The purpose of the NFS Risk Buffer Reserve mechanism is to provide assurance for the permanence of verified and issued Natural Capital Credits. The mechanism is required to ensure that any credits issued to areas of forest that unintentionally get deforested can be replaced from the pooled Risk Buffer Reserve.
The integrity of the NFS and the issued NCCs is ensured by setting appropriate levels of reserves that must be maintained across the portfolio of NFS projects. This safeguard is in place to cover the non-permanence risk that is applicable to NFS projects whilst provide a balance between the needs of the project being able to generate sufficient cash flows to address the deforestation pressures, and purchasers of the NCCs to have assurance that the conservation and project benefits are permanent.
The NFS requires projects to continuously monitor and maintain the project area, and provide annual reports including quantification of emissions for each crediting period. Following the initial contribution of 10% in Year 1, all subsequent Risk Buffer contributions from Year 2 onwards shall be subject to review by the NFS Risk Panel, and based on the project performance over time.
The relevance and appropriateness of specific measures to deliver permanence varies between project locations, so the NFS is not prescriptive about the specific measures to be implemented. The NFS provides some general guidance on how permanence can be addressed and how risk assessors may evaluate the adequacy of the measures adopted.