Global Investors Favor Forest Carbon Market

September 30, 2009

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A survey of investors, who manage approximately $7 trillion of assets, shows support for an expanded carbon market mechanism, which would address the estimated 20 percent of global carbon emissions due to deforestation and forest degradation, according to the WWF Forest Carbon Initiative. The investors believe that a compliance market in forest carbon would provide significant incentives to reverse deforestation in forest countries.

The 2009 Forest Carbon Investor Survey, conducted by the Brunswick Group on behalf of the WWF Forest Carbon Initiative, also found investors looking for initial public financing, viable policy frameworks, and more certainty from international agreements and national legislation before private funds can be mobilized to support an expanded carbon market.

Findings show that the investor community believes there is significant potential for a multi-billon dollar expanded carbon market; however, substantial preconditions still need to be met for REDD to succeed. The survey also found that they are also unlikely to invest in the market without clear political commitment, funding and on-the-ground implementation by key developed and developing countries.

The investment community is looking to the UN Climate Conference in Copenhagen to add strong policies to a global policy framework for Reduced Emissions from Deforestation and Degradation (REDD), aimed at combating forest-related emissions, said WWF.

Key milestones sought by investors include an agreement at the Copenhagen climate talks with support from major economies such as China and India, as well as the passage of U.S. climate change legislation, according to the survey. In addition, a strong legislative framework in forest countries is seen as essential to addressing problems of verification and monitoring that have hampered an agreement on REDD in the past, said WWF.

More than one-third of survey respondents expect a forest carbon market will evolve from a voluntary to a compliance market over the next five to fifteen years if certain conditions for a market-based approach can be met. This will require action from governments, including public sector funding to lay the foundation for the market and support efforts by forest nations to build legal and technical capacity for REDD, according to the report.

Earlier this month, a group of the world’s largest global investors issued a policy statement calling for a binding international treaty that will reduce pollution and drive significant global investments in low-carbon technologies. The policy statement was signed by 181 investors, who collectively manage more than $13 trillion in assets.

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