BANGKOK - Investors such as UBS, Citigroup and Blackrock back a potentially multi-billion dollar carbon credit market centered on saving forests but regulations and cash were needed to build a market first, a survey has found.

The survey of investors with $7 trillion of assets under management by the Brunswick Group for global conservation group WWF said banks and fund managers were waiting for the forest carbon scheme to be included in a broader U.N. climate pact.

They also said rich nations needed to include the U.N.-backed scheme, called reduced emissions from deforestation and degradation, into laws that allow forest carbon offsets to be included as part of steps to meet national emissions targets.

The tougher the targets the likely greater the demand for the offsets. The survey was released on Tuesday.

REDD is critical to a climate solution and financing is critical to make REDD work, said Donald Kanak, chairman of WWF's Forest Carbon Initiative, which commissioned the survey of 25 senior institutional money managers, analysts and sustainability investors globally.

In the long term private capital could play a major role if certain conditions are satisfied. We need the public sector to support sufficient financing in the near term to help forest countries become REDD ready, he told reporters in Bangkok.

Delegates from about 180 countries are trying to narrow differences on emissions reduction targets, climate finance and transfer of clean-energy technology before a December deadline to try to seal a tougher pact to replace the Kyoto Protocol.

REDD is seen as a crucial part of a new climate pact because deforestation is responsible for about 20 percent of mankind's greenhouse gas emissions, so saving forests is a key part of the climate puzzle.

Developing countries could potentially earn billions of dollars in annual funds from selling carbon offsets from projects that protect or rehabilitate forests for decades, thereby locking away large amounts of carbon dioxide.

PRECONDITIONS But Kanak said a number of preconditions needed to be met before a global forest carbon market could take off.

Agreement on a climate treaty at Copenhagen, with support from major economies such as China and India, and legislation in the U.S. are key pre-requisites, he said. Negotiators will try to agree on a broad outline of a post-Kyoto pact in Copenhagen in December.

Public sector funding will be vital before a market-based approach can take effect, he said, adding that problems on ensuring REDD projects are permanent and lead to significant long-term CO2 reductions could be addressed if there was a strong political framework in place.

National governments must also put in place robust and durable legal frameworks to create certainty for investors, he said.

The survey also found more than a third of investors expected a forest CO2 market would evolve from the existing voluntary carbon market to a compliance market backed by national emissions trading schemes in five to 15 years if the preconditions were met.

(Reporting by David Fogarty; Editing by Sanjeev Miglani)

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