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world economy could reach US$1 trillion per year by2100 (Eliasch, 2008)II. UNEP's Green Economy Reportconcludes that, on average, the global climateregulation benefits of reducing deforestation by 50 percent exceed the costs by a factor of three (UNEP, 2011).Investment on the scale of USD 17-33 billion per year ishighly unlikely to come from governments alone,especially in light of current budgetary constraints ofmost donor countries, and thus active participation ofprivate sector investors, including financial institutions(FIs), will be imperative for the implementation of forest-based mitigation activities at the needed scale and pace.This in turn depends on making the protection andenhancement of natural forests, and the planting of newforests, a competitive investment opportunity.There are many reasons why forest-based mitigationshould be interesting to the private sector generallyand financial institutions specifically. However, inorder to mobilise this private sector capital at therequired scale, it is paramount that policymakers:(i) offer avenues and formats for the private sector toinvest and engage in the protection, rehabilitation andcreation of forests; (ii) increase the financial competitiveness andattractiveness of forest-based climate mitigationinvestments and; (iii) reduce the investment risks involved. While a global framework for forest protection,conservation and enhancement is now a top priority inthe international climate change negotiations, there isno consensus yet that a framework agreed upon at thispolitical level will: (i) aim to involve and (ii) be effective in involving the private sector at scaleand unlock the required volumes of investment andfinance.It is therefore essential that:(i)Financial institutions fully understand the nature ofthe commercial opportunities, and potentialinvestment avenues in the area of forest-based climatechange mitigation; as well as the public mechanismsand risk-mitigation instruments available for suchinvestments.(ii) Policymakers, including in particular UNFCCCnegotiators, understand the needs, priorities and viewsof private sector investors, lenders and insurers inrelation to the specific characteristics of forest-basedmitigation opportunities, so as to facilitate theirinvolvement. Without such involvement, it seemslikely, for reasons outlined in this report, that theeffective implementation of forest-based climatechange mitigation at the needed scale seriously risksremaining an idea rather than becoming a reality. nII. Please note that this is an estimate of the forestry-relatedimpacts of climate change, additional to the climate changeimpacts of other industrial emissions of greenhouse gases.084FINANCE & INVESTMENTPhoto: UN Photo/Eskinder DebebeAbove: Processed timberstacks from legaldeforestation in Brazil

ACKNOWLEDGEMENTThe above article is excerpted from the Introduction to Part 2 of "Ready, Steady, Grow", a study by the UNEP Finance Initiative's Biodiversity andEcosystems Workstream (BEWS) and Climate Change Working Group (CCWG), September 2011.The United Nations Environment Programme FinanceInitiative (UNEP FI) is a strategic public-privatepartnership between the United Nations EnvironmentProgramme (UNEP) and approximately 200 financialinstitutions globally. For more information visit:www.unepfi.orgFINANCE & INVESTMENT085