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An estimated financing gap of at least £1.8 billion between 2022 and 2032 needs to be closed to meet UK woodland creation and management targets – a level over 2.5 times total public funding committed in 2021.

This study explores existing applications of Green Finance to UK trees, woods and forests (TWF) and their potential in further increasing private investment. Mechanisms include Timberland Investment Management Organisations (TIMOs), Environmental Impact Bonds (EIBs), and Community-funded Forestry, with case studies provided and the importance of ‘blended finance’ in catalysing private investment noted. The need to investigate critical factors determining successes and failures further is highlighted.

Research objectives

  1. Examine how Green Finance is defined in the literature, comparing it with Payments for Ecosystem Services (PES) and identifying how these categories relate to each other.
  2. Explore the coverage of existing Green Finance mechanisms related to UK forests, providing summary case studies of associated mechanisms and instruments where available.
  3. Review available evidence on successes and failures of Green Finance mechanisms applied in the UK that are related to trees, woods, and forests (TWF) and underpinning factors involved.
  4. Provide a brief overview of the evidence, identifying gaps and further research needed on this to support increased private sector investment in the UK’s natural capital.

Findings and Recommendations


  • There is no universally accepted definition of ‘Green Finance’, but it can broadly be conceptualised as ‘environmentally-targeted sustainable finance’.
  • Green finance mechanisms and Payments for Ecosystem Services (PES) are neither synonyms nor completely separate concepts. To the extent that PES involve project-focused funding or provide a revenue stream for investors, they can be viewed as a subset of Green Finance, though they also cover wider non-financial elements.
  • The application of innovative green finance mechanisms to TWFs in the UK is currently relatively under-developed, although the number of projects seeking to channel more private investment is growing (e.g. the Wyre Natural Flood Management Project, Mersey Forest, and Trees for Life).
  • Financial mechanisms that have potential to be applied to UK’s trees, woods, and forests include Timberland Investment Management Organisations (TIMOs), Environmental Impact Bonds (EIBs), and Community-funded Forestry.
  • Evidence on the critical factors underpinning the successes of mechanisms being applied in the UK is currently sparse. General factors from the broader literature include the need for more investment-ready projects, robust governance and regulation, as well as consultation of all stakeholders throughout a project.


  • Investigate further (e.g. using interviews) factors underpinning the success of innovative TWF-related green finance mechanisms applied in the UK (as projects continue to develop).
  • Conduct more detailed research on mechanisms like TIMOs and EIBs, which are more commonplace in other countries, to assess better their potential applicability in the UK context.

Latest updates

This study has been summarised in a two-page In Brief note: Green Finance in the context of trees, woods, and forests (In Brief)


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