This article was originally published in Mongabay.

The Brazilian government in 2023 announced a novel funding mechanism to incentivize forest preservation: the Tropical Forest Forever Facility (TFFF). In an episode of Mongabay’s weekly podcast Newscast, host Mike DiGirolamo explored what experts think about the TFFF, what it can do, and what it can’t.  

Mongabay contributor Justin Catanoso, who has written previously about the new fund, also known as the Tropical Forest Finance Facility, told DiGirolamo a key component that makes it different is that the money is neither a loan nor a donation. Instead, it’s an investment fund, where the “investors get paid back first, and the money that is generated by the investments above what the investors get is what will be given to the tropical countries,” Catanoso said.

Six wealthy nations — the U.S., Norway, Germany, France, the U.K. and the United Arab Emirates — will invest $25 billion in 2025 as seed capital into the fund to attract another $100 billion from international financial institutions and big philanthropic organizations.

Catanaso said the money will be invested in “a portfolio of carefully selected slash aggressive investment vehicles.” Investors are promised an annual return of 5.5% on average over 20 years. Whatever money is generated in excess of that by the investments each year, expected to be around $4 billion, will be distributed to around 70 tropical countries for keeping their tropical forests intact instead of cutting them down for agriculture, logging and other forms of deforestation. 

“If you go back and look at markets over the last 20 years going back, we’re well over 5.5% up in terms of what happens in the market. This is a very doable fund with a lot less risk than donating money that you’re not really sure is going to the right places,” Catanoso said.

Charlotte Streck, co-founder of advisory firm Climate Focus, told DiGirolamo that the TFFF “has great potential because it is put forward and supported by tropical rainforest countries.”

She added the mechanism is “a lot more compelling” for donor countries since the capital won’t be directly spent but instead be invested to generate more money.

However, Frédéric Hache, a sustainable finance lecturer at the Paris Institute of Political Studies, questioned what the fund would invest in and how the extra return would be generated. 

“They mentioned this figure of 4 billion to be available for conservation. That’s an estimate. I would love to know how this figure has been calculated on, based on which assumptions,” Hache said. “Another question is, what happens if the fund loses money? Who bears the loss?”

Hache also questioned if the TFFF would displace other forms of funding to tropical countries, such as loss and damage mechanisms and potential grants.

To learn more, listen to the episode “What’s the TFFF? A forest finance tool ‘like no other’ shows potential.”