Over 200 leading players in the financial sector have united under a partnership with the United Nations to call for international policy agreement on deforestation and forest degradation reduction in developing countries.

The institutions have united under a partnership with the United Nations Environment Programme Finance Initiative (UNEP FI) to call on country negotiators at the United Nations Framework Convention on Climate Change to follow through with their previous commitment at Cancun to an international policy architecture for deforestation and forest degradation reduction in developing countries.

The new study,  REDDy-Set-Grow Part II: Recommendations for international climate change negotiators, says that any post-Kyoto climate convention negotiated in Durban and beyond must iclarify the fundamental role of private engagement and investment in funding REDD+. In addition, it must also include measures to tackle the fundamental drivers of deforestation by shifting behaviour in the private sector towards sustainable land-use.

The report highlights the huge costs of failure for the world economy and the global environment. An ineffective climate change regime on forests would entail losses in the global economy of $1 trillion per year by 2100, and affect a siginificant portion of the estimated 1 billion people who rely on forests for their livelihood, according to previous research.

In contrast, a healthy forestry-based carbon market could mobilise investment for the protection and rehabilitation of natural forests in the order of $10+ billion by 2020 (The Economics of Ecosystem and Biodiversity - TEEB, 2010).

BNP Paribas' Director - Environmental Markets & Forestry, Christian del Valle said:

"The fundamental reason for current levels of deforestation worldwide is that cleared forests translate into economic opportunity for farmers, local communities and governments while standing forests do not. There is a price for soybeans, palm oil, beef and other products grown on deforested lands, but not for the many critically important services provided by healthy forests, including the sequestration and storing of carbon."

"With the possibility of a global funding mechanism for REDD+ we now have, at the global level, the unprecedented opportunity to address this imbalance. I hope we do not miss it so that natural forests are given the value they deserve."

Sufficient funding of REDD+ mechanisms, if achieved, could be a key boost to efforts to hold the global temperature rise below 2 Degrees Celsius - a target previously agreed by governments - by scaling up current efforts to protect carbon-absorbing forests.

However, the price tag associated with halving global deforestation and forest degradation at the required scale and speed to meet internationally agreed targets is steep - previously estimated to amount to a mammoth $17-$40 billion per year (Eliasch Review, 2008; UNEP Green Economy Report, 2010).

With total government pledges for REDD+ adding up to just $7 billion, REDDy-Set-Grow Part II stresses that plugging this gaping funding hole will require the close involvement of private finance, which has so far been on the margins of the funding debate.

"The banks, insurers and investors that are members of the UNEP Finance Initiative are optimistic that governments, when meeting in Durban this December, will realise the importance of mobilising private capital to help reduce deforestation and forest degradation," said Abyd Karmali, Managing Director and Global Head of Carbon Markets at Bank of America Merrill Lynch, a member institution of UNEP FI. "Without the systematic involvement of the private sector, ranging from institutional investors to local forest cooperatives, the REDD+ mechanism agreed to in Cancun risks being rendered ineffectual."

Under REDDy-Set-Grow Part II, the burden of reducing, halting and ultimately reversing deforestation would not be borne by tax payers in developed countries, but by carbon polluters (or emitters) in a market-based system which would provide a strong real-price signal.

Paul Clements-Hunt, head of UNEP Finance Initiative commented:

"The climate-change mitigation debate has not kept apace with the finance community's rapidly growing understanding of its critical role in enabling and driving the shift to the green and low-carbon economy, with the result that the views of one of the world's most economically influential sectors are currently largely unaccounted for in international climate change negotiations."