Financing the risk of catastrophic wildfire reduction: The Forest Resilience Bond

Year: 2020
Presenter/s: Nick Wobbrock
Symposium Session: 2020 - 08 Pre-Disaster: An ounce of prevention is worth a pound of cure
Topics covered: _other, beavers, community involvement, outside PNW, riparian, risk, and stream


ABSTRACT

In 2018, wildfires in the United States caused an estimated $24 billion in economic losses—a record-high—claiming human lives, damaging property, releasing greenhouse gases, contaminating water supplies and harming the forest products and tourism industries. This could be a sign of things to come, as climate change raises temperatures and exacerbates drought conditions and forest degradation in the American West. A new $4.6 million-dollar pilot project in the Tahoe National Forest—called the Forest Resilience Bond—is looking for a creative solution to reduce the risk of catastrophic wildfire by financing forest restoration through a public-private partnership.
WRI’s research on Protecting Drinking Water at the Source shows that natural infrastructure such as forests can help reduce wildfire risks, protect water quality and make communities more resilient if disaster strikes. WRI collaborated with Blue Forest Conservation and Encourage Capital, two environmentally-minded investment firms, to develop a way to proactively finance forest restoration. To help make the financial case for this first transaction, WRI provided economic analysis to beneficiaries, investors and partners including the U.S. Forest Service, the state of California, Yuba Water Agency, and the National Forest Foundation. Communities in the area were consulted to make sure stakeholders understood the bond’s benefits, including the protection of recreational resources, less exposure to smoke and more forest-related job opportunities.

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

Wildfires endanger the environment, economies, and health across the western United States. To avoid future catastrophic fires, more innovative partnerships like the Forest Resilience Bond will be needed to pay for forest health interventions across the fire-prone West. This pilot in the Yuba River Watershed is the first instance in which private capital has been mobilized to fight wildfires in the U.S., but with more than 50 million acres of National Forest land at risk of burning over the coming year, more new ideas like this one will be needed.