Insights CIO View August 2, 2023

Rainforests: the Earth’s green lung

Rainforests provide invaluable ecosystem services supporting climate management, biodiversity, and rural livelihoods. But, for all their powers, rainforests are fragile and significant damage is done to them every day.

In this publication, published on Earth Overshoot Day—the day on which humanity’s resource consumption for the current year exceeds our planet’s annual ability to regenerate those resources—we focus on four key concerns: deforestation, climate change, poaching and illegal trade, and mining and oil extraction.


Authors: Markus Müller - Chief Investment Officer ESG & Global Head of Chief Investment Office, Daniel Sacco - CESGA Investment Officer EMEA, Afif Chowdhury - CESGA Investment Officer EMEA

What they are

Rainforests are an essential ecosystem for the Earth - some of them have existed in their present form for at least 70 million years.

Rainforests are generally structured in four layers: an emergent layer with tall trees that can grow up to 60 meters high, a canopy layer that shades the forest floor, and an understory and forest floor with a diverse array of plant and animal species.

Every continent, with the exception of Antarctica, supports rainforests. The largest are located along the Congo and Amazon rivers.

Dense rainforest ecosystems can also be found in regions of Australia and Southeast Asia. Even the cool evergreen woods of Northern Europe and the Pacific Northwest of North America can be considered a type of rainforest - the so called temperate rainforests.1

Rainforests are an essential part of the natural world and are critical for all life on earth.

How rainforests help us 

Climate management

About 20% of the oxygen we breathe is produced by rainforests, which also store a significant amount of carbon dioxide. Additionally, rainforests absorb enormous amounts of solar radiation, contributing to the regulation of global temperatures.1 The Amazon also produces a large amount of water and influences air mass circulation, affecting rain patterns in Latin America and surrounding regions.2 Cutting trees down therefore threatens many fundamental ecosystem services which directly affect millions of people. Trees not only absorb carbon dioxide from the atmosphere, they also store carbon in their roots, leaves, and trunk (for example, an estimated 48 billion tons of carbon is stored in the Amazon rainforest alone).3


Rainforests are home to more than half of the world’s plant and animal species. As many as 1,500 flowering plants, 750 tree species, 400 bird species, and 150 butterfly species can be found in a 10 km² patch.1 Encompassing an area of 6.7 million km² (twice the size of India), the Amazon ecosystem is unsurpassed in scale and complexity 4 : it accomodates around 40% of the Earth's remaining rainforest, 25% of its terrestrial biodiversity and more fish species than in any other river system, including endemic and endangered flora and fauna.5       

Rural livelihoods

Rainforests support rural populations and economies by providing goods as an important source of harvest and creating jobs for populations with few alternative off-farm employment options.6 One study estimates that the mean value of the provision of habitat for species, carbon sequestration, water regulation, recreation and ecotourism is worth over USD400mn a year to the local populations of the Brazilian Amazon ecosystem alone.7



Threats to rainforests

For all their magnitude and remoteness, rainforests are fragile but invaluable ecosystems. Significant damage is done to them every day.


Deforestation is among the biggest threats to rainforests. Since 1947, the overall area of tropical rainforests has likely decreased by more than half, to about 6.2 - 7.8 million km².1 Scientists warn that the loss of 20-25% of the rainforest could imply a “point of no return” for the Amazon. Given the current pace of destruction, this could happen in no more than 20 years.2 

Climate change 

Climate change is hurting rainforests. Natural cycles are being altered, upsetting a delicate balance at local, regional and even global levels.2 If current climate trends continue, the Amazon rainforest could experience a serious decrease in rainfall, leading to widespread forest dieback and changes in the ecosystem that could potentially convert parts of the Amazon rainforest into a type of dry savanna.8 

Poaching and illegal trade in wildlife

Poaching and illegal trade in wildlife pose a significant threat to rainforest biodiversity. Wildlife trafficking is supported by a large consumer market: it is estimated that 38 million animals (excluding fish and invertebrates) are captured every year in Brazil alone.9

Mining and oil drilling

Mining and oil drilling are also significant threats to rainforests, particularly in the Amazon and Congo basins. They can lead to habitat destruction, soil erosion, and pollution, among other environmental problems.

“About 20% of the oxygen we breathe is produced by rainforests, which also store a significant amount of carbon dioxide.”


What can humanity do?

Conservation and restoration. As a major conservation goal, the 30 by 30 target, aiming to protect and conserve 30% of land and ocean areas by 2030, has been included in the Kunming-Montreal Global Biodiversity Framework and is receiving strong global support.11 New types of financial instruments can provide the needed capital. For example, in 2001, The Nature Conservancy (TNC), the U.S. government and the government of Belize agreed to sign a debt-for-nature swap to preserve about 90 km2 of rainforest in Belize and secure its management in the future. The agreement involves the reduction of debts with a total face value of USD 9.7 million owed by Belize, in exchange for payments to local conservation organizations.12 Intervention can yield impressive results: Due to its high dependency on rainforests and with the help of a comprehensive package of measures that includes the establishment of protected areas, payments for ecosystem services (PES) and ecotourism, Costa Rica is one of the first countries in the world to reverse deforestation. Tropical rainforests now cover almost 60% of the country's land area, having shrunk to 40% in 1987.13

Regenerative agriculture and community forestry. Partnering with forest communities around the world helps advancing sustainable landscape strategies that support local livelihoods in harmony with the health of forests. For example, Rainforest Alliance’s work with ten community-run forestry concessions in Guatemala has resulted in near-zero deforestation for 20 years and a drastically lower incidence of forest fires.14

Effective laws. Governments must ensure enactment of laws and the pursuit of law enforcement. Proper land demarcations, tougher fines for human intrusions, regulation of deforestation for industrial purposes – such as tea and coffee plantations – and prevention of species trafficking are part of this.15

Knowledge and awareness. Knowledge – not just around supply chains – will help the world community provide more effective support for rainforests. To enable greener and more inclusive economies, it is crucial to understand their economic value and to conserve them.15