London, 6 May 2011 -
Leading financial institutions upped the
ante on their future role in mitigating
climate change as they called for more effective
forest-carbon regulations during a United
Nations report launch in London Friday,
just months ahead of an international climate
change meeting to be held in South Africa.
Banking, insurance and
investment representatives at the event
welcomed the findings of the new study,
REDDy - Set - Grow: Opportunities and roles
of financial institutions in forest-carbon
markets, which stresses that the financial
sector must step up its engagement in the
emerging green market, and makes the case
for its improved regulation to facilitate
this.
Offers of cooperation
by financial representatives at the event
to work with their national and international
regulators mark a turning point in efforts
to get the forest carbon market off the
ground, only months ahead of United Nations
Framework Convention on Climate Change (UNFCCC)
climate change talks that will possibly
lead to a new mechanism to reduce deforestation
and forest degradation, known as REDD+.
"The market for
forestry carbon has significant potential
but will require concerted efforts in the
design phase by policy-makers to ensure
that it attracts flows of private capital.
Because of the ability for sustainable forestry
projects to deliver not just carbon but
also biodiversity and community benefits,
financial institutions stand ready to work
with governments to help ensure the full
potential is realised," said Abyd Karmali,
Managing Director and Global Head of Carbon
Markets at the Bank of America Merrill Lynch,
during the press conference, which was held
at the banks' European headquarters in London.
Governments successfully
agreed in Cancun last December to making
REDD+ a core component of the next global
regime on climate change. To date, this
has been carried forward by UNEP, the UN
Development Programme and the Food and Agricultural
Organization, with parallel and supportive
work by the World Bank. However, the question
of how this global mechanism will be implemented
and financed remains unresolved, and will
be a critical subject of future UN climate
convention negotiations - including upcoming
talks in Durban, South Africa.
The commitment of the
private sector and financial institutions
toward the implementation of REDD+ is crucial,
the UNEP Finance Initiative (UNEP FI) study
says, since the overall investment needed
for implementation of REDD+ activities appears
to exceed public capabilities and will thus
largely hinge on action from the private
sector.
Previous research has
established that a 50 per cent reduction
in deforestation is needed by 2030 if the
forestry sector is to support global efforts
aimed at holding the global temperature
rise to below 2 degrees Celsius, the global
climate target the world's governments have
set themselves in the international climate
change agreements of the UNFCCC.
Achieving this reduction
will require investment previously estimated
at US$17 - US$33 billion per year, according
to UNEP.
The report stresses
how private sector participation in REDD+
and deforestation activities can lead to
a win-win scenario for the finance sector
and governments, since such projects can
translate into both lucrative investment
opportunities and cost-effective strategies
to abate carbon emissions and protect biodiversity
and livelihoods.
The forestry-based carbon
market's value holds the potential to grow
to US$10+ billion by 2020, according to
The Economics of Ecosystem and Biodiversity
(TEEB), while that of total forest ecosystem
goods and services is estimated at US$5
trillion. This massive potential has, however,
largely been left untapped so far, with
low confidence levels from investors resulting
from an insufficient and ineffective national
and international regulatory framework.
Finance sector attendees
at the event saluted the report as the first
step of a critical learning process that
will not only sharpen their competitive
edge, but also boost their role in shaping
tomorrow's green economy.
"It is unwise in
this day and age for companies that wish
to remain competitive to turn a blind eye
to emerging green markets such as the forest-carbon
market. This is a rationale that makes sense
from a sustainability perspective, but also
from a profitability one," said Richard
Burrett, partner at Earth Capital Partners
LLP and Co-chair of UNEP FI.
A follow-up report of
REDDy - Set - Grow specifically geared for
policy-makers and containing recommendations
on the design of forest-carbon policies
will be released in June.
Financial institutions
at the event were gathered by UNEP FI, a
public-private partnership that has set
the sustainable finance and responsible
investment agenda for more than two decades
and counts close to 200 members on all continents
in the fields of investment, banking and
insurance.
Quotes from Partners
and Experts
Achim Steiner, United
Nations Under Secretary General and UNEP
Executive Director, said: "Addressing
deforestation and catalyzing sustainable
forestry has been pinpointed by UNEP's Green
Economy Initiative as a key sector for catalyzing
a transition to a low carbon, resource efficient
global economy. With the right and rigorous
safeguards in place for local communities
and indigenous peoples, forest-carbon markets
can contribute to not only addressing climate
change, but delivering multiple opportunities
from maintaining water supplies and soils
to decent employment in natural resource
management."
Christian del Valle,
BNP Paribas, said: "It is critical
to build a constructive dialogue between
the public sector and the private sector
so that private capital can be deployed
efficiently and quickly into financing REDD+
activities. The UNEP FI report clearly shows
the way to implement this."
Armin Sandhoevel, Allianz
Climate Solution, said: "Allianz believes
in the utmost relevance of forest-related
projects such as REDD+, alongside with Programme
of Activity (PoA) and small scale renewable
energy projects, because they offer an outstanding
value to the protection of biodiversity
and to climate change mitigation by combining
a wide array of activities into one project.
But in order for the private investors to
fully mobilize around REDD+ activities,
we feel that some issues must be addressed.
Credits derived from avoided deforestation
projects need to be part of compliance schemes,
and the projects need a robust domestic
legal framework that allows investors to
get involved with a long term perspective.
Moreover reliable and rigorous standards
for carbon credits derived from avoided
deforestation are a pre-condition for long
term price estimates, which are crucial
for investors. We think UNEP FI is the adequate
platform to talk to decision makers on how
the REDD+ mechanisms can potentially be
improved and, by extension, how future growth
of investments in forest-related projects
can be encouraged."
You can read more on
UNEP FI at www.unepfi.org, and on UNEP's
Green Economy Initiative at www.unep.org/greeneconomy.
The United Nations Environment
Program Finance Initiative (UNEP FI) is
a unique global partnership between the
United Nations Environment Program (UNEP)
and the global financial sector. UNEP FI
works closely with nearly 200 financial
institutions who are Signatories to the
UNEP FI Statements, and a range of partner
organizations to develop and promote linkages
between sustainability and financial performance.
Through peer-to-peer networks, research
and training, UNEP FI carries out its mission
to identify, promote, and realize the adoption
of best environmental and sustainability
practice at all levels of financial institution
operations.
