbs-chile-uae-more-french-and-aussie-certifiedbonds-us-munis

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Climate Bonds Initiative Forestry Background Document

Table 3: Key principles for the design of the Forestry Criteria
Principle

Requirement for the Criteria

Level of ambition

Compatible with meeting the objective of keeping global temperature rise well
below 2ºC above pre-industrial levels set by the Paris Agreement, and with arapid transition to a low carbon and climate resilient economy.

Robust system

Scientifically robust to maintain the credibility of the Climate Bond Standard.

“Do not reinvent thewheel”

Harness existing robust, credible tools, methodologies, standards and data toassess the low carbon and climate resilient credentials of any technology,
endorsed by multiple stakeholders where possible.

Level playing field

No discrimination against certain groups of producers (such as smallholders) or
geographies.

Multi-stakeholder support

Supported and developed by key stakeholders; those within the relevant
industry, the financial community and broader civil society.

Continuous improvement

Subject to an evolving development process with the aim of driving continuous
improvement and credibility in the green bond market.

Development of the Forestry Criteria is intended to broaden knowledge and capacity among
potential bond issuers about the credentials forestry projects and assets must have if they are to beconsidered low carbon and climate resilient.
In addition to the overarching principles discussed in the table above, the following additional
considerations were central to developing the Criteria and facilitating the scoping process.

3.1.1

Eligibility based on interventions

Defining bond eligibility under the Forestry Criteria based on interventions means deciding eligibility
and compliance based on plans and processes as a proxy for expected climate impact. Thisapproach is necessary to:•••

Be flexible for bond issuers regardless of whether they are financing new or refinancing existing
projects and assets
Be measurable during implementation phases
Keep transaction costs of proving compliance low

Development of metrics and benchmarks, suitable for outcome based eligibility, was not possible for
the Forestry Criteria. For other Sector Criteria, such as the Geothermal Criteria and the Transport
Criteria, standardized metrics have made use of technology-based emissions profiles anddecarbonisation scenarios from the IEA. This is not possible for forestry, as it has not been
incorporated into these models and few organisations in the forestry sector are measuring their total
GHG emissions.

3.1.2

Technology agnostic

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Climate Bonds Initiative Forestry Background Document
In general, the Climate Bonds Standard avoids picking 'winners and losers’ in terms of technologies– a task beyond its mandate and capacity. Environmental impacts of some forest commodities havegenerated significant alarm as have some technologies, such as genetically modified seeds. 44 For
these examples and others, controversy continues in part because the scientific, commercial,economic, and policy dimensions remain unsettled and broad agreement has not emerged for how
to resolve trade-offs.
Recognizing the highly variable and dynamic nature of commodity production and the complexity ofrelated scientific underpinnings, the Forestry Criteria take a technology and commodity agnostic
approach by stipulating processes that must be adhered with to achieve Climate Bonds Certification.

3.1.3

Prioritization

The Criteria determines the scope of eligible project based on two key considerations: mitigation
potential and demand for bond issuance. Some forestry activities will coincide with both categories,
while others may be linked to one or the other. The Forestry Criteria have been developed toencompass activities that fall under either category to promote inclusiveness and enable Climate
Bonds Certification for a diverse range of activities. The scope may be expanded with revisions toinclude new mitigation technologies that emerge and reflect growing or changing demand from thebond market.

3.2

Assets in Scope

Eligible assets include land, machinery, equipment, inputs, information systems, risk monitoring andearly warning systems, and other relevant technologies. Eligible activities include land and resource
management (including remediation or rehabilitation), set-asides, training, research, and preventionof illegal land or resource use.
The scope of eligible assets and activities is presented in Table 4 and has been organized using a
traffic light system for ease of use as follows:▪

Green: almost certain to be compatible with a low carbon or climate-resilient economy in all
circumstances and automatically assumed to be eligible for certification▪

Red: almost certain to be incompatible with a low carbon or climate-resilient economy andautomatically assumed to be ineligible▪

Amber: ambiguous and needing further assessment to determine its eligibility

The first column in Table 4, ‘Eligible activity types’, gives an exhaustive list of all the activity types
that are within scope of the Forestry Criteria. The second column, ‘Example use of proceeds’, is an
illustrative list of the type of projects that may be included in a Certified Climate Bond. It is notpossible to include an exhaustive list of all potential use of proceeds due to the breadth ofpossibilities, but all use of proceeds must fall within one of the specified eligible activity types.

44 Over recent decades, scientific evaluations of the use of GMOs in agriculture have provided a mixed picture regarding

environmental and health impacts, while a range of interest groups have taken strong advocacy positions.

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Climate Bonds Initiative Forestry Background Document
Table 3: scope of eligible projects and assets for Climate Bonds Certification under the Forestry Criteria
Eligible activity types

Plantation forestry – planted forestthat is intensively managed andmeet all the following criteria at
planting and stand maturity: one or
two species, even age class andregular spacing45

Example use of proceeds

Mitigation Adaptation&
resilience

Land acquisition for purpose of establishing or expanding forest stands
for timber production

The purchase of equipment and cost of resources needed for planting
and replanting activities (such as seedling production, soil preparation,and seedling planting, nursery maintenance, pest control), ongoing
maintenance, clearing, thinning, fertilisation, management, harvestingand extracting.
The cost of setting-up and maintaining protection measures (e.g.
rangers and monitoring equipment). GIS analysis, satellite datacollection and data analysis.
Sustainable forest management – Land acquisition for purpose of establishing or expanding native forest
commercial management of natural stands for commercial sustainable forest management
forests in a sustainable manner forthe production of timber. Natural
The purchase of equipment and cost of resources needed for activities
forests are forest areas with many (such as seedling production, soil preparation, and seedling planting,of the principal characteristics and nursery maintenance, pest control), ongoing maintenance andkey elements of a native
management, clearing, thinning, fertilisation, harvesting and extracting
ecosystem, such as complexity,
structure and biological diversity,
The cost of setting-up and maintaining protection measures (e.g.
including soil characteristics, flora
rangers and monitoring equipment). GIS analysis, satellite data
and fauna, in which all or almost allcollection and data analysis.
the trees are native species, notclassified as plantations46
Production of non-timber forest
Land acquisition for purpose of establishing or expanding either
products (NTFP) – the commercial plantation or natural forest stands
cultivation and/ or extraction of
goods derived from forests that are The purchase of equipment and cost of resources needed for all
tangible and physical objects ofoperational activities associated with maintaining forests for NTFP andbiological origin other than wood.47 for harvesting and extracting the NTFP
Includes, amongst other things, thecommercial cultivation and
The cost of setting-up and maintaining protection measures (e.g.
harvesting of amriso (broom grass),
rangers and monitoring equipment). GIS analysis, satellite data
timur, bamboo stems, bamboo
collection and data analysis.
shoots, paper mulberry bark, rattan
stems, gum, resin, nuts,
mushrooms, fruits, herbs, spices,aromatic plants, game, fibres,
medicinal, cosmetic or cultural
produce. Can be practised in either
plantations or sustainably managed
forests.
Forest conservation - nonLand acquisition for purpose of protecting and conserving, forested
commercial forestry activities
areas for a range of ecosystem services
designed to maintain the existing
45 FAO, Global Forest Resource Assessment 2020: Terms and Definitions, FRA 2020

‘Natural forest’ includes the following categories: (i) Forest affected by harvesting or other disturbances, in which trees are being or havebeen regenerated by a combination of natural and artificial regeneration with species typical of natural forests in that site, and where manyof the above-ground and below-ground characteristics of the natural forest are still present. In boreal and north temperate forests which
are naturally composed of only one or few tree species, a combination of natural and artificial regeneration to regenerate forest of thesame native species, with most of the principal characteristics and key elements of native ecosystems of that site, is not by itself
considered as conversion to plantations. (ii) Natural forests which are maintained by traditional silvicultural practices including natural orassisted natural regeneration. (iii) Well-developed secondary or colonizing forest of native species which has regenerated in non-forest
areas. (iv) The definition of ‘natural forest’ may include areas described as wooded ecosystems, woodland and savanna. Definition fromFSC
47 FAO, Global Forest Resource Assessment 2020: Terms and Definitions, FRA 2020
46

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Climate Bonds Initiative Forestry Background Document
forest habitat in both area andquality. Activities will range fromminimal interventions to active
management and could include
protection from deforestation risk,
voluntary and mandatory set aside
and active conservation efforts

The purchase of equipment and cost of resources needed for the ongoing maintenance and management of conservation forestry project
The cost of setting-up and maintaining protection measures (e.g.
rangers and monitoring equipment). GIS analysis, satellite datacollection and data analysis.

Forest restoration and rehabilitation Land acquisition for purpose of expanding and restoring forested areas– non-commercial forestry activities for a range of ecosystem services
designed to increase the area or
improve the quality of existing
The purchase of equipment and cost of resources needed for the onforest habitat or to establish new
going maintenance and management of restoration and rehabilitation
forest stands. Activities will range
forestry projects
from minimal interventions to active
The cost of setting-up and maintaining protection measures (e.g.
restoration including facilitating
rangers and monitoring equipment). GIS analysis, satellite dataregeneration and restoration via
collection and data analysis.
natural or artificial means,
Reforestation or afforestation of former mined landConservation of non-forested land–conservation of non-commercially
productive land to maintain theexisting habitat in both area andquality. Activities could include theestablishment of protected land or
national parks, voluntary or
mandatory set aside

Land acquisition for purpose of conserving existing areas for a range of
ecosystem services

The purchase of equipment and cost of resources needed for the ongoing maintenance and management of conservation projects
The cost of setting-up and maintaining protection measures (e.g.
rangers and monitoring equipment). GIS analysis, satellite datacollection and data analysis.
Restoration or rehabilitation of non- Land acquisition for purpose of expanding and restoring existing areas
forested land – restoration or
and for establishing new habitats for a range of ecosystem services
rehabilitation of non-commercially
productive land to improve the
The purchase of equipment and cost of resources needed for the onquality or to increase the area ofgoing maintenance and management of restoration and rehabilitation
existing habitats or to establish new projects
habitats
The cost of setting-up and maintaining protection measures (e.g.
rangers and monitoring equipment). GIS analysis, satellite datacollection and data analysis.
Restoration or rehabilitation of former mined land

Supporting and supply chain
Cost of installation, upgrade, maintenance or running costs ofinfrastructure – infrastructure that is manufacturing and processing facilities and associated equipment for
associated with the forestry sector solid wood production, veneer and plywood production andand initial processing of timber. It
reconstituted panels
could be processing of timber
Cost of acquiring, upgrade, maintenance or running costs for vehicles
products into wood products orused on the forestry concession
paper and pulp, storage,
manufacture of monitoring andCost of establishing, upgrading or maintain forest roads on the forestry
assessing equipment and plant
concession
nurseries
Installation, upgrade or maintenance of warehouses and storage
infrastructure and associated equipment
Installation, upgrade or maintenance of warning systems or satellite
monitoring for fire, illegal incursion, epidemics, invasion of harmful
invasive species, flood and drought conditions.
Installation, upgrade or maintenance of information and information
management systems such as installation of weather, soil and plant
information capture and analysis systems (e.g. weather stations), andSupported by:15

Climate Bonds Initiative Forestry Background Document
technologies to promote precision forestry harvesting
Installation, upgrade or maintenance of plant nurseries supplying theforestry sector
Cost of acquiring, upgrade, maintenance or running costs for aircraft
used on the forestry concession
Installation, upgrade or maintenance of fertiliser production
infrastructure

3.3

Assets out of Scope

The red items in Table 4 are excluded either because they are incompatible with a low carbon or
climate-resilient economy or because determining their eligibility is outside the mandate of theForestry Criteria. The justifications for exclusions are presented in the following sections.

3.3.1

Reforestation or restoration of former mined land

Reforestation, restoration, remediation or rehabilitation of former mined land is also out of scope for
the Forestry Criteria. These Criteria have not been developed to consider the clean-up necessary forpotentially highly polluted landscapes, such as formerly mined land.

3.3.2

Fertiliser production

Fertiliser production is not included in the scope for the Forestry Criteria. This can be a very energy
and chemical intensive process and requires a different set of Criteria to ensure its compatibility witha low carbon and climate resilient future.

3.3.3

Aircraft

In some cases monitoring and management of forests may be done with light aircraft or helicopters.
Any aircraft is not eligible use of proceeds because of the high GHG emissions they have. It is worth
nothing that in most cases aircraft would be provided to a forestry issuer by a contractor and sowould be unlikely to be financed in a forestry bond anyway.

3.4

Alignment with other Sector Criteria

The interconnected nature of the economy, infrastructure and terrestrial and aquatic ecosystems
creates challenges for developing clearly delineated Sector Criteria. For example, investments infreshwater resources can be implemented in many sectors including agriculture (e.g., irrigation),
forestry (e.g. restoration of watershed habitat), aquaculture, supply and sanitation (e.g., water supply
or wastewater treatment), storage and transfer (e.g., reservoirs, pumping stations, aquifers), floodand drought management (including storm water), and natural resource management.
It is essential that clear guidance on which Sector Criteria assets and projects are eligible for Climate
Bonds Certification is given. This saves confusion and means that it is clear, both to the verifier,issuer and investor, which requirements a given asset or project is expected to meet. Table 5
identifies possible overlaps and explains which Sector Criteria should be referred to in which cases.
The following sections give further explanation.
Table 5: clarification of which Sector Criteria assets or activities are eligible for Climate Bonds Certification underSupported by:16

Climate Bonds Initiative Forestry Background Document

Assets or Activity

Land transport

Water transport

Applicable Sector Criteria
Vehicles used within the forest concession up to the forest gate are applicablefor Certification with the Forestry Criteria.
Vehicles used beyond the forest concessions and past the forest gate mustcomply with the Transport Criteria.
Vessels used within the forest concession up to the forest gate are applicablefor Certification with the Forestry Criteria.
Vessels used beyond the forest concessions and past the forest gate will becovered by the Shipping Criteria that are currently in development.

Restoration of forest forthe purposes of watershedmanagement, flood anddrought protection

Must comply with the Water Criteria

Agroforesy, palm oil andsilvopastoralism

Will be covered by the Agriculture Criteria. Excluded from Climate Bonds
Certification under the Forestry Criteria because of cross-over with agriculture

Bioenergy facilities orplantsMust comply with the Bioenergy Criteria. Growth of timber derived bioenergy
feedstocks (e.g. forest stands destined for bioenergy) must comply with theForestry Criteria

3.4.1

Bioenergy feedstock and facilities

Entities with primary responsibility for forestry activities seeking to increase the sustainability of
productive and conservation activities in forest ecosystems (e.g., producing fibre and fuel andsupporting ecosystem services such as soil fertility or biodiversity), should seek certification under
the Forestry Criteria.
The Forestry Criteria are not designed for entities working predominantly in the bioenergy industry(producing biodiesel, trading pellets, sourcing for bioenergy production, etc.). Assets and use ofproceeds related to the processing or conversion of feedstocks for bioenergy or biofuels are coveredby the Bioenergy Criteria.48 Assets and use of proceeds related to the production of timber
feedstocks for bioenergy are covered by the Forestry Criteria.

3.4.2

Watershed management or improvement

Forest assets or forestry activities may be carried out with the intent of restoring, improving or
managing watersheds and flood or drought protection. This presents a cross-over with the Water
Criteria49 as the Water Criteria covers nature based infrastructure that can benefit watersheds orprovide flood or drought protection.
To address this potential intersection, activities will be eligible with the Sector Criteria that aligns with
their purpose. For example, if a forest is established or managed with the purpose of restoring awatershed it should comply with the Water Criteria, whereas if it is established or managed for thecommercial production of timber it should comply with the Forestry Criteria.
48
49

Full details of the Bioenergy Criteria can be found here: https://www.climatebonds.net/standard/bioenergy
Full details of the Water Criteria can be found here: https://www.climatebonds.net/standard/water

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3.4.3

Agroforestry or silvopastoralism

Any forestry assets or activities that are combined with agriculture will have to comply with theAgriculture Criteria. The Forestry Criteria have not been set-up to ensure that agriculture activities
are low carbon and climate resilient. This will be tackled by a separate TWG and Agriculture Criteria
will be developed with their expertise. During the Agriculture Criteria development, the Forestry
Criteria requirements will be considered given that agroforestry has large reforestation potential.

3.4.4

Water transport

Shipping assets or other water based transport will be eligible for Climate Bonds Certification under
the Shipping Criteria. Development of Shipping Criteria is to begin shortly. The exception to this ruleare vessels that are used predominantly in the forest concession, which can be included as eligible
use of proceeds under the Forestry Criteria.

3.4.5

Land transport

Supporting vehicles working on the forestry concession are an essential part of the management of
all forestry operations. In addition, the carbon sequestration benefits of the forests should outweighthe emissions from vehicles. Requiring that these supporting vehicles comply with the Transport
Criteria, would likely cause an issuer to decide not to get Climate Bonds Certification rather thanremove vehicles from their use of proceeds. Instead, as these vehicles are necessary supporting
infrastructure, particularly to good management of forests, they are included as eligible supporting
infrastructure if they are used predominantly within the forest concession. Vehicles, such as trucks,
that are used predominantly beyond the forest gate would still have to meet the Transport Criteria.50

4 Discussion and Eligibility Criteria
4.1

Overarching considerations

The purpose of the Forestry Criteria, like all Sector Criteria developed for the Climate Bonds
Standard & Certification Scheme, is to certify assets and projects that are aligned with a low carbon
economy and are climate resilient. Requirements for demonstration of alignment with theseobjectives will vary depending on the type of forestry that is being practiced. However, there are also
overarching principles and considerations that apply to all types of forestry within scope. These are
discussed in detail in this section.

4.1.1

The overarching principles of the Forestry Criteria

The Forestry Criteria require compliance with the following:•

The investment results in land and natural resource management that directly contribute to
reducing atmospheric greenhouse gas concentrations (GHGs) and maintaining carbon stocks,
consistent with avoiding dangerous climate change, and have a net positive impact on mitigation(i.e., net GHG reduction)

50 Climate Bonds Standard Transport Criteria can be found here: https://www.climatebonds.net/standard/transport

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Climate Bonds Initiative Forestry Background Document•

No natural landscape should be converted, particularly because of the large emissions resulting
from such land use change•

The issuance should demonstrate significant attention to climate risks and a clear plan forachieving a positive effect on operational resilience•

There is a neutral (at minimum) or positive net effect on the resilience of biodiversity andregulating ecosystem services (e.g., water supply, air quality) and habitats should be wellmanaged

The requirements for each type of forestry assets (e.g. plantation forestry or sustainable forest
management) are designed to reflect these overarching principles.

4.1.2

Assets that mitigate GHG emissions

Bond issuances could, in theory, support assets or activities that have:••••

Quantifiable on-site mitigation: for example, tree planting resulting in carbon sequestration.
Positive transformational effects on a supply chain: for example, other companies adopt thepractices of companies financed by certified bonds and thereby gain experience with mitigation
strategies, leading to new expectations for commodity production practices.
Positive transformational effects on a region: for example, successful GHG reduction strategies
are mimicked across the larger region, leading to ‘scaled up’ mitigation.
Positive transformational effects on sectoral business practices: for example, bond-financed
initiatives can test novel land use methods at scale and pave the way for broader application.

Mitigation in forestry can result from changes in management that protect existing carbon stocks,
encourage further carbon sequestration, and reduce net GHG emissions. Investable assets
commonly include land, machinery, equipment, inputs, information systems (e.g. weather; soil andplant analysis), risk monitoring and early warning systems (e.g. fire, drought, pest / disease
outbreaks, illegal incursion), and other technologies.
Supporting activities can include strategies that increase productivity on an area basis, while
maintaining or increasing carbon stocks, as well as strategies that reduce soil erosion and loss oftrees to stressors (e.g. fire, drought, disease).
Activities with potential to reduce net GHG emissions commonly include: afforestation, reforestation,
sustainable forest management projects, and set-asides of areas with high carbon stocks. Natural
ecosystem protection and restoration can include strategies that protect areas with high carbon
stocks or the potential to release significant GHG emissions if disturbed. It can also include
remediation or rehabilitation of degraded areas as well as reduction of illegal logging or land
conversion.

4.1.3

Greenhouse gas calculations for Forestry

The mitigation component of several other Climate Bonds Sector Criteria is set through a GHG
threshold. If the operating emissions of a project or asset fall below the GHG threshold they pass the
mitigation component requirements, otherwise the bond fails to be certified. The Transport,
Geothermal and Buildings Criteria all operate with GHG thresholds for their mitigation components.
The application of this approach to the Forestry Criteria would require the establishment of a GHG
emissions reduction target and would require issuers to complete GHG emissions accounting.
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The implications of requiring bond issuers to demonstrate achievement of net GHG emissions
reduction above an established threshold was carefully considered during the Criteria development
process through the review of the possible approaches and mitigation potential of different
technologies, regions, asset classes, and activity types. It was concluded that it is impractical toidentify mitigation benchmarks that can be universally applied given the significant variations amongareas, practices, and technologies and given the lack of emissions reporting currently happening inthe sector. Setting a universal threshold for net GHG reduction would be arbitrary and would likely
exclude a wide array of valuable land use investments.
Instead, screening criteria should be used to identify low carbon and climate resilient activities for
Certification. One option for achieving this is to set a minimum relative threshold for mitigation (e.g.,
20% reduction in tCO2eq from a BAU baseline) or requiring only net positive mitigation effect (i.e.,
net GHG emissions reduction).51
However, even with the application of a relative benchmark or threshold, the task remains
complicated. Mitigation opportunities in the forestry sector are widely distributed around the globe
and the set of investments that could meaningfully contribute to avoiding dangerous climate change
is diverse. The amount of feasible GHG emissions reduction varies due to factors such as inherent
biophysical conditions, land use history, available technology, and management interventions. For
any given bond issuer, GHG reduction potential will be further influenced by the set of assets andactivities under their operational control as well as regulatory and market context.
A systematic evaluation was undertaken of various approaches for confirming that use of certified
bond proceeds delivered an appropriate level of ambition relative to the global climate change
challenge. The following key aspects were taken into consideration:•••

Technological potential: While it is possible to define absolute thresholds for GHG mitigation
potential for renewable energy generation and other sectors for which technology is a key driver,nothing similar exists for mitigation in forestry. Mitigation in forestry occurs through deployment of
a diverse array of management practices and technologies (often in unique combinations) inextensive landscapes.
Region: While it is possible to define ‘top performers’ on a jurisdictional or regional basis for lowcarbon buildings, for example, this approach does not translate well to forestry because of theextreme heterogeneity of soil type, land use history, micro-climate, size of land management
units, land use drivers, and many other variables that have meaningful influence on GHG
emissions reduction potential.
Activity type: Setting mitigation benchmarks for different forestry activity types including thosewith different levels of permanence (e.g., avoided fire, sequestrations) was another potential
option for consideration.52 However, it was determined that, while many different forestry
activities can deliver meaningful GHG mitigation, the volume will be highly contingent on specificconditions. Also, optimal management often involves careful selection of a mix of practices
based on specific site conditions and management objectives.

51 It is possible that bond issuances will support activities or infrastructure that are not ‘additional’ (i.e., would have been

implemented through some other form of financing in the absence of the CBI-labeled bond). This is not necessarily aproblem since green bonds are simply intended to steer capital toward environmentally beneficial initiatives as analternative to other financial opportunities. Green bonds do not carry the same ‘additionality’ expectation as do REDD orother offset schemes.
52 See approaches used in carbon offset markets: www.comet-planner.com

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Based on the above, it is not feasible to identify a meaningful relative threshold for mitigation thatwould be broadly relevant. While sensible in concept, in practice this would quickly become
impractical or impossible given the very high diversity of forestry activities and geographic contexts.
Additionally, GHG emissions calculations are recognised to be expensive and time consuming to do
and are not common practice, especially by smaller forestry operators. If compliance is too time
consuming or expensive, it is likely that issuers will opt out of Climate Bonds Certification and acareful balance of effectiveness and feasibility is required within the Criteria. This led to the Criteria
being underpinned by an approach relying on the identification of management practices thatindicate that a forestry asset or project will lead to carbon sequestration and be climate resilient. If anissuer is conducting GHG emissions calculations for their forestry project it would be worth disclosing
this to investors as an indication of best practice beyond the requirements of the Criteria.
These requirements vary depending on the type of forestry being practiced and are presented in
Section 4 of this document alongside discussion of each respective forestry type.

4.1.4

Definitions and key terms

Natural vs. Native
The terms ‘natural’ and ‘native’, despite being commonly used terms in the context of sustainable
forestry (particularly for conservation and restoration projects) are often misunderstood or usedinterchangeably and can lead to ambiguity in defining and thus certifying climate aligned and resilient
projects.
The TWG discussions concluded that for the purposes of the Forestry Criteria, the term ‘natural’would be favoured over ‘native’. Native implies that there must be some definition of species that aresupposed to be in a location in the absence of disturbance. There are habitats whose present
vegetation and species have been there for relatively long periods yet are not considered ‘native’.
This leads to questions on how far back a species should be present in a habitat or ecosystem to be
defined as ‘native’.
The term ‘natural’ can also be subjective, but is less problematic. The term ‘natural’ is most relevantin the requirements for plantation forestry. Specifically, the Criteria require that there has been ‘nonatural landscape conversion since 2010’. A definition of natural landscape was then determinedthrough evaluating external definitions used by reputable organisations involved in forestry. These
included the FAO, OECD and IUCN.
NaturalThe following definition was drafted:
Natural landscape: An area with many of the principal characteristics and key elements ofanthropogenically-undisturbed ecosystems, such as complexity, structure and biological diversity,
including soil characteristics, flora and fauna, in which a significant portion of species are indigenous,
and where there has been continuity of ecological processes over a significant time period. In thecase of forests, they are not used for plantation.
Climate Bonds acknowledges the ambiguity inherent in any definition of natural landscape, andefforts were made to therefore avoid usage of this term wherever possible throughout the Criteria.

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Smallholder
Defining smallholders for the purposes of these Criteria is also critical in order to avoid ambiguity andsubjectivity in applying requirements that differ for large-scale foresters and smallholders. The FSC
definition of smallholder is adopted.
An appropriate definition for smallholder, especially when setting a hectare threshold, can differ
considerably between countries. For example, in African countries a smallholding is accepted to beless than 10ha, while in Brazil, smallholding can be up to 1000ha 53. For certain jurisdictions FSC
provides tailored definitions of smallholders.
The Forestry Criteria set an overarching smallholder definition based on the FSC’s definition andleverage the country level definitions available in FSC’s Small and Low Intensity Managed Forests 54
where they are available. In the instance that a project in a country that does not have a specificdefinition of a smallholding size, the overarching definition is to be used.
For the purposes of these Criteria, smallholders will be defined as either:
1. A forest management unit that is under 100ha55
2. A forest that is being managed for the production of non-timber forest products (NTFP) only56
3. Where the rate of timber harvesting is less than 20% of the mean annual increment within the
total production forest area of the unit and the harvest from the total production forest area isless than 5000m3/year57
4. A forest management unit that complies with the FSC SLIMF Eligibility Criteria - Addendum
FSC-STD-01-003a EN

4.1.5

Disclosure

In bond markets, issuers are generally not required to be explicit in their use of proceeds. The
Climate Bonds Standard is a pioneering effort to promote transparency on intended use of proceeds
and independent review of proceeds management, thereby holding issuers accountable for activities
and outcomes. Disclosure on use of proceeds is an important factor for all sectors that green bonds
are issued in. For that reason the requirements around disclosure are stipulated in the Climate
Bonds Standard58 and not the Sector Criteria and no additional disclosure requirements have been
added to the Forestry Criteria specifically59. However, the Forestry Criteria do stipulate disclosure
items that are best practice to disclose and that investors are interested to see disclosed (seesection 4.8).

4.1.6

Leveraging existing best practice standards

In all Climate Bonds Standard Sector Criteria development, the aim is to leverage existing work as
far as possible. This is in recognition of the fact that significant industry efforts have been directed53

FSC SLIMF Eligibility Criteria - Addendum FSC-STD-01-003a EN

54 https://ic.fsc.org/en/for-business/fsc-tools/certifying-small-forests
55 FSC Standard, SLIMF Eligibility Criteria (FSC-STD-01-003 (Version 1-0) EN)
56 Ibid
57 Ibid
58 https://www.climatebonds.net/standard/download
59 The requirements of the Climate Bonds Standard can be found here:

https://www.climatebonds.net/standards/standard_download

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toward designing and implementing best practice certification schemes. To do this, the requirementsof the Sector Criteria must first be set. Once they have been established, external schemes areevaluated against these requirements to ascertain if they are worth leveraging.
See section 4.6 for an explanation of the evaluation carried out and the decision about which
certification schemes to leverage in the Forestry Criteria.

4.1.7

National legislation and regulation

Legislation on forestry operations in many countries is strong, comprehensive, and in line with therequirements of the Criteria. In these cases, and where legislation is properly enforced, it could be
inferred that all forestry operations in these countries are eligible for Climate Bonds Certification. To
validate this, a comprehensive review of legislation, enforcement, and practice would be required ona country by country basis. This is a significantly time consuming process and outside of the remitand capacity of the Climate Bonds Standard. Instead, a more practical approach of setting common
requirements that apply across asset types and geographies has been adopted. However, an issuer
or verifier may use compliance with national legislation as part of their evidence base to demonstratethat specific requirements stipulated by the Criteria have been met.

4.1.8

Soil carbon

The impact of maintaining and improving soil carbon on climate change mitigation is widely
recognised and is a crucial consideration for all types of forestry, including commercial activities andconservation & restoration activities. However, currently we lack a robust way to measure soil carbon.
In lieu of a more direct methodology, the Criteria have defined requirements around a soil
management plan being in place. This plan must considers several aspects of soil health, such as
soil retention, soil structure, productivity, soil biomass and soil carbon. This requirement is detailed in
the management plan (for further details see section 4.4)

4.1.9

Genetically Modified Organisms (GMO)

While the use of GMO can be contentious, it is not a climate issue and the remit of these Criteria is
to stipulate requirements that ensure the performance of assets and projects is aligned with limiting
warming to 2C. Secondly, GMO is not a significant issue in the forestry sector. Notwithstanding, it isworth noting that FSC60 and PEFC61 both prohibit the use of GMO so by default all the projects andassets that must hold either FSC or PEFC certification to achieve Climate Bonds Certification will not
use GMO.

4.1.10Fire management

Forests are vulnerable to climate change related increases in fire risk. Forest fires have terrible
impacts on the carbon sequestration potential of forestry; fires release large amount of CO2
emissions during burning and it takes forests considerable time to recover and regrow. Such risks
60 Forest Stewardship Council, FSC International Standard, FSC Principles and Criteria for Forest Stewardship, FSC-STD-

01-001 V52 EN
61 PEFC International Standard, Requirements for Certification Schemes, Sustainable Forest Management –Requirements, PEFC ST 1003:2010

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may be mitigated by adaptive actions like salvaging dead timber, landscape planning to minimize firedamage, and adjusting fire management systems.
Fire regimes affecting forested areas are shifting due to climate change and issuers should
demonstrate that bond-financed assets and activities evaluate fire risks. They should ensure thatrisks are not only mitigated but that assets and activities do not further exacerbate or increase firerelated risks. For example, afforestation of former pasture lands should ensure that the species mix
is appropriate to current and projected climatic conditions and are unlikely to become fuel for fires.

4.1.11

Protection of water resources

The forestry sector is deeply intertwined with water resources, either utilising them directly in
harvesting, processing or transport, or through the proximity of forests to important aquatic
ecosystems such as rivers or lakes. Equally, forests are closely linked to important hydrogeologicalprocesses such as soil stability. Poor practices in forestry can pose high risks to water resources andcan lead to issues such as soil erosion and pollution of watercourses, groundwater and riparian
areas. These are key concerns for the resilience of forestry projects and the Criteria include arequirement to address water resource management and protection of riparian areas in the
management plan section of the Forestry Criteria (see section 4.4).
In addition, it is important to note that any forestry assets or projects implemented solely to improve,
restore or regenerate watersheds, water networks or drainage systems are eligible for Certification
under the Water Criteria62 and not the Forestry Criteria.

4.1.12Illegal logging

The Criteria address the protection of forests from illegal deforestation and degradation. Illegal
deforestation poses a significant problem particularly in tropical regions. It is a source of carbon
emissions and reduces the sequestration capacity of forests, while negatively impacting biodiversity
and the other ecosystem services that forests provide.
Illegal logging can be carried out by a variety of actors and in all types of forestry. As such, forestry
protection is required for each type of forestry that the Criteria cover.
Requirements for forest protection and monitoring are included in the Criteria in through the
management plan. The management plan contains a specific requirement (see section 4.4)
regarding forest protection. The Criteria do not stipulate specific monitoring and protection measures.
Rather, it is up to the project proponents to select and demonstrate that adequate monitoring andprotection measures have been planned and are in place to prevent illegal logging and deforestation.
This allows flexibility for forestry practitioners to employ the most effective and appropriate
approaches for monitoring and protection.
It is important to note that adequate monitoring and protection measures are valuable proxies for
ensuring a consistent increase in carbon stocks. This, alongside requirements for no naturallandscape conversion and good management, justifies the absence of a greenhouse gas
assessment requirement.

62

Full details of the Water Criteria can be found here: https://www.climatebonds.net/standard/water

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4.1.13

Application of the Forestry Criteria to different issuer types

The Forestry Criteria have been developed to accommodate different types of issuers. Analysis of
the needs, capacities and requirements of potential issuers led to the identification of two groups that
may need slightly altered requirements; these include smallholders and banks looking to refinance apool of loans made to forestry operators.
Smallholders make up a significant portion of the forestry sector. However, smallholder forestry is
considerably different from large-scale forestry for multiple reasons such as size of forest
concessions, access to finance and technology and level of education. These differences are
addressed in the Criteria.
The requirements for plantation forestry and sustainable forest management lean heavily on projects
or assets being either FSC- or PEFC-certified (see section 4.6). However, requiring compliance withthese certification bodies poses an unrealistic requirement for many smallholders as they often lackthe organisational structure to go through the process of certification required for either of theseschemes. Yet smallholder projects without FSC or PEFC certification may still be low carbon andclimate resilient.
Therefore, for smallholders, the Forestry Criteria only require compliance with the management plan(see section 4.4). In summary, FSC or PEFC certification is not required by smallholders, but allother requirements set out in the Forestry Criteria apply to smallholders.
Banks seeking to refinance loans made to forestry operators may also have difficulty in meeting theForestry Criteria requirements due to lack of access to information. Most banks do not have accessto information about the management of the forests and, especially if loans have already been made,cannot go back to the operator to request more information. The Criteria however do not make any
concessions to account for this. Without compliance with all requirements it is not possible to be surethat a forest project or asset is delivering positive mitigation and resilience benefits.
These Criteria should act as a guide to banks and other users about the type of information andquestions that need to be captured and evaluated ahead of giving loans and making investments.
The vision is that the Forestry Criteria will help to incentivize banks to seek more information before
they make new loans in the future.

4.1.14

Evidence using satellite imagery

Most components of the Forestry Criteria require reporting regarding forest cover. For example,
plantation forestry must be able to show that no natural landscape was converted after 2010, whileconservation projects must demonstrate that forest cover is being maintained, and restoration
projects must demonstrate that forest cover is increasing.
The use of satellite imagery for demonstrating compliance with these requirements is acceptablewithin the Criteria. Extensive and sufficiently accurate coverage exists globally for satellite imagery
and presents a feasible option that is relatively easy to use and at a reasonable cost, especiallywhen compared to field-based verification conducted by forest managers or other parties, which canbe extremely costly and time-consuming. Moreover, satellite imagery is continuously improving andbeing updated, making the global coverage more accurate.
Limitations of satellite imagery were considered including that an actively managed forest canappear the same as a cleared or degraded forest on satellite imagery. Issuers will have to provide
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supplementary information to the comfort of the verifier if this is the case.
Other forms of evidence, such as field verification, may also be provided to show compliance withthe requirements in the Forestry Criteria. The verifier will make a judgement about whether this issufficient to prove compliance and may request additional information from the issuer if necessary.

4.2

Mitigation Requirements

Mitigation requirements for the Forestry Criteria have been set depending on forestry type. The
following sections give the requirements separately for plantation forestry, sustainable forest
management, non-timber forest products (NTFP), conservation and restoration, supply chain andforest roads.
If a bond contains plantation forestry projects and sustainable forest management projects, forexample, the plantation forestry projects must comply with the plantation requirements and thesustainable forest management projects must comply with the sustainable forest management
requirements. This holds for any bond with any mixture of project or asset types.

4.2.1

Plantation Forestry

Plantation forestry is not always compatible with climate change mitigation. Land conversion fromnatural landscape to plantation forestry can result in large GHG emissions and badly managed
plantations will not achieve the carbon sequestration that they could. As a result, plantation forestry
assets and projects seeking Climate Bonds Certification must comply with requirements and are notconsidered low carbon or climate resilient by default.
Ensuring plantation forestry is carbon sequestering
The aim of the Climate Bonds Certification is to only certify projects and assets that result inemissions reductions and increase resilience. The obvious way to ensure that a project is carbon
sequestering is to require a GHG assessment to be carried out. However, several factors precluded
the adoption of a GHG assessment requirement. First, GHG assessments are not currently common
practice in this sector, second, they can be prohibitively expensive, and third, the TWG members
were confident that simpler and less expensive compliance requirements could be set (see section
4.1.3).
Factors that would make a forestry project GHG emitting rather than GHG sequestering were
flagged and analysed while setting up the Criteria and included the following:•••Land use change is often the reason that plantation forestry projects end up being GHG
emitting
Maintaining the health of the forest stands will boost the carbon sequestered by the forest
A forest that is not well protected or managed to prevent degradation or destruction (forexample from illegal logging or forest fires) is at high risk of causing GHG emissions

No natural landscape conversion since 2010
The Forestry Criteria require that no conversion from natural landscape to plantation forestry hastaken place since 2010. Land use change directly affects the exchange of GHGs between terrestrial
ecosystems and the atmosphere. Clearing forest and other natural landscape results in large
emissions and the mitigation potential of commercial plantation forestry would not outweigh these
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emissions, not to mention the biodiversity and ecosystem services losses associated with losing
natural landscapes.
It was important to ensure that forestry practitioners do not convert an area of natural landscape to aplantation and receive Certification. However, it was recognised that plantation forestry on previously
converted natural landscape should not be entirely restricted from achieving Certification. For areasof natural landscape that were converted some time ago it can be beneficial, from a mitigation andresilience perspective, to establish plantation forestry.
The Criteria stipulate a cut-off year of 2010, after which no conversion of natural landscape toplantation forestry is acceptable. 2010 was chosen as it was deemed sufficiently long ago so as not
to allow Certification of any recently converted land or create perverse incentives. FSC states a land
conversion cut-off year of 1994, while PEFC states a cut-off year of 2010. It was also considered thatby setting the cut-off year at 2010, holding either FSC or PEFC certification would show compliance.
2010 is a fixed cut-off year and, at present, there is no intention to move that date forward in future
iterations of the Forestry Criteria. Smallholders must comply with the same conversion year deadline.
The requirement described above, ‘no conversion of natural landscape since 2010’, requires adefinition of natural landscape. This is discussed fully in section 4.7 but to summarise: naturallandscape that is not to be converted is defined for the purposes of these Criteria as High Carbon
Stock (HCS) land and peatland.
Projects and assets certified by FSC and PEFC will have already had to comply with roughly thesame rule to gain certification (see Appendix 2). The exception is that neither FSC nor PEFC are
explicit that peatlands must not be converted to plantation forestry. FSC does provide
recommendations regarding conversion of peatlands in its International Generic Indicators 63:
However, this principle has not yet been adopted into FSC’s overarching standard and as such is nota formal part of the FSC International Standard.
The Forestry Criteria exclude any forestry projects that involve planting of forests on peatlands, toreflect the importance of maintaining peatlands from a climate change mitigation perspective.
Peatlands can vary in their vegetation cover, with extensive forest ecosystems being found on peatsoils, as well as sparser vegetation types so they are not necessarily always recognised in the HCS
approach. Extensive peat swamps and forests are mainly found in tropical regions with high rainfall,
where the risk of deforestation is also high. Because peatland soils are extremely rich in carbon andplay important roles as carbon sinks, deforestation and subsequent planting of plantation forests on
peatlands carries particularly high climate risk.

Resulting Criteria

63 Forest Stewardship Council, International Generic Indicators, FSC-STD-60-004 V1-0 EN, Principle 5:1

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4.2.2

Sustainable Forest Management

The requirements specified under the sustainable forest management section of the Forestry Criteria
apply to the commercial sustainable management of natural forests to produce timber (the full scopeof this section is given in Table 3). Advocating commercial use of natural forest can be controversial
as it is seen in some cases to threaten natural ecosystems and biodiversity. However, if done right it

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can boost carbon sequestration, biodiversity and the ecosystem services provided by the forest.64 65
Moreover, sustainable forest management often helps to protect primary forest by giving it a valuethat relies on the health and ecosystem being maintained, thus incentivizing the protection,
management and maintenance of the forest.
It is important to allow Certification for sustainable forest management given that a large portion ofcommercial forestry takes place in natural forests, rather than plantations. By setting requirements,
these Criteria give incentives for sustainable forest management projects seeking finance to bealigned with best practice. The requirements safeguard that sustainable forest management forcommercial purposes is promoting a carbon sequestering, thriving and resilient ecosystem bothwithin the actual projects and assets themselves and more broadly in the wider ecosystem.
Ensuring sustainable forest management is carbon sequestering and resilient
The development of the Forestry Criteria involved the evaluation of a range of methodologies,
standards, and practices to assess their applicability to the Criteria. This included the potential toleverage practices such as Reduced Impact Logging and Sustainable Logging to certify projects andassets. However, these practices and techniques do not have set parameters that must be adhered
to or any sort of verification scheme associated and were thus unviable proxies.
The option for an outright exclusion for logging in primary forest was also considered, but was
rejected given that the Criteria need to be globally applicable. While excluding logging in primary
forest may make sense in European countries it is not appropriate for South America or Africa.
Instead, the Criteria sets requirements that ensured logging is done in a positive way.
The major factors that can affect the carbon sequestering and resilience of sustainably managed
forests is poor management and inadequate protection of the forest stands. The management plan
has been designed with this specifically in mind.
As with all other types of forestry covered by these Criteria they must also comply with theadaptation and resilience checklist. It is not necessary to require compliance with the ‘no conversion
from natural landscape’ requirements for sustainable forest management projects and assets, like it
is for plantation forestry projects and assets, because activities are being carried out in the naturallandscape.
Resulting criteria
See diagram on next page.

FAO (2010), Managing forests for climate change, available here: http://www.fao.org/docrep/013/i1960e/i1960e00.pdf (accessed on
12/09/2018)
65 Nature (2014), Carbon sequestration: managing forests in uncertain times, available here: https://www.nature.com/news/carbonsequestration-managing-forests-in-uncertain-times-1.14687 (accessed on 12/09/2018)
64

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4.2.3

Non-Timber Forest Products (NTFP)The production of non-timber forest products (NTFP) occurs in all types of forestry; plantation,
sustainable forest management and conservation and restoration forestry.
The scope of the Forestry Criteria therefore encompass NTFP as well as timber. The Criteria
stipulate that as long as the forest in which the NTFP are being collected is in compliance with the
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relevant requirements (i.e. the plantation forestry requirements if NTFP are being collected in aplantation) then the projects or assets related to NTFP should also be eligible for Certification.
A global standard specific to NTFPs does not yet exist due to the variety of categories NTFPs canfall into with different parts of the plant being used depending on the species. Any future standards
developed that fill this gap will be evaluated to determine their suitability for use in these Criteria.
Resulting Criteria
For NTFP to be eligible for certification the forest in which the products are collected must comply
with the relevant forest type requirements.
For NTFP products harvested from:•••Plantations see section 4.2.1 for the relevant requirements
Sustainable forest management see section 4.2.2 for the relevant requirements
Conservation or restoration forestry see section 4.2.4 for the relevant disclosure
requirements

4.2.4

Conservation & Restoration of Forests and Non-forested Land

Conservation and restoration of both forested and non-forested land refers to non-commercial
activities that aim to preserve or improve the forested or non-forested habitat (more details on thescope in section 3.2, Table 4). These activities may also be included in a bond alongside commercial
activities or in bonds coming from development banks or sovereigns.
Conservation and restoration projects have the potential to be beneficial both from a mitigation and aclimate change resilience standpoint. However, if projects are inappropriate for the location, not wellmanaged or not properly planned they will not deliver mitigation and resilience. Therefore, theForestry Criteria aim to ensure Certification is only awarded to projects that are strong on both the
mitigation and the resilience fronts.
The requirements for conservation and restoration focus on two key areas:••

Ensuring restoration and conservation projects meet a minimum requirement to show they
are beneficial from a mitigation and resilience perspective
Preventing arrested succession of conservation and restoration projects

Conservation & restoration projects are not required to comply with the ‘no conversion from naturallandscape since 2010’ because they aim to enhance or restore natural landscapes. Instead aminimum threshold for certification analyses whether the habitat is appropriate for the location.
Minimum threshold for Certification of conservation and restoration projects
The Certification of projects that have a conservation and restoration label but in practice are notactually maintaining or restoring a valuable habitat is specifically avoided in the Forestry Criteria.
Inappropriate habitat can detrimentally affect the resilience of the projects itself and the wider system
so it is an important consideration for the Climate Bonds Forestry Criteria. Therefore, a minimum
starting point is required.
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The Forestry Criteria adopt the Ecoregion Approach66. Ecoregions are defined geographical units,developed as part of an initiative by WWF along with academic institutions and researchers. WWF
defines an ecoregion as a "large unit of land or water containing a geographically distinct
assemblage of species, natural communities, and environmental conditions". These units recognise
the unique biodiversity and interactions between species in all areas of the globe and importantly thetypes of species that are typically found in each ecoregion. Ecoregions are the results of regional
analyses of biodiversity across the globe, completed in collaboration with regional experts and by
conducting extensive literature reviews.
The Ecoregion Approach utilises ecoregion classifications developed by WWF67 to determine
species and species mixtures suitable to a given area. It is granular enough to provide global
coverage of any area, and furthermore provided adequate information regarding appropriate species.
An issuer would thus have to prove that they are conserving or restoring species that are in line with
their location’s Ecoregion classification to receive Certification. Promoting natural habitats caninherently provide long-term benefits to emissions mitigation as well as considerable adaptation andresilience benefits by ensuring thriving and resilient ecosystems.
Because small areas of forest can be very important for the overall resilience of an ecosystem and asmall per cent of proceeds in a very large bond can equate to a large area of forest, the Ecoregion
Approach is the most appropriate tool to use as it is based on the quality of the forestry project itself.
Ecoregions are classified by WWF and various other academic institutions and experts and therefore
rely on these bodies and sources to carry out updates to reflect any biogeographical changes to agiven Ecoregion. Therefore, when Ecoregion classifications are updated, the Criteria forConservation & Restoration of Forests and Non-Forested Land will reflect this.
Avoiding arrested succession in restoration and conservation projects
The Forestry Criteria aim to avoid arrested succession in conservation and restoration projects.
Arrested succession refers to the prevention of climax vegetation from developing. In relation toclimate change mitigation this would mean a habitat is prevented from reaching its carbon
sequestration potential. In extreme cases, reverse succession can occur where a habitat starts tobecome degraded.
Adhering to the management plan (see section 4.4) ensures that arrested succession is not aconcern for restoration and conservation projects. It indicates that there is proactive management of
the forest or other habitat taking place.
Invasive species vs. suitable species
One requirement that is particularly pertinent for conservation and restoration of forestry and nonforested land in the management plan regards the selection of suitable species (see section 4.4).
The types of projects and assets that must meet this requirement are conservation and restoration
forestry and non-forested projects and smallholders who are not FSC- or PEFC-certified. The
Forestry Criteria aim to prevent unsuitable species being introduced so that genetic diversity andappropriate ecological conditions are maintained.

66
67

Ecoregion descriptions can be found here: https://www.worldwildlife.org/biome-categories/terrestrial-ecoregions
WWF’s shapefile can be found here: https://www.worldwildlife.org/publications/terrestrial-ecoregions-of-the-world

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This requirement specifies ‘suitable species selection’ to comprehensively reflect the types of
species selection that needs to take place in forestry projects. For example, having a requirement forinvasive species would not necessarily accommodate projects such as smallholder forest plantations,as they may involve the planting of trees that are not technically ‘native’ and thus could beconsidered ‘invasive’.
Placing invasive species as the focus of this requirement implies that the only way to maintaingenetic diversity and ecological integrity is by preventing any non-native species introduction.
However, simultaneously promoting species suitable for that habitat, whether native or not, would
ensure and imply that the forestry practitioner is considering a wider range of ecological factors
rather than simply avoiding the introduction of invasive species.
Extending the conservation and restoration requirements to cover non-forested land
Given there are areas where forests are not the natural ecosystem, the Criteria allow for the
Certification of conservation and restoration of landscapes other than forest. The requirements laidout for conservation and restoration forestry are equally applicable to forested and non-forested land.
Therefore, both are within scope.
Resulting Criteria

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Climate Bonds Initiative Forestry Background Document

4.2.5

Supply Chain and supporting infrastructure

Supply chain assets and operations are essential to value addition, profitability, and re-investment inforestry and, therefore, key to climate compatible forestry management. Efficient supply chains canimprove productivity, minimize raw material use, reduce post-harvest loss, improve energy and water
use efficiency. Storage, processing and other supply chain facilities are likely to be important in
future bond issuances as these represent large, investable assets. Bond issuers may seek to financenew or upgraded supply chain assets and operations or to refinance existing investments. This could
encompass establishing, upgrading, extending or maintaining facilities necessary for:••

Input supply (e.g., tree nurseries; delivery and quality assurance mechanisms)
Storage (e.g., storage depots; dedicated warehousing)

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Climate Bonds Initiative Forestry Background Document••

Transport (e.g., on concession vehicles)
Primary processing (e.g., milling) and packaging of processed products

The Forestry Criteria aims to recognise this and allow Certification for the necessary supporting
infrastructure and supply chain as well as the actual forestry projects and assets themselves, as
without the supporting infrastructure the forests are often not viable or cannot be maintained or
managed. However, including necessary supporting infrastructure in a Certified Climate Bond
without having to meet any additional requirements could be problematic if some of the supply chainor supporting infrastructure are particularly energy intensive, for example.
Scope of supply chain
The decisions made on scope are fully presented in Table 4 but broadly the scope was decided tocover:
•
•
•
•
•
•
•
•
•
•

Nurseries or seed orchards
Storage facilities
Monitoring and assessment equipment
Soil wood production
Veneer and plywood production
Saw mills
Stud mills
Reconstituted panels: fibreboard, particleboard, MDF and OSB
Pulp production
Paper and board manufacture

Fertiliser production facilities are considered out of scope. This fully discussed in section 3.3.2.
Best practice certification and supply chain
Where FSC and PEFC are already being leveraged this stays the case for the related supply chain.
Both FSC and PEFC have chain of custody certification. To achieve FSC or PEFC certification afacility must show that it has proper processes in place to keep certified wood separate from noncertified wood so that there is no mixing. For this reason, these Criteria specify that all inputs must
hold FSC or PEFC certification and the facility itself must be certified by either FSC or PEFC.
Considerations for supply chain assets
Certain supply chain assets, particularly pulp & paper manufacture facilities and sawmills, can bevery polluting. However, requiring them to hold either FSC or PEFC certification will mean that they
have had to comply with best practice requirements in this regard so there shouldn’t be a need forany additional requirements here.
FSC and PEFC certification do not account for how energy intensive facilities are, something the
Climate Bonds Forestry Criteria is particularly concerned with given the focus on climate change
mitigation and resilience. The manufacturing aspects of the supply chain are where these concerns
arise. Therefore, this applies to veneer and plywood production, reconstituted panels, pulp
production and paper and board manufacture.
Despite the high-energy needs of these types of facilities, they often use a considerable amount of
renewable energy. This generally comes from the waste material that is created in the wood or pulp
manufacture process. The decision was to stipulate a minimum per cent of the energy used that35
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must be generated from renewable energy or waste to energy.
Restricting the Certification of paper & pulp manufacture to residual wood products only is highly
impractical, given that paper & pulp is a much better alternative to plastic production. In future
iterations of the Criteria it may be reconsidered whether to only allow Certification for paper & pulp
manufacture from residuals.
Resulting criteria
See diagram on next page.

4.2.6

Forest roads

There are arguments for and against forest roads being aligned with low carbon and climate resilient
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Climate Bonds Initiative Forestry Background Document
forest projects. Generally, the Climate Bonds Standard explicitly excludes roads as eligible use ofproceeds because they support the use of fossil fuel vehicles. However, in the case of forestry, theargument is more nuanced.
Roads are a crucial piece of supporting infrastructure. Forestry projects without suitable roads in theforestry concession would likely experience significantly higher damage during regular management
and harvesting, as the machinery would have to clear its own path through the forest. This would
potentially require greater fuel usage than if a road was in place, leading to increased fossil fuelemissions. But, roads increase access to forests and can enable illegal logging and forest
degradation. And, if poorly built, roads can lead to soil erosion and disrupt watercourses.
Forest roads can be one of the large infrastructure costs a forestry project must finance. Excluding
roads from the scope of these Criteria could significantly discourage potential issuers from seeking
Certification. Therefore, forest roads are eligible use of proceeds under the Forestry Criteria, but
additional requirements must be met if they are included in a bond seeking Climate Bonds
Certification.
FSC and PEFC have guidelines relating to the construction, management and monitoring of forest
roads.68 These are to minimise any adverse environmental impacts roads might have including thepossibility of increasing illegal logging. Supplementary guidelines provide more specific strategies forcertificate holders to carry out these requirements69. Moreover, illegal deforestation and protection
against it is also acknowledged by FSC and PEFC.
Resulting Criteria
1. Road is contained within the forestry concession
AND
2. The forestry concession must comply with the relevant requirements (i.e. if the road is in aplantation forest then the forest must comply with the requirements set for plantation forestry)AND
3. Road must not pass through an Intact Forest Landscape (IFLs).70 It can be verified whether
the road will pass through an IFL using the map shapefile available online71 72
AND, 4 OR 5
4. Projects and assets are FSC or PEFC certified
OR
5. Road is designed and managed considering:a. Soils are protectedb. Water courses are protectedc. Disturbance of and damage to rare and threatened species, habitats, ecosystems andlandscape values are prevented, mitigated or repaired
d. Measures are in place to prevent unauthorised vehicle access into the forest stands
PEFC International Standard criterion 5.3.8, 5.4.11, 5.5.1, 5.5.5 contain stipulations about forest roads. FSC has requirements in Annex
2, Annex 3, guide for SLIMS, Scale, Intensity and Risk Guideline for Standard Developers and FSC guidelines for the implementation ofFPIC
69 https://ic.fsc.org/en/document-center/id/59, https://ic.fsc.org/en/document-center/id/106, https://ic.fsc.org/en/document-center/id/105,
https://ic.fsc.org/en/document-center/id/67
70 An Intact Forest Landscape is a seamless mosaic of forest and naturally treeless ecosystems within the zone of current forest extent,
which exhibit no remotely detected signs of human activity or habitat fragmentation and is large enough to maintain all native biologicaldiversity, including viable populations of wide-ranging species. See more here: http://www.intactforests.org/
71 http://www.intactforests.org/data.ifl.html
72 https://www.globalforestwatch.org/map/3/-16.58/138.54/ALL/grayscale/loss,forestgain/607?tab=analysis-tab&begin=2001-0101&end=2017-01-01&threshold=30&dont_analyze=true
68

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4.3

Adaptation & Resilience Requirements

The IPCC defines adaptation as: “The process of adjustment to actual or expected climate and its
effects. In human systems, adaptation seeks to moderate or avoid harm or exploit beneficial
opportunities. In some natural systems, human intervention may facilitate adjustment to expectedclimate and its effects.” (IPCC, 2014a).
The IPCC defines resilience as: “The capacity of social, economic and environmental systems tocope with a hazardous event or trend or disturbance, responding or reorganizing in ways thatmaintain their essential function, identity and structure, while also maintaining the capacity foradaptation, learning and transformation.” (IPCC, 2014a). Capacity for adaptation and for resilience
will depend on available assets and their distribution within a population as well as institutional
infrastructure.
All forest systems are likely to be influenced by climate change, with impacts on profitability,
resource supply, and government budgets. Maintaining and enhancing productivity of forested
landscapes will increasingly require strategic investments to promote adaptation capacity andresilience. This should be of immediate interest to governments developing and implementing
economic frameworks for natural resource management, and to farsighted forest asset owners andmanagers concerned about long-term profitability and revenue predictability. To counteract material
impacts of climate change on businesses operating within the forestry sector, investments topromote adaptation capacity and resilience are likely to be necessary.
Adaptation and resilience interventions are likely to vary by region, but could include 73:
•
•
•
•
•
•
•
•
•
•
•

Introducing new plant varieties (e.g., that have a higher drought tolerance, or that are lesssusceptible to pests and diseases likely to be exacerbated because of climate change);
Installing and upgrading enhanced systems for observation and early warning (e.g., weather
information systems);
Facilitating changes in practices (e.g., providing training and inputs to enable forest managers to
implement sustainable, climate-smart management);
Establishing wildfire management systems by providing equipment, early warning systems, andtraining;
Creating infrastructure to reduce post-harvest losses and waste (e.g., building storage facilities);
Protecting or enhancing natural buffers in coastal and riverine zones (e.g., mangroves, sea
grass, corals) and restoring wetlands to reduce impacts of sea level rise, flooding, storm events;
Introduce new techniques to restored wetlands (e.g., reed or Alder wood as a renewable
resource) to keep them in production while saving the carbon stock;
Creating micro-credit and insurance mechanisms to help landowners and land users cope withextreme events;
Promoting the increase in carbon sinks, e.g., in protecting primary forests and peatlands,
supporting increase in woody biomass growth, and promoting long-lived, recycled Harvested
Wood Products (HWPs);
Adapting trade finance and working capital provision so that it facilitates improved management
along supply chains, and;Consulting and utilising climate modelling when designing forestry or land management plans

73 Additional interventions are suggested in FAO. 2011.

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Climate Bonds Initiative Forestry Background Document
The Forestry Criteria have established a process-based approach to checking that projects andassets are climate resilient. The Forestry Criteria interpret climate resilient to mean that projects andassets will remain operational and economical despite the changing climate. Issuers may wish toinclude additional impact metrics and are free to do so, including, for example, metrics on habitats,species conserved or biodiversity impact. Any such disclosure would be treated as additional
information available to investors and would not be within scope of the checks done by the Climate
Bonds Approved Verifier.
Bond issuers can refer to national-level adaptation planning to understand major opportunities andconstraints for forestry projects in the regions where they operate. Under the UNFCCC, fifty Least
Developed Countries (LDCs) have submitted National Adaptation Programmes of Action (NAPAs),
which address urgent and immediate adaptation needs. 74 A number of countries have developed
National Adaptation Plans (NAPs), which are intended to encourage integrated development andcross-sector planning to address medium- to long-term climate change threats to socio-economic
security and progress.75 Other countries have submitted adaptation components in National
Communications to the UNFCCC76 or developed climate resilience strategies and regional
initiatives.77
Noting that FSC and PEFC address many factors of resilience but are less robust with regard toclimate related risks, the Forestry Criteria are particularly comprehensive in this area. However, it is
not a simple matter to set resilience enhancement targets. A process-oriented approach for the
resilience and adaptation components of the Forestry Criteria is applicable to all types of forestry and
it is a requirement that all types of forestry must meet the resilience checklist to be awarded Climate
Bonds Certification.
Resulting Criteria
Table 6: The adaptation and resilience checklist for evaluating compliance with the Forestry Criteria
Item

Demonstrationof compliance

Section 1: The future climate change related risks and vulnerabilities to the asset/site have been evaluated
1.1

Processes are in place to assess key risks from a changing climate, both to the asset itself, AND to thebroader ecosystem78
Examples of risks that may need to be evaluated are:••••Temperature changes
Changes to water availability
Increased risk of flooding or drought
Changes to wind patterns

For example:
management
plan, fire
management
plan,
environmental
impactassessment or
adaptation plan.
Existing,
authoritative and74 http://unfccc.int/adaptation/workstreams/national_adaptation_programmes_of_action/items/4585.php
75 Kissinger et al. 2014.
76 UNFCCC National Communications: http://unfccc.int/national_reports/items/1408.php
77 Regional plans include the European Climate Adaptation Platform: http://climate-adapt.eea.europa.eu/countries, othernations have specific strategies, e.g., USDA 2014 Climate Change Adaptation Plan:
http://www.usda.gov/oce/climate_change/adaptation/adaptation_plan.htm Preventionweb provides a useful overview ofnational focal points on adaptation: http://www.preventionweb.net/english/hyogo/national/list/
Risks that the asset poses to the resilience of the broader ecosystem or local stakeholders might include any ways in which forestry
activities might affect the resilience of other users/stakeholders or any ways in which forestry activities improve the adaptation capacity or
resilience of other users/stakeholders. For example, does the asset impact water availability in the entire ecosystem?

78

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Climate Bonds Initiative Forestry Background Document••

Increased fire risk
Impact on water quality and quantity for other users in the basin

Areas that are felt to be of concern for the operation of these assets should be evaluated.

peer reviewed
analyses thathave been usedmust be cited.

This process should include:••

Mapping of risks; where, when, severity and likelihood. This may be a quantitative or
qualitative mapping of risks
Linking the risk to the possible impact on the asset and ongoing operations – e.g. impact on
operating feasibility, harvesting or yield, or impact on maintenance requirements79

These processes and assessments should use existing, authoritative and peer reviewed analyses or reports
such as the Intergovernmental Panel on Climate Change’s most recent Assessment Report, National
Adaptation Strategies and/or Action Plans, National Adaptation Programmes of Action, Nationally
Determined Contributions, Strategic Programmes for Climate Resilience and other relevant adaptation
strategies and policies and academic journals.
An appropriate timescale over which climate change impacts are assessed should be established. To
assess the climate change signal above observed climatic variability, the characteristics of future climate
should be assessed over a period of at least 20 years.
Section 2: A plan has been designed and implemented to mitigate and adapt to the climate risks and vulnerabilities identified and to improve
the resilience of the assets

2.1

A plan has been designed and is being implemented to address the risks identified in 1.1.
A link between the risks identified in section 1.1 and the planning and design of the risk mitigation or
adaptation measures should be articulated.

For example,
adaptation plan,management
plan

The expected benefits of recommended measures should be explained.
Examples of measures to address risks identified might be:•

There are training, capacity and governance arrangements in place for how the organization willdeal with the impacts of exceptional events such as droughts, floods, wildfires, severe pollution•

Tree species that are appropriate for the expected changes in climate, as well as for the current
climate have been selected•

There is a programme of stakeholder engagement and collaboration to strengthen resilience
outcomes across the system (e.g. policy development, consultation and collaboration to ensure
connectivity of green nodes, of supply chain actors, or neighbours in same ecosystem)

Section 3: There is a plan in place to re-evaluate the risks climate change poses
Re-evaluation should be carried out annually.
Re-evaluation of adaptation or resilience plans and measures, as specified in 2.1, is also planned.
There are monitoring and reporting systems and processes in place to identify high risk scenarios and to
identify when unexpected risks are likely.

4.4Management plan

The management plan of the Forestry Criteria defines what good management in relation toachieving carbon mitigation and climate resilience is. Development of the management plan began
by outlining all the aspects that would ideally be managed in a forestry project. This was then paired
back to those that are crucial for ensuring that a project or asset is low carbon and climate resilient:•
79

Soil healthThis list taken from World Banks Climate and Disaster Risk Assessment Tool

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•
•
•
•
•

Water management
Fire management
Riparian areas protection
Biodiversity management
Species selection

The management plan will apply to all types of forestry projects and assets. For certain forestry
activities, FSC or PEFC certification will be taken as a proxy to show that the management plan has
been complied with (see section 4.6). For forestry activities that are not required to show FSC or
PEFC certification, the issuer will have to provide evidence to the verifier that assets or projects arein compliance with the management plan.
Resulting criteria
Table 7: The management plan of the Forestry Criteria

Requirements of the management plan
1. Soil health: a soil management plan is developed and implemented with a focus on soil
carbon, productivity, retention of soil, retention of soil biomass and soil structure
2. Water management: there has been an assessment done of the water requirements ofthe forests, impacts on and water needs of downstream users (both human and natural)and discharges into watercourses. A water management plan is in place that addresses
relevant risks and includes measures to protect ground water and local water bodies
3. Fire management: measures have been developed and are implemented for theprevention of destructive forest fires (i.e. fires that do not serve management purposes)80
4. Riparian areas protection: provision has been made to protect riparian areas
5. Biodiversity management: the management plan includes provisions for managing andmaintaining biodiversity
6. Species selection: selection of species that are suitable for the project type (e.g.
conservation, restoration or sustainable forest management), will not disrupt genetic
diversity or that are suitable for current or projected future ecological conditions
7. Chemical use: prohibition of active ingredients that are listed in the Stockholm
Convention, the Rotterdam Convention or that are listed as classification Ia or Ib in the
WHO recommended Classification of Pesticides by Hazard, except in case of an
emergency situation or a governmental order. In these cases, environmental and social
risk assessment is required.
8. Forest protection: protection and monitoring measures are in place to prevent andmonitor for illegal logging and illegal land conversion.

4.5

Free, Prior & Informed Consent (FPIC) Requirement

Generally, Free, Prior & Informed Consent (FPIC) is considered outside the strict climate change
scope that we set for the Climate Bonds Standard Criteria. However, in the case of the Forestry
Criteria, due to the nature of the assets being so interlinked with surrounding communities, theForestry Criteria do have a requirement that FPIC is carried out.
Resulting CriteriaFree, prior & informed consent (FPIC) from affected indigenous peoples or local communities must
be sought when:
80 This is not meant to address the possible increased fire-proness due to climate change. The resilience checklist covers

that part of fire management.

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Climate Bonds Initiative Forestry Background Document••

Property rights are potentially affected, FPIC must be obtained from property rights holders;orProject activities may lead to the removal or relocation of habitation or activities important totheir culture and livelihood

FPIC must be carried out in accordance with one of the following:
•
•
•
•
•
•
•

ILO 169
FSC
Climate, community and biodiversity standard
PEFC
UN Declaration of the Rights of Indigenous Peoples
FAO’s FPIC Manual for Practitioners
HVC-HCSA Assessment

It is the issuers responsibility to provide information about which FPIC guidance has been followed
and evidence that the guidelines have been adhered to.

4.6

Leveraging Existing Certification Schemes

In all Climate Bonds Standard Sector Criteria, the aim is to leverage existing schemes and initiatives
that are in use in the sector in question. This is because:•••

Significant industry effort has already gone towards designing and implementing theseschemes
Many have been through multi-stakeholder development processes and periods of public
consultation
It is very likely that some established schemes and initiatives check similar requirements to
those that the Climate Bonds Standard Forestry Criteria require are fulfilled

To determine which existing schemes can be leveraged as showing compliance with parts of theForestry Criteria, the schemes must be evaluated against the requirements of the Forestry Criteria.
Schemes are leveraged if they are compliant with most of the Forestry Criteria requirements.
Projects or assets seeking certification via a recognised best practice standard will still have tocomply with the areas of the Forestry Criteria requirements that the best practice does not cover.
Table 8 shows the criteria that external best practice schemes are evaluated against.
Table 8: Evaluation criteria for external best practice schemes

Forestry Criteria Requirements
No natural landscape conversion since 2010 - any forestry projects converting natural landscapes since2010 onwards cannot be certified
Soil health – a soil management plan is developed and implemented. Includes consideration of soil
carbon, productivity, retention of soil, retention of soil biomass and soil structure
Water management – there has been an assessment done of the water requirements of the forests,
impacts on and water needs of downstream users (both human and natural) and discharges into
watercourses. A water management plan is in place that addresses relevant risks and includes

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Climate Bonds Initiative Forestry Background Document
measures to protect ground water and local water bodies
Fire management – measures have been developed and are implemented for the prevention ofdestructive forest fires (i.e. fires that do not serve management purposes) 81
Riparian areas protection – provision has been made to protect riparian areas
Biodiversity management – provision has been made for managing and maintaining biodiversity
Species selection – no introduction of invasive species that may disrupt genetic diversity or that are notsuitable for current or projected future ecological conditions
Chemical use – prohibition of active ingredients that are listed in the Stockholm Convention, theRotterdam Convention or that are listed as classification Ia or Ib in the WHO recommended
Classification of Pesticides by Hazard, except in case of an emergency situation or a governmental
order. In these cases, environmental and social risk assessment is required.
Forest protection – protection and monitoring measures are in place to prevent and monitor for illegal
logging and illegal land conversion.
1. Future climate change related risks and vulnerabilities to the asset/site havebeen evaluated
2. A plan has been designed and implemented to mitigate and adapt to the
Resilience
climate risks and vulnerabilities identified and to improve the resilience ofchecklist
the assets
3. There is a plan in place to periodically re-evaluate the risks climate change
poses

Governance Requirements
Multi-stakeholder in involvement in standard development process
Scientific input in development of standard
Transparency in public reports and communication of the standard
Complaints and appeals process is in place
Regular reviews and revisions of the standard
Training of auditors
Training opportunities for users of the standard
Audits required
Sanction mechanisms in place

Governance is evaluated because it is essential that the Climate Bonds Standard only leverages
well-run, transparent and trustworthy schemes and initiatives.
Using the above approach, several best practice schemes were evaluated and the Forest
Stewardship Council (FSC) and the Programme for the Endorsement of Forest Certification (PEFC)
have been identified as industry best practice certification bodies to be leveraged by the Forestry
Criteria. Both have large global coverage of the forestry sector, have standards thatcomprehensively cover forestry and its associated sub-sectors, and effectively promote sustainable
forestry. Though these certification schemes are not perfect in terms of ensuring high-production,
sustainable forestry, with each having their own unique drawbacks, they are the best existing
schemes with global coverage. Important to also note is FSC’s and PEFC’s good track record
regarding grievances and complaints resolution.
Gaps between the Forestry Criteria requirements and FSC’s and PEFC’s requirements wereidentified and issuers are required to comply with these in addition to showing FSC or PEFC
certification. The full evaluation of both schemes against the requirements in Table 7 is available inAppendix 2. Other certification schemes may be leveraged in future revisions of these Criteria
provided they pass through a similar evaluation.

81 This is not meant to address the possible increased fire-proness due to climate change. The resilience checklist covers

that part of fire management.

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Climate Bonds Initiative Forestry Background Document
The main area of the Forestry Criteria that FSC and PEFC do not cover is the resilience checklist.
While both certification schemes cover it to some extent they do not specifically require that futureclimate changes are considered. This is a fundamental part of the Forestry Criteria resilience
checklist, so issuers will have to give supporting evidence to show it has been complied with.
It is also worth noting that leveraging PEFC and FSC certification brings a host of other checks toforestry projects that would normally be outside the remit of the Climate Bonds Certification. For
example, FSC has requirements for compliance with law, workers’ rights, employment conditions,indigenous peoples’ rights and community relations, all of which are outside the scope of therequirements set under the Climate Bonds Standard but are certainly beneficial safeguards.
All plantation and sustainable forest management projects, except smallholder projects, are required
to hold FSC or PEFC certification as part of their compliance with the Forestry Criteria. Smallholders
that do not hold PEFC or FSC certification must instead prove compliance with the management
plan (see section 4.4). Issuers must disclose the expiry date and any corrective action requests, pastor pending, that have been issued by the certification body.
By leveraging FSC and PEFC, Climate Bonds Initiative is not commenting that these standards areof equal value. The opinion expressed is that they have checks in sufficient areas to be worth
leveraging as a proxy for compliance with some parts of the Forestry Criteria (see Appendix 2 for thefull evaluation).

4.7

High Conservation Value-High Carbon Stock Assessments (HCV-HCSA)

HCV-HCS assessments82 are leveraged for use in the Forestry Criteria, with regards to smallholders
projects complying with the requirement that no natural landscape has been converted since 2010.
Use of this approach is required for issuers that are not required to be FSC or PEFC certified but doneed to comply with the requirements of ‘no natural landscape conversion since 2010’. Two
categories of land have been identified where the Criteria prohibit land use change; High Carbon
Stock (HCS) land and peatlands. The HCV-HCSA has six classifications of land; high density forest,
medium density forest, low density forest, young regenerating forest, scrub and open land 83. The first
four classes are considered HCS land, however for the Forestry Criteria it is stipulated that scrub
should not be converted to plantation forestry because it can have high soil carbon that should beprotected. Hence, the resulting requirement was set that the only land that is acceptable to convert
to plantation forestry since 2010 is open land (if it is not peatland).
To determine which HCS category land falls into the HCV-HCSA should be used. The toolkit isdesigned to standardise the methodology and to make it available to all practitioners. 84

4.8Best Practice for Disclosure

Beyond the disclosure requirements already stipulated within the Climate Bonds Standard, theForestry Criteria do not require the issuer to disclose supplementary information to receive
certification. Nonetheless, all Criteria under the Climate Bonds Standard (including the Forestry
82 http://highcarbonstock.org/
83 http://highcarbonstock.org/the-hcs-approach-toolkit/
84 The HCS Approach Toolkit Version 2.0: Putting no Deforestation into Practice (2017) http://highcarbonstock.org/the-hcs-

approach-toolkit/

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Criteria) seek to promote and encourage best practice of disclosure of any project information
available publically and particularly to the investor. In following best practice disclosure guidelines,
issuers are demonstrating to the market that they are following pioneering practices of transparency
and management of proceeds. Therefore, in the case of the Forestry Criteria, while not compulsory,the issuer is encouraged to disclose information on the following:
•
•
•
•

•
•
•
•
•

4.9

GHG emission footprint – including quantification, methodology used and performance overthe lifetime of the bondSpecies planted and used – species names of all trees to be planted including whether the
species are native to the location or not
Genetically Modified (GM) plants – whether GM trees are to be planted and harvested and, if
so, details regarding these trees
Percentage of unconverted or conserved land – whether a mixed forestry project comprisedof plantation and conservation forestry or solely conservation forestry, an issuer can disclose
the percentage of each within a project
Supply chain assets – issuers are also encouraged to disclose any operational safeguards
that may be in place
Impact assessments, external audits and ESG safeguards – relevant assessments andaudits carried out separately to those required in the Criteria are welcomed
Broader benefits of the project for the surrounding ecosystems and unconverted andconserved land
Medium to long-term investment plans
Past or pending litigation concerning land rights, livelihood or health issues related to
stakeholders, and any remedial action

Reporting requirements

Reporting on the use of proceeds for a Certified Climate Bond is required at three stages:
1. Pre-issuance – before issuing the bond the issuer must engage with the verifier to confirm
use of proceeds are aligned with the requirements of the Climate Bonds Standard
2. Post-issuance – after issuing the bond the verifier confirms that use of proceeds, once
allocated, remain aligned with the requirements of the Climate Bonds Standard and Forestry
Criteria
3. Annual reporting – the issuer must prepare a simple report each year for the term of the bondto confirm that use of proceeds are aligned with the requirements of the Climate Bonds
Standard and the Forestry Criteria
The above are the overarching reporting requirements as laid out in the Climate Bonds Standard 85.
This is to both prove compliance and to promote stronger disclosure of use of proceeds from issuers.

85 Further information about the Climate Bonds Standard can be found here:

https://www.climatebonds.net/standards/standard_download

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Appendix 1: TWG and IWG members
Members of the Forestry Technical Working Group
•
•
•
•
•
•
•
•
•

Christine Negra, Versant Vision LLC, Lead Specialist
Torsten Boettcher, Agrobanco
Sergio Collaco de Carvalho, University of Oxford, Geography Department
Paul Chatterton, WWF International
Stuart Clenaghan, EcoSystem Service Ltd
Rupert Edwards, Forest Trends
David Ganz, RECOFTC
Michele Laird, Abt Associates
Petri Lehtonen, Indufor

Members of the Land Use Technical Working Group
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

Christine Negra, Versant Vision LLC, Lead Specialist
Tanja Havemann, Clarmondial AG, Lead Specialist
Keith Alverson, UNEP
Geoff Blate, USDA Forest Service
Rupert Edwards, Forest Trends
Martial Bernoux, French Research Institute for Development (IRD)
Adam Chambers, USDA NRCS-National Air Quality and Atmospheric Change TeamPaul Chatterton, WWF International
Jane Feehan, European Investment BankDavid Ganz, RECOFTC
Mark Holderness, Global Forum on Agricultural Research
David Howlett, Global Resilience PartnershipFrank Hicks, Independent advisor
Henry Neufeldt, (formerly) World Agroforestry Center (ICRAF)
Mark New, African Climate and Development Intiative, University of Cape Town
Simon Petley, EnviroMarket Ltd.
Roseline Remans, Bioversity International, CGIAR
Lamon Rutten, Independent Consultant
Brett Shields, Spatial Informatics Group (SIG) and Asia LEDS Global Partnership
Naomi Swickard and Jerry Seager, Verified Carbon Standard (VCS)
Annette Thiele, University Greifswald, Partner in the Greifswald Mire Centre
Raylene Watson, Independent Consultant

Members of the Forestry Industry Working Group
•
•
•
•
•
•
•
•
•

Michael Anderson, ERM
Sophie Beckham, International Paper
Jean-Dominique Bescond, World Bank
Brian Kernohan, Hancock Natural Resources Group
Sami Lundfren & Tim Lehesvrta, UPM
Lars Mac Key, DanskeBank
Jacob Michelsen, Nordea
Beth Nelson & Pip Best, EYMark Robinson, DNV.GL

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Climate Bonds Initiative Forestry Background Document
Members of the Land Use Industry Working Group• John Tobin & Fabian Huwyler, Credit Suisse• Hans Biemans & Justin Sherrard, Rabobank• Marc Sadler, World Bank
• Brian Kernohan, Hancock Natural Resources Group• Ali bin Mohamed, Hassad Foods• Howard-Yana Shapiro, Mars / UC Davis• Oli Haltia, Dasos Capital• Tim McGavin, Laguna Bay• Karla Canavan• Esben Brandi, Quantum Global• Marcos Mancini, Banorte• Cristiano Oliveria, Fibria• Mads Asprem, Green Resources• Chris Brown, Olam• Andrew Voysey, Cambridge Institute for Sustainable Leadership• Jason Green, ECOM Trading• Lara Yacob, The Nature Conservancy• John Simpson, Duxton Asset Management• Katalin Solymosi, IADB
• Timm Tennigkeit, UNIQUE• Michael Hendriksz, ADM• Stephen McDowell, Barclays• Rishi Madlani, Royal Bank of Scotland• Caroline Cruickshank, Emma Wilkes & Jamie Bartlett, Bank of New York Mellon

Appendix 2: Evaluation of best practice standards
TABLE 8. Evaluation table of FSC requirements against the requirements of the Climate Bonds Standard
Forestry Criteria

Evaluation
Criteria

Evidence of FSC meeting requirement

Forestry Criteria requirements
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Climate Bonds Initiative Forestry Background Document
FSC International Standard, Principle 6:
6.9: ‘The Organization shall not convert natural forest to plantations, nornatural forests or plantations on sites directly converted from natural forest
to non-forest land use, except when the conversion:•••

affects a very limited portion of the area of the Management Unit,
andwill produce clear, substantial, additional, secure long-term
conservation benefits in the Management Unit, anddoes not damage or threaten High Conservation Values, nor any
sites or resources necessary to maintain or enhance those High
Conservation Values.’

6.10: ‘Management Units containing plantations that were established on
areas converted from natural forest after November 1994 shall not qualify
for certification, except where:••
No naturallandscapeconversion since2010 - any
forestry projects
converting
naturallandscapessince 2010
onwards cannot
be certified

clear and sufficient evidence is provided that The Organization
was not directly or indirectly responsible for the conversion, or
the conversion affected a very limited portion of the area of theManagement Unit and is producing clear, substantial, additional,
secure long-term conservation benefits in the Management Unit.’

FSC-STD-01-001 V 5-2, Glossary of Terms:
Natural forest: A forest area with many of the principal characteristics andkey elements of native ecosystems, such as complexity, structure andbiological diversity, including soil characteristics, flora and fauna, in which
all or almost all the trees are native species, not classified as plantations.
‘Natural forest’ includes the following categories:• Forest affected by harvesting or other disturbances, in which trees
are being or have been regenerated by a combination of naturaland artificial regeneration with species typical of natural forests inthat site, and where many of the above-ground and below-groundcharacteristics of the natural forest are still present. In boreal andnorth temperate forests which are naturally composed of only one
or few tree species, a combination of natural and artificial
regeneration to regenerate forest of the same native species, withmost of the principal characteristics and key elements of native
ecosystems of that site, is not by itself considered as conversion
to plantations.
• Natural forests which are maintained by traditional silvicultural
practices including natural or assisted natural regeneration.
• Well-developed secondary or colonizing forest of native species
which has regenerated in non-forest areas.
• The definition of ‘natural forest’ may include areas described aswooded ecosystems, woodland and savanna.
*FSC International Standard and subsequent principles does not yet
address peatlands in terms of conversion. However, wetlands aredescribed. Peatland conversion is directly addressed in the FSC
International Generic Indicators document but this is not included as adirect requirement in the FSC international Standard*

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Climate Bonds Initiative Forestry Background Document
Summary:
FSC certification plus confirmation that no peatlands have been converted
since 2010 will satisfy the Climate Bonds Standard Forestry Criteria forthis requirement
FSC International Standard, Principle 9:

Soil health – asoil
management
plan isdeveloped andimplemented
with a focus on
soil carbon,
productivity,
retention of soil,
retention of soil
biomass and soil
structure

9.1: ‘High Conservation Value (HCV) 4 - Critical ecosystem services.
Basic ecosystem services in critical situations, including protection ofwater catchments and control of erosion of vulnerable soils and slopes.’
FSC International Standard, Principle 10:
10.6: [Any use of fertilisers] … ‘prevent, mitigate, and/or repair damage toenvironmental values, including soils.’
10.10: ‘The Organization shall manage infrastructural development,
transport activities and silviculture so that water resources and soils areprotected…’
Glossary of Terms – ‘Ecosystem Services’, includes:c) ‘supporting services such as soil formation and nutrient cycling’
Summary:
FSC certification is sufficient evidence that this requirement has been met
FSC International Standard, Principle 6:

Water
management –there has been
an assessment
done of thewaterrequirements ofthe forests,
impacts on andwater needs ofdownstream
users (bothhuman andnatural) anddischarges into
watercourses. A
watermanagement
plan is in placethat addresses
relevant risks
and includes
measures toprotect groundwater and local
water bodies

6.7: ‘The Organization shall protect or restore natural water courses, water
bodies, riparian zones and their connectivity. The Organization shall avoid
negative impacts on water quality and quantity and mitigate and remedy
those that occur.’
FSC International Standard, Principle 9:9.1: ‘HCV (High Conservation Value) 4 - Critical ecosystem services.
Basic ecosystem services in critical situations, including protection ofwater catchments and control of erosion of vulnerable soils and slopes.’
9.1, HCV 5 – ‘Community needs. Sites and resources fundamental forsatisfying the basic necessities of local communities or Indigenous
Peoples (for livelihoods, health, nutrition, water, etc.) …’
FSC International Standard, Principle 10:
10.10: ‘The Organization shall manage infrastructural development,
transport activities and silviculture so that water resources and soils areprotected…’
Glossary of Terms – ‘Connectivity’:‘Aquatic connectivity deals with the accessibility and transport of materials
and organisms, through groundwater and surface water, between different
patches of aquatic ecosystems of all kinds’
Glossary of Terms – ‘Ecosystem Services’, includes:

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Climate Bonds Initiative Forestry Background Documenta) provisioning services such as food, forest products and water

Summary:
FSC certification is sufficient evidence that this requirement has been met
FSC-STD-01-001 V 5-2
6.2 Prior to the start of site-disturbing activities, The Organization* shallidentify and assess the scale, intensity and risk* of potential impacts ofmanagement activities on the identified environmental values*.

Firemanagement –measures havebeen developed
and areimplemented forthe prevention ofdestructive
forest fires (i.e.
fires that do not
serve
management
purposes)

6.3 The Organization* shall identify and implement effective actions toprevent negative impacts of management activities on the environmental
values*, and to mitigate and repair those that occur, proportionate to thescale, intensity and risk* of these impacts (addresses intentional fires as amanagement activity)
1.4 The Organization* shall develop and implement measures, and/or
shall engage with regulatory agencies, to systematically protect theManagement Unit* from unauthorized or illegal resource use, settlement
and other illegal activities (addresses intentional, illegal fire)
10.9 The Organization* shall assess risks and implement activities that
reduce potential negative impacts from natural hazards proportionate toscale, intensity, and risk*. (addresses prevention and impact mitigation ofnatural fires)
FSC-STD-01-001 V 5-2, Glossary of Terms:
Natural Hazards: disturbances that can present risks to social andenvironmental values* in the Management Unit* but that may also
comprise important ecosystem functions; examples include drought, flood,fire, landslide, storm, avalanche, etc.
Summary:
FSC certification is sufficient evidence that this requirement has been met
FSC International Standard, Principle 6:

Riparian areas
protection –provision has
been made toprotect riparianareas

Supported by:

6.7: ‘The Organization shall protect or restore natural water courses, water
bodies, riparian zones and their connectivity. The Organization shall avoid
negative impacts on water quality and quantity and mitigate and remedy
those that occur’
Glossary of Terms – ‘Connectivity’:‘Aquatic connectivity deals with the accessibility and transport of materials
and organisms, through groundwater and surface water, between different
patches of aquatic ecosystems of all kinds’

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Climate Bonds Initiative Forestry Background Document
Summary:
FSC certification is sufficient evidence that this requirement has been met
FSC International Standard, Principle 6:
6.6: ‘The Organization shall effectively maintain the continued existence of
naturally occurring native species and genotypes, and prevent losses of
biological diversity, especially through habitat management in theManagement Unit. The Organization shall demonstrate that effective
measures are in place to manage and control hunting, fishing, trappingand collecting.’
FSC International Standard, Principle 9:
Biodiversity
management –provision has
been made formanaging andmaintaining
biodiversity

9.1: The Organization, through engagement with affected stakeholders,interested stakeholders and other means and sources, shall assess andrecord the presence and status of the following:••

HCV 1 – ‘Species diversity. Concentrations of biological diversity
including endemic species, and rare, threatened or endangered
species, that are significant at global, regional or national levels.’
HCV 3 – ‘Ecosystems and habitats. Rare, threatened, orendangered ecosystems, habitats or refugia.‘*Within the document cited, many definitions and terms are derived fromthe Convention on Biological Diversity*
Summary:
FSC certification is sufficient evidence that this requirement has been met
FSC International Standard Scope:‘The decision [on whether or not a certain vegetation type can be certified]should include consideration of the species involved…’
FSC International Standard, Principle 6:
Speciesselection – nointroduction ofinvasive species
that may disrupt
genetic diversity
or that are notsuitable forcurrent or
projected future
ecologicalconditions

6.4: ‘The Organization shall protect rare species and threatened species
and their habitats in the Management Unit through conservation zones,
protection areas, connectivity and/or (where necessary) other direct
measures for their survival and viability… The Organization shall take into
account the geographic range and ecological requirements of rare andthreatened species beyond the boundary of the Management Unit, when
determining the measures to be taken inside the Management Unit.’
6.6: ‘The Organization shall effectively maintain the continued existence of
naturally occurring native species and genotypes, and prevent losses of
biological diversity, especially through habitat management in theManagement Unit. The Organization shall demonstrate that effective
measures are in place to manage and control hunting, fishing, trappingand collecting’FSC International Standard: Principle 10:
10.3: ‘The Organization shall only use alien species* when knowledge
and/or experience have shown that any invasive impacts can becontrolled and effective mitigation measures are in place’

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Climate Bonds Initiative Forestry Background Document

Summary:
FSC certification is sufficient evidence that this requirement has been met
Chemical use –prohibition ofactiveingredients thatare listed in the
Stockholm
Convention, theRotterdam
Convention orthat are listed asclassification Ia
or Ib in the WHO
recommended
Classification of
Pesticides by
Hazard, except
in case of an
emergency
situation or agovernmental
order. In thesecases,
environmental
and social risk
assessment isrequired

FSC International Standard, Principle 10:
10.6: ‘The Organization shall minimize or avoid the use of fertilizers. Whenfertilizers are used, The Organization shall demonstrate that the use isequally or more ecologically and economically beneficial than the use ofsilvicultural systems that do not require fertilizers, and prevent, mitigate,and/ or repair damage to environmental values, including soils.’
10.7: ‘The Organization shall use integrated pest management andsilviculture systems which avoid, or aim at eliminating, the use of chemical
pesticides. The Organization shall not use any chemical pesticides
prohibited by FSC policy. When pesticides are used, The Organization
shall prevent, mitigate, and / or repair damage to environmental values
and human health.’
The FSC policy on prohibited chemical pesticides bans the use of all
pesticides that are banned by any international agreement or listed underPrior Informed Consent (PIC). 86 87
Summary:
FSC certification is sufficient evidence that this requirement has been met

86 Review of the Forest Stewardship Council’s Pesticide Indicators and Thresholds, Report by Pesticide Action Network UK

for Forest Stewardship Council International Center (2005)
87 FSC List of ‘highly hazardous’ pesticides, FSC-STD-30-001a EN (2017)

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Climate Bonds Initiative Forestry Background Document
FSC-STD-01-001
1.4 The Organization* shall develop and implement measures, and/or
shall engage with regulatory agencies, to systematically protect theManagement Unit* from unauthorized or illegal resource use, settlement
and other illegal activities.
1.5 The Organization* shall comply with the applicable national laws*,
local laws*, ratified* international conventions and obligatory codes ofpractice*, relating to the transportation and trade of forest products within
and from the Management Unit*, and/or up to the point of first sale.
FSC-STD-60-004 V2-0, International Generic Indicators:
1.4.1 Measures are implemented to provide protection* from unauthorized
or illegal harvesting, hunting, fishing, trapping, collecting, settlement andother unauthorized activities.
FSC International Standard, Principle 7:

Forest protection– protection andmonitoringmeasures are inplace to preventand monitor for
illegal logging
and illegal land
conversion.

Foreword: ‘The management plan shall be implemented and kept up todate based on monitoring information in order to promote adaptive
management.’
FSC International Standard, Principle 8:
8.1 The Organization shall monitor the implementation of its management
plan, including its policies and objectives, its progress with the activities
planned, and the achievement of its verifiable targets.
8.4: ‘The Organization shall make publicly available a summary of theresults of monitoring free of charge, excluding confidential information.’
FSC International Standard, Principle 9:9.4: ‘The Organization shall demonstrate that periodic monitoring iscarried out to assess changes in the status of High Conservation Values,
and shall adapt its management strategies to ensure their effective
protection. The monitoring shall be proportionate to the scale, intensity
and risk of management activities, and shall include engagement withaffected stakeholders, interested stakeholders and experts.’
FSC’s Policy for Association allows FSC to disassociate from certified
companies even if they are not directly but indirectly involved in illegal
logging or illegal timber trade and/or these activities take place outside thecertified management unit(s). This tool can be applied to companies thatare solely chain-of-custody certified.
Summary:
FSC certification is sufficient evidence that this requirement has been met

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Climate Bonds Initiative Forestry Background Document
Resilience
checklist 1 Future climatechange relatedrisks andvulnerabilities tothe asset/site
have been
evaluated

FSC-STD-60-004
6.1 The Organization* shall assess environmental values* in theManagement Unit* and those values outside the Management Unit
potentially affected by management activities
6.1.2 Assessments of environmental values* are conducted with a level ofdetail and frequency so that: 4) Monitoring of impacts or environmental
changes can be conducted as per Principle* 8.
Summary:
Issuers will have to show compliance with the resilience checklist even if
they are FSC certified.

Resilience
checklist 2 - Aplan has been
designed andimplemented tomitigate andadapt to theclimate risks andvulnerabilities
identified and to
improve theresilience of theassets

6.8 The Organization* shall manage the landscape* in the Management
Unit* to maintain and/or restore a varying mosaic of species, sizes, ages,
spatial scales and regeneration cycles appropriate for the landscapevalues* in that region, and for enhancing environmental and economic
resilience*.”
7.1 The Organization* shall, proportionate to scale, intensity and risk* ofits management activities, set policies (visions and values) and objectives*
for management, which are environmentally sound, socially beneficial andeconomically viable. Summaries of these policies and objectives shall beincorporated into the management plan*, and publicized.”
10.2 The Organization* shall use species for regeneration that areecologically well adapted to the site and to the management objectives*.
The Organization shall use native species* and local genotypes* forregeneration, unless there is clear and convincing justification for using
others.” (plus according indicators, and Instructions for standard
developers from the IGIs.)
10.9 The Organization* shall* assess risks* and implement activities that
reduce potential negative impacts from natural hazards* proportionate toscale, intensity, and risk*.” (plus according indicators, and Instructions forstandard developers from the IGIs)
Summary:
Issuers will have to show compliance with the resilience checklist even if
they are FSC certified.

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Climate Bonds Initiative Forestry Background Document
Resilience
checklist 3 There is a planin place toperiodically reevaluate therisks climatechange poses

FSC-STD-60-004
6.1.2 Assessments of environmental values* are conducted with a level ofdetail and frequency so that: 4) Monitoring of impacts or environmental
changes can be conducted as per Principle* 8.
7.4 The Organization shall update and revise periodically the
management planning and procedural documentation to incorporate theresults of monitoring and evaluation, stakeholder engagement* or new
scientific and technical information, as well as to respond to changing
environmental, social and economic circumstances.
Summary:
Issuers will have to show compliance with the resilience checklist even if
they are FSC certified.

Governance evaluation
Multistakeholder
involvement instandarddevelopment
process
Scientific input indevelopment ofstandardYes

The ‘FSC Procedure for the Development and Revision of FSC normative
documents’ (FSC-PRO-01-001) requires scientific input for normative
documents:
9.5 The review of the document’s continued relevance and effectivenessin meeting the stated objective shall consider the following information:a) New or changed legislation or best practices;b) Emerging technologies or scientific knowledge;c) The results of FSC’s Monitoring and Evaluation activities, e.g.
implementation problems, competitive advantage or threats;d) Evaluation of Change Requests;e) Existing interpretations and Advice Notes to be incorporated.

Transparency inpublic reports
andcommunicationof the standard

Supported by:

In addition, scientific research is used in Working Groups and in thestandard itself.
Summary audit reports for forest management are publicly available in
one space, the FSC certificates database http://info.fsc.org. Audit reports
are here available in usually two languages: in the local language and ineither English or Spanish.

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Climate Bonds Initiative Forestry Background Document
All complaints cases are reported and archived on FSC’s website,with ongoing cases also reported on.
Complaints against certificate holders:Complaints andappeals process
is in place

Dealt with by the certification body in the first place and can be escalated
to the accreditation body and later to FSC. FSC– in its accreditation
standard FSC-STD-20-001, section 1.9 – is very specific about the frame
for handling complaints. The process is timebound, starting with the initial
response to the complainant. The language for handling the complaint
must be agreed between both parties and at least offers the two options
from the public summary audit reports, which is the local language and
one world language, either English or Spanish. This enables not only local
but also international stakeholders to file complaints.
Complaints against the performance of the certification scheme as such:
Managed according to FSC-PRO-01-008 or FSC-PRO-01-005.
Complaints against certified or member companies that are linked tounacceptable practices:

Regular reviews
and revisions of
the standard
Training ofauditors
Training
opportunities forusers of thestandard
Audits required

Sanctionmechanisms in
place
Other

Supported by:

In FSC, this is described as “Policy for association” (PfA) complaints. The
disputes on the FSC website that you refer to in the backgrounddocument, p 69, are mostly “Policy for association” complaints. The policy
for association (FSC-POL-01-004) allows FSC to dissociate fromcompanies with unbearable practices, like involvement in illegal logging
etc. Complaints based on the Policy for association are treated according
to ‘FSC-PRO-01-009 - Processing PfA Complaints’.
Yes

Yes
Yes

The FSC system requires field visits to the forest management units of theapplicant certificate holders before a certificate can be issued.
Nonconformities need to be remedied within a certain timeline (12 months
for minor nonconformities, 3 months for majors). If this does not happen,
the certificate will normally be suspended. This provides FSC with a tool toenforce certificate holders to put corrective actions in place, and to ensure
certificate holders cannot continue with nonconforming practices.
Yes

FSC is registered as an ISEAL member, which means they are committed to
ISEAL’s Credibility Principles and follow their Codes of Good Practice insetting standards, assuring compliance and monitoring impacts. Organisations
become full members by demonstrating full compliance with the ISEALStandard-setting Code.

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Climate Bonds Initiative Forestry Background Document
TABLE 9. Evaluation table of PEFC requirements against the requirements of the Climate Bonds Standard
Forestry Criteria

Evaluation
Criteria

Evidence of PEFC meeting requirement

Forestry Criteria requirements
PEFC International Standard:
5.1.11: ‘Conversion of forests to other types of land use, including
conversion of primary forests to forest plantations, shall not occur unlessin justified circumstances where the conversion:

No naturallandscapeconversion since2010 - any
forestry projects
converting
naturallandscapessince 2010
onwards cannot
be certifieda) is in compliance with national and regional policy and legislation
relevant for land use and forest management and is a result of
national or regional land-use planning governed by agovernmental or other official authority including consultation withmaterially and directly interested persons and organisations; andb) entails a small proportion of forest type; andc) does not have negative impacts on threatened (including
vulnerable, rare or endangered) forest ecosystems, culturally andsocially significant areas, important habitats of threatened species
or other protected areas; andd) makes a contribution to long-term conservation, economic, andsocial benefits.’
5.1.12: ‘Conversion of abandoned agricultural and treeless land into forest
land shall be taken into consideration, whenever it can add economic,
ecological, social and/or cultural value.’
PEFC International Standard, Appendix 1: Guidelines for the interpretationof requirements in the case of plantation forestry:
Requirement: ‘5.1.1. Conversion of forests to other types of land use,
including conversion of primary forests to forest plantations, shall notoccur unless in justified circumstances where the conversion…’
Interpretation for forest plantations: ‘The requirement for the “conversionof forests to other types of land use, including conversion of primary
forests to forest plantations” means that forest plantations established bya forest conversion after 31 December 2010 in other than “justified
circumstances” do not meet the requirement and are not eligible forcertification.’
Requirements for Sustainable Forest Management in Temperate, Boreal
and Plantation Forests - Consultation:‘Special key biotopes in the forest such as… wetlands… shall beprotected or, where appropriate, restored when damaged by forest
practices.’*No explicit mention of conversion from peatland*

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Climate Bonds Initiative Forestry Background Document
Summary:
PEFC certification plus confirmation that no peatlands have been
converted since 2010 will satisfy the Climate Bonds Standard Forestry
Criteria for this requirement
PEFC International Standard, 5.1.1: ‘Forest management planning shall
aim to maintain or increase forests and other wooded areas and enhance
the quality of the economic, ecological, cultural and social values of forest
resources, including soil and water.’
5.1.9: ‘Forest management practices shall safeguard the quantity andquality of the forest resources in the medium and long term by…
preferring techniques that minimise direct or indirect damage to forest, soil
or water resources.’

Soil health – asoil
management
plan isdeveloped andimplemented
with a focus on
soil carbon,
productivity,
retention of soil,
retention of soil
biomass and soil
structure

5.2.7: ‘Appropriate forest management practices such as reforestation andafforestation with tree species and provenances that are suited to the site
conditions or the use of tending, harvesting and transport techniques thatminimise tree and/or soil damages shall be applied’
5.3.5: ‘Regeneration, tending and harvesting operations shall be carriedout in time, and in a way that does not reduce the productive capacity ofthe site, for example by avoiding damage to… the forest soil, and by using
appropriate systems.’
5.5.1: ‘Forest management planning shall aim to maintain and enhanceprotective functions of forests for society, such as… protection from soil
erosion...’5.5.3: ‘Special care shall be given to silvicultural operations on sensitive
soils and erosion-prone areas as well as in areas where operations mightlead to excessive erosion of soil into watercourses. Inappropriatetechniques such as deep soil tillage and use of unsuitable machinery shallbe avoided in such areas. Special measures shall be taken to minimise
the pressure of animal populations.’
5.5.5: ‘Construction of roads, bridges and other infrastructure shall be
carried out in a manner that minimises bare soil exposure, avoids theintroduction of soil into watercourses...’Summary:

Watermanagement –there has been
an assessment
done of thewaterrequirements ofthe forests,
impacts on andwater needs ofdownstream
users (bothhuman andnatural) andSupported by:

PEFC certification is sufficient evidence that this requirement has been
met
PEFC International Standard, 5.1.1:‘Forest management planning shall
aim to maintain or increase forests and other wooded areas and enhance
the quality of the economic, ecological, cultural and social values of forest
resources, including soil and water.’
5.1.9: ‘Forest management practices shall safeguard the quantity andquality of the forest resources in the medium and long term by…
preferring techniques that minimise direct or indirect damage to forest, soil
or water resources.’
5.5.1: ‘Forest management planning shall aim to maintain and enhanceprotective functions of forests for society, such as… protection of water
resources and from adverse impacts of water such as floods oravalanches.’58

Climate Bonds Initiative Forestry Background Document
discharges into
watercourses. A
watermanagement
plan is in placethat addresses
relevant risks
and includes
measures toprotect groundwater and local
water bodies

Firemanagement –measures havebeen developed
and areimplemented forthe prevention ofdestructive
forest fires (i.e.
fires that do not
serve
management
purposes)

Riparian areas
protection –provision has
been made toprotect riparianareas

5.5.3: ‘Special care shall be given to silvicultural operations on sensitive
soils and erosion-prone areas as well as in areas where operations mightlead to excessive erosion of soil into watercourses. Inappropriatetechniques such as deep soil tillage and use of unsuitable machinery shallbe avoided in such areas. Special measures shall be taken to minimise
the pressure of animal populations.’
5.5.4: ‘Special care shall be given to forest management practices inforest areas with water protection functions to avoid adverse effects on
the quality and quantity of water resources. Inappropriate use ofchemicals or other harmful substances or inappropriate silvicultural
practices influencing water quality in a harmful way shall be avoided.’
5.5.5: ‘Construction of roads, bridges and other infrastructure shall be
carried out in a manner that… avoids the introduction of soil into
watercourses and preserves the natural level and function of water
courses and river beds. Proper road drainage facilities shall be installed
and maintained.’
Summary:
PEFC certification is sufficient evidence that this requirement has been
met
PEFC International Standard, 5.2.2: ‘Health and vitality of forests shall be
periodically monitored, especially key biotic and abiotic factors that
potentially affect health and vitality of forest ecosystems, such as… fire,and damage caused by climatic factors…’
5.2.3: ‘The monitoring and maintaining of health and vitality of forest
ecosystems shall take into consideration the effects of naturally occurring
fire…’PEFC International Standard, 5.2.6: ‘Lighting of fires shall be avoided andis only permitted if it is necessary for the achievement of the management
goals of the forest management unit.’
5.7.2: ‘Forest management shall provide for adequate protection of theforest from unauthorised activities such as… illegally initiated fires…’
Summary:
PEFC certification is sufficient evidence that this requirement has been
met
PEFC International Standard, 5.4.2: ‘Forest management planning,
inventory and mapping of forest resources shall identify, protect and/or
conserve ecologically important forest areas containing significant
concentrations of:a) protected, rare, sensitive or representative forest ecosystems
such as riparian areas and wetland biotopes’
5.5.3: ‘Special care shall be given to silvicultural operations on sensitive
soils and erosion-prone areas as well as in areas where operations mightlead to excessive erosion of soil into watercourses. Inappropriatetechniques such as deep soil tillage and use of unsuitable machinery shallbe avoided in such areas. Special measures shall be taken to minimise
the pressure of animal populations.’
5.5.5: ‘Construction of roads, bridges and other infrastructure shall be
carried out in a manner that… avoids the introduction of soil into
watercourses and preserves the natural level and function of water

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Climate Bonds Initiative Forestry Background Document
courses and river beds. Proper road drainage facilities shall be installed
and maintained.’
5.4.11 Infrastructure shall be planned and constructed in a way thatminimises damage to ecosystems, especially to rare, sensitive or
representative ecosystems and genetic reserves, and that takes
threatened or other key species – in particular their migration patterns –into consideration.
5.5.1 Forest management planning shall aim to maintain and enhanceprotective functions of forests for society, such as protection of
infrastructure, protection from soil erosion, protection of water resources
and from adverse impacts of water such as floods or avalanches.
5.5.4 Special care shall be given to forest management practices in forest
areas with water protection functions to avoid adverse effects on thequality and quantity of water resources. Inappropriate use of chemicals orother harmful substances or inappropriate silvicultural practices
influencing water quality in a harmful way shall be avoided.
Summary:
PEFC certification is sufficient evidence that this requirement has been
met
PEFC International Standard, 5.4.1: ‘Forest management planning shall
aim to maintain, conserve and enhance biodiversity on ecosystem,
species and genetic levels and, where appropriate, diversity at landscapelevel.’
5.4.12: ‘With due regard to management objectives, measures shall betaken to balance the pressure of animal populations and grazing on forest
regeneration and growth as well as on biodiversity.’

Biodiversity
management –provision has
been made formanaging andmaintaining
biodiversity

5.1.11: ‘Conversion of forests to other types of land use, including
conversion of primary forests to forest plantations, shall not occur unlessin justified circumstances where the conversion:a) does not have negative impacts on threatened (including
vulnerable, rare or endangered) forest ecosystems, culturally
and socially significant areas, important habitats of threatened
species or other protected areas…’
5.2.5: ‘Forest management practices shall make best use of natural
structures and processes… Adequate genetic, species and structural
diversity shall be encouraged and/or maintained to enhance the stability,
vitality and resistance capacity of the forests to adverse environmental
factors and strengthen natural regulation mechanisms.’
5.4.2: ‘Forest management planning, inventory and mapping of forest
resources shall identify, protect and/or conserve ecologically important
forest areas containing significant concentrations of:a) areas containing endemic species and habitats of threatened
species, as defined in recognised reference lists;b) endangered or protected genetic in situ resources; and taking
into accountc) globally, regionally and nationally significant large landscapeareas with natural distribution and abundance of naturally
occurring species.’

Supported by:60

Climate Bonds Initiative Forestry Background Document
5.4.3: ‘Protected and endangered plant and animal species shall not be
exploited for commercial purposes. Where necessary, measures shall betaken for their protection and, where relevant, to increase their
population.’
5.4.8: ‘Forest management practices shall, where appropriate, promote adiversity of both horizontal and vertical structures such as uneven-aged
stands and the diversity of species such as mixed stands. Where
appropriate, the practices shall also aim to maintain and restore
landscape diversity.’
5.4.10: ‘Tending and harvesting operations shall be conducted in a waythat does not cause lasting damage to ecosystems. Wherever possible,
practical measures shall be taken to improve or maintain biologicaldiversity.’
5.4.11: ‘Infrastructure shall be planned and constructed in a way that…
takes threatened or other key species – in particular their migration
patterns – into consideration.’
5.4.12: ‘With due regard to management objectives, measures shall betaken to balance the pressure of animal populations and grazing… on
biodiversity.’
5.4.13: ‘Standing and fallen dead wood, hollow trees, old groves andspecial rare tree species shall be left in quantities and distribution
necessary to safeguard biological diversity…’
5.7.1: ‘Forest management shall comply with legislation applicable toforest management issues including… protected and endangered
species…’
5.1.1 Forest management planning shall aim to maintain or increase
forests and other wooded areas and enhance the quality of the economic,
ecological, cultural and social values of forest resources, including soil
and water. This shall be done by making full use of related services andtools that support land-use planning and nature conservation.
5.1.2 Forest management shall comprise the cycle of inventory andplanning, implementation, monitoring and evaluation, and shall include anappropriate assessment of the social, environmental and economic
impacts of forest management operations. This shall form a basis for acycle of continuous improvement to minimise or avoid negative impacts.
5.4.6 Afforestation and reforestation activities that contribute to theimprovement and restoration of ecological connectivity shall be promoted.
5.4.9 Traditional management systems that have created valuableecosystems, such as coppice, on appropriate sites shall be supported,
when economically feasible.
Summary:
PEFC certification is sufficient evidence that this requirement has beenmet

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Climate Bonds Initiative Forestry Background Document
PEFC International Standard, 5.2.5: ‘Forest management practices shallmake best use of natural structures and processes… Adequate genetic,
species and structural diversity shall be encouraged and/or maintained toenhance the stability, vitality and resistance capacity of the forests toadverse environmental factors and strengthen natural regulation
mechanisms.’
5.4.1: ‘Forest management planning shall aim to maintain, conserve andenhance biodiversity on ecosystem, species and genetic levels and,
where appropriate, diversity at landscape level.’

Speciesselection – nointroduction ofinvasive species
that may disrupt
genetic diversity
or that are notsuitable forcurrent or
projected future
ecologicalconditions

5.4.2: ‘Forest management planning, inventory and mapping of forest
resources shall identify, protect and/or conserve ecologically important
forest areas containing significant concentrations of:c) endangered or protected genetic in situ resources
5.4.5: ‘For reforestation and afforestation, origins of native species andlocal provenances that are well-adapted to site conditions shall be
preferred, where appropriate. Only those introduced species,
provenances or varieties shall be used whose impacts on the ecosystemand on the genetic integrity of native species and local provenances havebeen evaluated, and if negative impacts can be avoided or minimised.’‘Note: CBD (Convention on Biological Diversity) Guiding Principles for thePrevention, Introduction, and Mitigation of Impacts of Alien Species thatThreaten Ecosystems, Habitats or Species are recognised as guidance
for avoidance of invasive species.’
5.4.11: ‘Infrastructure shall be planned and constructed in a way that…
takes threatened or other key species – in particular their migration
patterns – into consideration.’
5.2.7 Appropriate forest management practices such as reforestation andafforestation with tree species and provenances that are suited to the site
conditions […] shall be applied.
Summary:

Chemical use –prohibition ofactiveingredients thatare listed in the
Stockholm
Convention, theRotterdam
Convention orthat are listed asclassification Ia
or Ib in the WHO
recommended
Classification of
Pesticides by
Hazard, except
in case of an
emergency
Supported by:

PEFC certification is sufficient evidence that this requirement has been
met
PEFC International Standard, 5.2.12: ‘Where fertilisers are used, theyshall be applied in a controlled manner and with due consideration for theenvironment.’
5.5.4: ‘…Inappropriate use of chemicals or other harmful substances orinappropriate silvicultural practices influencing water quality in a harmful
way shall be avoided.’
5.2.8: The use of pesticides shall be minimized and appropriate
silvicultural alternatives and other biological measures preferred
5.2.9: The WHO type 1A and 1B pesticides and other highly toxic
pesticides shall be prohibited, except where no other viable alternative isavailable
5.2.10: Pesticides, such as chlorinated hydrocarbons whose derivates
remain biologically active and accumulate in the food chain beyond theirintended use, and any pesticides banned by international agreement,

62

Climate Bonds Initiative Forestry Background Document
situation or agovernmental
order. In thesecases,
environmental
and social risk
assessment isrequiredshall be prohibited
Note: “pesticides banned by international agreements” are defined in the
Stockholm Convention on Persistent Organic Pollutants 2001, as
amended5.2.11: The use of pesticides shall follow the instructions given bypesticide producer and be implemented with proper equipment andtraining
5.2.12: Where fertilisers are used, they shall be applied in a controlledmanner and with due consideration for the environment
5.2.5 Forest management practices shall make best use of natural
structures and processes and use preventive biological measures
wherever and as far as economically feasible to maintain and enhance thehealth and vitality of forests. Adequate genetic, species and structural
diversity shall be encouraged and/or maintained to enhance the stability,
vitality and resistance capacity of the forests to adverse environmental
factors and strengthen natural regulation mechanisms.
Summary:
PEFC certification is sufficient evidence that this requirement has been
met
PEFC International Standard, 5.1.2: ‘Forest management shall comprisethe cycle of inventory and planning, implementation, monitoring andevaluation…’

Forest protection– protection andmonitoringmeasures are inplace to preventand monitor for
illegal logging
and illegal land
conversion.

5.1.7: ‘Monitoring of forest resources and evaluation of their management
shall be periodically performed, and results fed back into the planning
process.’
5.7.2: ‘Forest management shall provide for adequate protection of theforest from unauthorised activities such as illegal logging, illegal land use,
illegally initiated fires, and other illegal activities.’
5.2.2 Health and vitality of forests shall be periodically monitored, especially
key biotic and abiotic factors that potentially affect health and vitality of forest
ecosystems, such as pests, diseases, overgrazing and overstocking, fire, anddamage caused by climatic factors, air pollutants or by forest management
operations.

Summary:
PEFC certification is sufficient evidence that this requirement has beenmet

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Climate Bonds Initiative Forestry Background Document
Resilience
checklist 1 Future climatechange relatedrisks andvulnerabilities tothe asset/site
have been
evaluated

5.1.2 Forest management shall comprise the cycle of inventory andplanning, implementation, monitoring and evaluation, and shall include anappropriate assessment of the social, environmental and economic impacts offorest management operations. This shall form a basis for a cycle ofcontinuous improvement to minimise or avoid negative impacts
5.2.2 Health and vitality of forests shall be periodically monitored, especially
key biotic and abiotic factors that potentially affect health and vitality of forest
ecosystems, such as pests, diseases, overgrazing and overstocking, fire, anddamage caused by climatic factors, air pollutants or by forest management
operations.
5.2.4 Forest management plans or their equivalents shall specify ways andmeans to minimise the risk of degradation of and damages to forest
ecosystems. Forest management planning shall make use of those policy
instruments set up to support these activities

Summary:
Issuers will have to show compliance with the resilience checklist even if
they are PEFC certified.
Resilience
checklist 2 - Aplan has been
designed andimplemented tomitigate andadapt to theclimate risks andvulnerabilities
identified and to
improve theresilience of theassets

5.1.2 Forest management shall comprise the cycle of inventory andplanning, implementation, monitoring and evaluation, and shall include anappropriate assessment of the social, environmental and economic impacts offorest management operations. This shall form a basis for a cycle ofcontinuous improvement to minimise or avoid negative impacts

Resilience
checklist 3 There is a planin place toperiodically reevaluate therisks climatechange poses

5.1.2 Forest management shall comprise the cycle of inventory andplanning, implementation, monitoring and evaluation, and shall include anappropriate assessment of the social, environmental and economic impacts offorest management operations. This shall form a basis for a cycle ofcontinuous improvement to minimise or avoid negative impacts

5.1.4 Management plans or their equivalents, appropriate to the size anduse of the forest area, shall be elaborated and periodically updated. They
shall be based on legislation as well as existing land-use plans, andadequately cover the forest resources

Summary:
Issuers will have to show compliance with the resilience checklist even if
they are PEFC certified.

5.1.4 Management plans or their equivalents, appropriate to the size anduse of the forest area, shall be elaborated and periodically updated. They
shall be based on legislation as well as existing land-use plans, andadequately cover the forest resources
5.1.7 Monitoring of forest resources and evaluation of their management
shall be periodically performed, and results fed back into the planning process
5.2.2 Health and vitality of forests shall be periodically monitored, especially
key biotic and abiotic factors that potentially affect health and vitality of forest
ecosystems, such as pests, diseases, overgrazing and overstocking, fire, anddamage caused by climatic factors, air pollutants or by forest management
operations.

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Climate Bonds Initiative Forestry Background Document
Summary:
Issuers will have to show compliance with the resilience checklist even if
they are PEFC certified.

Governance evaluation
Multistakeholder
involvement instandarddevelopment
process
Scientific input indevelopment ofstandard
Transparency inpublic reports
andcommunicationof the standard

Yes

Yes

Yes

Complaints against certificate holders:Complaints and appeals relating to the decisions and activities of acertified entity; an accredited certification body or an accreditationbody shall be dealt with by the complaints and appeals proceduresof the relevant accredited certification body; accreditation body; orby the International Accreditation Forum.
Complaints andappeals process
is in place

Complaints against the performance of the certification scheme as such:

Regular reviews
and revisions of
the standard
Training ofauditors
Training
opportunities forusers of thestandard
Audits required

Yes

Sanctionmechanisms inplace

Supported by:Complainants must outline their concern in a letter to PEFC
accompanied by supporting documentation. The information
provided must be verifiable as accurate and correct. PEFC assigns
a Task Force to deal with the complaint or appeal. Members of the
Task Force must not have a vested interest in or conflict with thesubject matter. PEFC’s Board of Directors decides on the complaint
or appeal, based on a written report by the Task Force.

Yes, see https://www.pefc.org/certification-services/chain-of-custodytraining
Yes, see e.g. http://www.pefc.co.uk/events/save-the-date-pefc-2018workshop-dates for an example from the UK

Yes, certification must comply with ISO 17021 or ISO Guide 17065, bothof which require annual audits
Yes, certification must comply with ISO 17021 or ISO 17065, both ofwhich require sanction mechanisms

65Climate Bonds Initiative Forestry Background Document

Appendix 3: Summary of public consultation
No.
1

2

Feedback received
The Criteria should require issuers tomake FSC and PEFC audits publicly
available
What if a concession or forest is newly
purchased and it’s the first time it will be
harvested and all is legally done inaccordance with the forest law? In thiscase it is probably an IFL but road
construction should be allowed.

Response
Will leverage what FSC or PEFC stipulates

Verifiers cannot check that projects are inaccordance with all applicable laws. This isbeyond the scope of their verification.
Opening the road requirements further is risky
so will stick with what is there.
No change proposed3

4

Due to the low productivity of the soil
many smallholders have a cultivation
cycle that includes a longer production
pause where a new forest regenerates.
This young regeneration and up to low
density forest will be burned down after 5
to 10 years. Conversion of this land into
a forest plantation would have a net
positive impact. This is THE common
smallholder agriculture practice in theamazon low- and high- land.

TWG did not suggest altering as it would meanchanging the natural land conversion
requirement and risk allowing through projects
that are converting established natural forests.

What happens to the certification in caseof fire or natural disasters? For example,
if there is a proposed review process,this may take many years: what will
happen with certification in themeantime? How will it be ensured that
this does not create a loophole fordestructive practices?

FSC and PEFC require that in the event of anatural disaster measures are put in place toreturn the habitat back to what was there
before.

Supported by:Here, the Criteria take a strict stance to makesure there is not the possibility of Certifying
projects that are contributing to deforestation.

The Forestry Criteria will leverage FSC and
PEFC’s mechanism and if those certifications
are withdrawn following a natural disaster,
Climate Bonds Certification will also be
withdrawn.

66

Climate Bonds Initiative Forestry Background DocumentNo.
5

Feedback received

Response

There is no mechanism to ensure humanrights are protected and no requirementthat ensures Free, Prior and Informed
Consent (FPIC) is carried out.

A requirement around Free, Prior and Informed
Consent (FPIC) has been added to the Forestry
Criteria.

Particularly concerned about this inrelation to conservation and restoration
projects.
Recommend that parties seeking to meet
the Forestry Criteria obtain certificationfrom existing certification schemes, suchas the Climate, Community andBiodiversity standards and that it require
all projects seeking to meet the CBIForestry Criteria to fully apply the High
Carbon Stock Approach and High
Conservation Values.
6

There are no criteria to determine if there
has been a net positive effect onsurrounding communities.

Net positive effects on forest communities willremain outside of scope for these criteria.
We will be clear in all documentation about thescope of the Criteria and make sure it could not
be construed that we are certifying that net
positive effects on social aspects are being
checked.

7

High Carbon Stock Approach should
always be used in association with High
Conservation Value assessments. The
two organisations have developed amanual for joint assessment, andassessments of HCVs is a requirement
for companies wishing to use the HCSA
approach.

The Criteria have been edited to recognise thatthese schemes have been combined.

The HCS methodology is intended to be
applicable for any moist tropical forest on
mineral soils, but the HCS Approach
Toolkit Module 4 includes details ofvariations to the methodology whichmight be necessary to address issues
relating to image quality and types ofland cover and land use in different
regions.

Supported by:67

Climate Bonds Initiative Forestry Background DocumentNo.
8

Feedback received
Question about whether the Criteria
should require an increase in carbon
stocks at best and maintenance ofcarbon stocks at minimum

Response
Certification is not awarded in levels, it is a passor fail. This makes it difficult to specify what is
the minimum and what is best.
No change.

9Will emissions from harvesting,transportation, processing and disposal
be considered? Does assessment
involve the entire life cycle of emissions?

In some areas of the supply chain there must be
some level of renewable energy used in
facilities. Will make sure this is explained
clearly.

10

We recommend additional requirements
to facilitate additionality from plantation
assets and to reduce their negative
impact risk.

Additionality is not something that can be easily
measured with green bonds and we do not
require additionality in any sectors.
No change.

11

It is a concern that the criteria permit thelogging of primary forests - we favour aclear exclusion instead.

We explain in the background document why
logging of primary forest can in some cases be
Certifiable. This was a decision that the TWG
and IWG supported
No change.

12

Suggest adding a request for disclosure
on monoculture, species used, alien
species and GM plants, disclosure on
plantation type/composition andpercentage of unconverted/conservation
land.

We will add some text about best practicedisclosure. We cannot require this level of
disclosure for Certification.

This should hold for supply chain as well
as forestry assets. Supply chain assets
should be required to disclose theiroperational safeguards
13

It is not clear what the minimum
requirements an external standard, suchas FSC or PEFC, must meet in order tobe leveraged by the Forestry Criteria

14

Disagree that FSC and PEFC are equally The opinion we are giving is not that both
valid Standards.
schemes are equally robust or strict, but rather
that both were found to meet the minimum
requirements for the purpose of the Forestry
Criteria.

Supported by:

We have edited the background document to
explain clearly the minimum performance we
expect an external standard to meet for it to beleveraged in the Forestry Criteria.

68Climate Bonds Initiative Forestry Background Document
No.

Feedback received

Response

15

PEFC should not be leveraged by the
Forestry Criteria on the basis of being
weak on FPIC and because Greenpeace
recommends FSC as the best
certification scheme and advises against
using PEFC
Is it national or international FSC or
PEFC certification that is being
requested?

We are proposing to continue to leverage PEFC
as it meets the requirements of the Forestry
Criteria sufficiently.

17

What happens to CBI certification if FSC
certification is allowed to lapse during the
lifetime of the bond?

Climate Bonds Certification would be revoked

18

What happens to CBI certification if achange in circumstances prevents recertification of forest asset? FSC may, in
first instance, issue Corrective Action
Requests (CARs) – what would be thestatus of CBI certification in this phase?

Certification would be revoked if the CARs are
not corrected. We would have to put the bondon a watch list while it is in this phase

19

Issuers need to disclose any pending
and past requests as well as any
remedial action that has been taken. The
same applies to any PEFC audit findings.
Issuers should disclose certification,
including expiry dates, for all of theirforest holdings, not just the holdings
funded by a given bond, as well as any
certification in progress or that has been
revoked.

Agree, should add this request

In the absence of in-field verification,
third party verification needs to bestrengthened.

We don’t have the ability to require in-field
verification. By leveraging FSC and PEFC
certification in many places we ensure thatfurther verification has been done on projects.

16

20

21

No change.
Any FSC or PEFC certification is accepted (i.e.
international or national)

Agree in part, I don’t think we can ask them todisclose about projects that are outside of thebond

The green bond market accepts the model werun of third-party verification and this is thebusiness model that the verifiers work from.
No change.

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Climate Bonds Initiative Forestry Background Document
No.

Feedback received

Response

22

There is no additional verification from
Climate Bonds Initiative. This means thatthe strength of the standard rests on anassumption that the basic FSC model issolid, and an assumption of complianceverified by an auditor chosen by theclient.

Misunderstood the Criteria. There is additionalverification, other than FSC/PEFC certification,
based on the resilience checklist. Verifiers will
check compliance with FSC/PEFC, compliancewith the resilience checklist and, in some cases,
compliance with the management plan.
No change.

23

Is there a set of checks to ensure thethird-party verifiers are not too close to
the client?

Yes, verifiers are required by the Climate Bonds
Standard to notify of any conflict of interest,
which includes being too close to the client24

Is there a third-party verification process
to check the auditing process?

Third party verification is the model we run. This
will check compliance with FSC/PEFC and allother aspects of the Criteria that are relevant

25Will activities be verified by third parties
to ensure reported results are correct?

Yes, at pre-issuance and post-issuance26

How will the robustness of reporting
mechanisms on activities supported bybond financing be guaranteed?

Annual reporting is required. Climate Bonds
checks it, if there is any doubt of compliance we
can request a official verification of annual
reporting27

Use of ‘social’ in the backgrounddocument

Delete ‘social’ it is misleading in terms of our
scope

28

Management plan includes chemical use
and biodiversity management, i.e.
beyond the scope of climate

Rationale for including biodiversity is that thismaintains a healthy ecosystem which affects
the carbon sequestration and resilience of theforest. Equally use of damaging chemicals canin the long term affect the ability of the land tofoster growth, therefore limiting its ability tosequester carbon.

29

How is the resilience checklist verified?

External verifier is responsible for giving an
opinion about whether the checklist has been
met

30

Scope of the resilience checklist

The resilience checklist looks at the functionalityof the assets or the ability for the assets toachieve their objectives – i.e. operational
resilience (not the resilience of the surrounding
systems).

31

Clarify that palm oil is not covered

Palm oil will be tackled in the Agriculture Criteria

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Climate Bonds Initiative Forestry Background Document
No.

Feedback received

Response

32

Solid, objective justification is needed toshow that climate bonds will be aneffective method for reducing GHG
emissions

Expanded explanation of how the mitigation
requirements ensure good GHG emission
performance

33

A method is needed for standardising
forest and land-use definitions

Where possible we refer to FAO definitions. If
terms are not defined by FAO then we refer toanother relevant and robust external definition.

34

Can you explain the peer review processof resilience?

TWG, IWG and then public consultation

35

The definitions of forestry are highlyvariable, so that ‘natural forest’ and‘forested land’ mean different things todifferent people.

Reviewed definitions and consistency within the
document

36

Criteria wording on roads is confusing

Reviewed for clarity

37

Unclear how conservation andReviewed and expanded justification for thisrestoration of non-forested land fits within
Forestry Criteria.

Appendix 4: References
Citations
Denef K et al. 2012. Report of greenhouse gas accounting tools for agriculture and forestry sectors.
Interim Report to USDA under Contract No. GS23F8182H 140.
https://www.usda.gov/oce/climate_change/techguide/Denef_et_al_2012_GHG_Accounting_Tool
s_v1.pdf
ECA. 2009. Shaping climate-resilient development: A framework for decision-making, A Report of
the Economics of Climate Adaptation Working Group, a partnership between ClimateWorks
Foundation, Global Environment Facility, European Commission, McKinsey & Company, The
Rockefeller Foundation, Standard Chartered Bank and Swiss Re.
http://ccsl.iccip.net/climate_resilient.pdf
Fischedick M et al. 2014. Industry. In: Climate Change 2014: Mitigation of Climate Change.
Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panelon Climate Change [Edenhofer O et al. (eds.)]. Cambridge University Press, Cambridge, United
Kingdom and New York, NY, USA. http://www.ipcc.ch/pdf/assessmentreport/ar5/wg3/ipcc_wg3_ar5_chapter10.pdf
Heal MG et al. 2014. Economics of adaptation. In: Climate Change 2014: Impacts, Adaptation,
Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth
Assessment Report of the Intergovernmental Panel on Climate Change [Field CB et al. (eds.)].
Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA
http://www.ipcc.ch/pdf/assessment-report/ar5/wg2/WGIIAR5-Chap17_FINAL.pdf
IPCC. 2014a: Summary for policymakers. In: Climate Change 2014: Impacts, Adaptation, andSupported by:71

Climate Bonds Initiative Forestry Background Document
Vulnerability.Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth
Assessment Report of the Intergovernmental Panel on Climate Change [Field CB et al. (eds.)].
Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, pp. 1-32.
http://www.ipcc.ch/pdf/assessment-report/ar5/wg2/ar5_wgII_spm_en.pdf
IPCC, 2014b: Summary for Policymakers. In: Climate Change 2014: Mitigation of Climate Change.
Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panelon Climate Change [Edenhofer O et al. (eds.)]. Cambridge University Press, Cambridge, United
Kingdom and New York, NY, USA. https://www.ipcc.ch/pdf/assessmentreport/ar5/wg3/ipcc_wg3_ar5_summary-for-policymakers.pdf
Iversen P, Lee D, Rocha M. 2014. Understanding Land Use in the UNFCCC.
http://ghginstitute.org/wpcontent/uploads/2015/04/Understanding_Land_Use_in_the_UNFCCC.pdf
Kissinger G et al. 2014. Climate adaptation and agriculture: Solutions to successful national
adaptation plans. CCAFS Policy Brief no. 9. Copenhagen, Denmark: CGIAR Research Programon Climate Change, Agriculture and Food Security (CCAFS).
Met Office Hadley Centre. 2012. Reconciling LULUCF accounting with modeled mitigation targets.
http://www.avoid.uk.net/2012/01/avoid-1-reconciling-lulufc-accounting-with-modeled-mitigationtargets/OECD. 2013. A characterization of environmental labeling and information schemes.
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=ENV/EPOC/WPIEEP(2013)2/FINAL&docLanguage=En
Plambeck, EL. 2012. Reducing greenhouse gas emissions through operations and supply chain
management. Energy Economics, 34: S64-S74. http://uscib.org/docs/plambeck.pdf
Tubiello FN et al. 2014. Agriculture, Forestry and Other Land Use Emissions by Sources andRemovals by Sinks, 1990-2011 Analysis. ESS Working Paper No., 2, Mar. 2014. FAO. Rome,
Italy. http://www.fao.org/docrep/019/i3671e/i3671e.pdf
WEF. 2014. Climate Adaptation: Seizing the Challenge. Geneva, Switzerland: World Economic
Forum. http://www.weforum.org/reports/climate-adaptation-seizing-challenge
Wunder S. 2005. Payments for environmental services: Some nuts and bolts. CIFOR Occasional
Paper No. 42. Center for International Forestry Research. Bogor Bara, Indonesia.
http://www.cifor.org/publications/pdf_files/OccPapers/OP-42.pdf

For further reference
General references• Climate Bonds Standard: http://www.climatebonds.net/standards/standard• IPCC: http://www.ipcc.ch• IPCC Emissions Factor Database: http://www.ipcc-nggip.iges.or.jp/EFDB/main.php• FAO STAT: http://faostat3.fao.org/home/E• Green Growth Knowledge Platform: http://www.greengrowthknowledge.org
National references• National Communications to the UNFCCC: http://unfccc.int/national_reports/nonannex_i_natcom/items/2979.php andhttp://unfccc.int/national_reports/annex_i_natcom/submitted_natcom/items/3625.php• Submitted National Adaptation Programme of Actions (NAPA):
http://unfccc.int/adaptation/knowledge_resources/ldc_portal/items/4722.php• Submitted Nationally Appropriate Mitigation Actions (NAMAs):
http://www4.unfccc.int/sites/nama/SitePages/Home.aspx• Global Climate Change Alliance national programs: http://www.gcca.eu
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Climate Bonds Initiative Forestry Background Document
Mitigation references• UNFCCC CDM Methodologies: https://cdm.unfccc.int/methodologies/index.html• UNFCCC JI Methodologies:
http://unfccc.int/kyoto_protocol/mechanisms/joint_implementation/items/1674.php• Verified Carbon Standard: http://www.v-c-s.org• American Carbon Registry: http://americancarbonregistry.org• Gold Standard: http://www.goldstandard.org/luf• European Commission monitoring and reporting of GHG emissions:
http://ec.europa.eu/clima/policies/g-gas/monitoring/index_en.htm
Adaptation references• European Climate Adaptation Platform: http://climate-adapt.eea.europa.eu/agriculture-andforestry• US EPA Climate Change Impacts and Adapting to Change:
http://www.epa.gov/climatechange/impacts-adaptation/• Climate Adaptation Knowledge Exchange (CAKE): http://www.cakex.org• ADAPT Asia-Pacific: http://www.adaptasiapacific.org• Asia Pacific Adaptation Network: http://www.apan-gan.net• Global Adaptation Network: http://www.ganadapt.org
Forestry best practice standards• ITC Standards Map: http://www.standardsmap.org• ISEAL Alliance: http://www.isealalliance.org/our-sectors• GIIN IRIS (impact reporting metrics): https://iris.thegiin.org• Climate and Community & Biodiversity Alliance: http://www.climate-standards.org• Forest Stewardship Council (FSC): https://us.fsc.org• American Tree Farm System: https://www.treefarmsystem.org• Canadian Standards Association: http://www.csasfmforests.ca• Programme for the Endorsement of Forest Certification: http://www.pefc.org• Sustainable Forestry Initiative: http://www.sfiprogram.org• IRFS (IAS41): http://www.iasplus.com/en/standards/ias/ias41• USPAP: http://www.uspap.org• AASB: http://www.aasb.gov.au• SASB: http://www.sasb.org/standards/status-standards/• TEEB: http://www.teebweb.org

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