Healthy forests support water supply, carbon sequestration, biodiversity, and rural economies. However, climate change, fire suppression, and urban expansion have made forests in the western United States overgrown and prone to severe wildfires.

Wildfire frequency and intensity have increased significantly. Since 2000, nine of the ten worst fire seasons have occurred, with 47,000 fires burning over 7 million acres in 2017. The cost of suppression exceeded $2 billion for the first time that year. Meanwhile, a backlog of restoration work persists, with California alone facing a 30–45-year delay.

The Forest Resilience Bond (FRB) facilitates private sector investment to fund forest restoration. By reducing fire risk, it protects water supplies, prevents carbon release, and mitigates damage to infrastructure.

Contribution to conservation goals

The FRB enables private capital to cover the upfront costs of restoration, accelerating efforts traditionally funded by government agencies. This approach enhances fire prevention, protects air and water quality, supports biodiversity, and promotes rural economic growth.

To measure impact, Blue Forest Conservation (BFC) works with research partners to assess fire risk reduction, water availability, and economic benefits. This data strengthens the economic case for continued investment.

The business model

The FRB raises private capital for restoration, with repayments shared among beneficiaries, including government agencies, utilities, and private landowners. Payments may be fixed-cost agreements or pay-for-success contracts based on project outcomes.

A key innovation is the cost-sharing approach, which distributes financial responsibility across multiple stakeholders. BFC oversees the process, ensuring alignment between investors and conservation goals.

Governance measures prevent conflicts of interest. BFC does not receive investor capital until all environmental planning is complete, and restoration is managed by independent non-profits.

Products and services being sold

The FRB funds forest restoration activities such as hazardous fuel reduction, reforestation, invasive species control, and habitat enhancement. These interventions restore ecosystem health, reduce wildfire risk, and improve water supplies.

For example, thinning overgrown forests increases water availability, while road maintenance in sensitive areas protects aquatic ecosystems.

Revenue model

The FRB generates revenue through contracted payments from beneficiaries, which fund investor repayments. Payments are structured as either fixed-cost agreements or pay-for-success contracts.

The Yuba River watershed pilot project combined concessionary capital from foundations (earning 1% returns) with market-rate investments (earning 4%). Future projects aim to transition toward fully market-rate funding.

Risk management

Several risks exist, including contract complexity, measuring benefits, and ensuring investor confidence. These are mitigated through:

• Legal review to ensure contract compliance.
• Scientific research to validate environmental benefits.
• Small pilot projects to test effectiveness before scaling up.
• Investor risks, such as payment reliability and government budget constraints, are managed through legally binding contracts and flexible repayment structures.

The investment Model

The FRB structure relies on a special purpose vehicle (SPV) to manage financial flows. This ensures transparency and facilitates structured investor repayments.

Investment follows a phased approach. Early-stage funding comes from grants and concessionary capital, while pilot projects use a mix of low-return and market-rate funding. Institutional investors are expected to play a larger role as the model matures.

The first FRB pilot raised $4 million for a $4.6 million restoration project in the Tahoe National Forest. Future projects aim to scale to $15–50 million, attracting pension funds, insurance companies, and other large investors.

Replicability and scalability

The FRB model has significant expansion potential, with 8 million acres of priority restoration land in the U.S., representing an $8 billion market. The goal is to deploy $1 billion in private investment over the next decade.

Scaling up requires larger projects and a structured investment fund, making the model more attractive to institutional investors. The FRB could also be adapted for other conservation areas, such as riparian restoration and rangeland management.

Conclusion

The FRB is an innovative financing model that leverages private capital for forest restoration. Its cost-sharing structure engages multiple stakeholders, ensuring financial sustainability and ecological benefits. With continued refinement, it has the potential to drive large-scale environmental restoration efforts.