How little-known cloud forests could unlock new sustainable income streams

Guest post by UBS Global Visionary, Earth Security


A new report by UBS Global Visionary Alejandro Litovsky, CEO & Founder of Earth Security, uncovers the significant economic value of little-known cloud forest ecosystems, 90 per cent of which are found in 25 developing countries.

When Alejandro Litovsky visited Costa Rica many years ago, he learned that by capturing fog from the clouds, misty mountain cloud forest ecosystems increased the volume of water flowing downstream. It struck him that this function was so formidable, yet so unknown, and that finding a way to finance the value of this water, which is used by hydropower dams, cities and farms, could, in addition to the carbon stored in these forests, provide a key to financing their protection.

A new report from Earth Security, a global specialist in climate and nature-based assets, founded and run by Alejandro, finds that most of the world’s cloud forests are concentrated in just 25 tropical developing countries, and that of the 979 hydropower dams operating in those countries, more than half are depending on water from cloud forests. This represents billions of dollars of electricity production taking nature’s ecosystem services for granted.

And that’s not the full story. Hydropower capacity across the tropics is set to double as countries try to expand access to energy with a lower carbon footprint. We identify some 1,084 dams that are already at some stage of planning and investment in these 25 countries. Of these future dams, some 684 – two- thirds – will rely on water from cloud forests.

According to the World Bank, almost 60% of the world’s poorest countries are in debt distress or at high risk of it, a situation worsened by the Covid-19 pandemic. Many of these countries are the last frontier for standing tropical forests and vibrant biodiversity, but without adequate finance they cannot be expected to meet climate and nature commitments.

To tackle this issue, Earth Security proposes the development of a Cloud Forest Bond, intended to provide these 25 cloud forest countries and a range of financial actors, including philanthropy, public finance and private investment, with a set of options to capture the economic value of the ecosystem services of these forests. Through their work, it has become clear that if sovereign finance instruments for nature are to prevent deforestation, they must also help countries create new, long-term income streams from keeping their forests standing.

Raising the need to pursue these opportunities on a global scale, the report also proposes a Cloud Forest 25 (CF25) Investment Initiative; a collective of all 25 countries sharing this common natural asset, so as to accelerate the international application of market templates, and aggregate the blended finance and data needed to achieve solutions at scale.

My hope for the future is that we can accelerate the paradigm shift that aligns investments with the planet’s life-support systems. We are working actively to catalyse these opportunities and welcome an engagement with all stakeholders
Alejandro Litovsky