THE FUND FOR NATURE INSTRUMENT ANALYSIS

The Fund for Nature (TFFN) is a financial instrument designed to provide market-rate project-level debt to nature-based carbon projects, primarily in Sub-Saharan Africa. By offering an alternative to the common practice of pre-selling carbon credits at steep discounts to corporate buyers, TFFN aims to increase the revenue captured by local project implementers and communities. A central innovation of the fund is the development of a standardized, open-sourced Simple Agreement for Future Offtake (SAFO), which serves as a bankable document to secure future carbon credit supply and act as collateral for debt. The fund targets the agriculture, forestry, and blue carbon sectors, specifically focusing on afforestation, reforestation, and revegetation (ARR) and reducing emissions from deforestation and forest degradation (REDD+). A pilot fund of USD 50-70 million is envisioned, with the potential to scale as voluntary carbon markets are projected to grow significantly by 2030.

• TFFN addresses a 'credit gap' in nature-based carbon project financing where developers typically cover up-front costs through grants or by pre-selling credits at a 'steep discount' to brokers or corporate buyers, often leading to disproportionate value capture by intermediaries.
• The fund introduces a Simple Agreement for Future Offtake (SAFO), an open-sourced, standardized document intended to reduce transaction costs, increase transparency, and serve as collateral for project-level debt.
• The pilot phase focuses on Sub-Saharan Africa, with a shortlist of target countries including the Democratic Republic of the Congo (DRC), Ghana, Kenya, Mozambique, Sierra Leone, and Zambia, based on criteria such as carbon market precedence and regulatory environment.
• TFFN targets the AFOLU (agriculture, forestry, and other land use) sector, prioritizing removal projects in afforestation, reforestation, and revegetation (ARR) as a primary focus, with avoidance projects (REDD+) as a secondary focus.
• Quantitative modeling for a USD 70-100 million pilot fund suggests a return of 12-15%, with underlying ARR and REDD+ projects showing returns of 20-35%. The model is considered robust, withstanding 50%+ changes in key variables like carbon credit prices before becoming uneconomical.
• The fund aims to catalyze significant private capital; an at-scale vehicle of USD 100 million is projected to catalyze USD 900 million of commercial capital, including carbon credit payments, for projects in Africa.
• To mitigate the risk of irregular cash flows—particularly for ARR projects where credit sales may not begin until years 3-5—the fund will blend ARR and REDD+ projects and allow for a 3-year grace period with payment in kind (PIK) interest.

APA

Climate Policy Initiative (2022). THE FUND FOR NATURE INSTRUMENT ANALYSIS. https://www.climatepolicyinitiative.org/wp-content/uploads/2022/10/TFFN-report.pdf

Chicago

Climate Policy Initiative. THE FUND FOR NATURE INSTRUMENT ANALYSIS. 2022. https://www.climatepolicyinitiative.org/wp-content/uploads/2022/10/TFFN-report.pdf.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=THE FUND FOR NATURE INSTRUMENT ANALYSIS |date=September 2022 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2022/10/TFFN-report.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2022fund, author = {{Climate Policy Initiative}}, title = {{THE FUND FOR NATURE INSTRUMENT ANALYSIS}}, institution = {Climate Policy Initiative}, year = {2022}, month = sep, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2022/10/TFFN-report.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }