Natural Capital – Financing Forest Certification in Malaysia
A new report from WWF/GFTN, Natural Capital – Financing Forest Certification in Malaysia, released this September ahead of the second Malaysia Forest Dialogue meeting in Kuala Lumpur, attempts to highlight key challenges and opportunities involved in financing forest certification in Malaysia.
Forest certification is a promising market instrument that can help in managing risks inherent in exposure to the forest industry. However, private sector uptake of forest certification in Malaysia has been slow and there are a number of pitfalls for the unwary lender.
Drawing from forty-four separate discussions with timber companies, investment consultants, lenders and government departments, the report explores some economic and market aspects of responsible forestry and certification as well as the current relationship between the financial sector and the forest industry in Malaysia.
The report concludes that the reputational risks associated with exposure to the forest industry in Malaysia and the complexities involved in managing those risks are high. Banks and other financial institutions that identify suitably qualified partners to help them both understand and manage the risks involved stand to prosper at the expense of those that do not.
WWF’s Global Forest & Trade Network, with its affiliate, the Malaysia Forest & Trade Network, and 15 years of experience working in partnership with the forest industry worldwide is uniquely placed to assist banks and investors that choose a partnership approach.
The report provides recommendations in five key areas in order to stimulate the growth of forest certification:
1. Improved market information flows
2. Market research on certification feasibility
3. Forest industry investment guidelines
4. Joint bank/forest industry working group
5. Progressive finance facilities