Forestry: An Asset That’s Not Just For Eco-Investors
Financial investments in the forestry sector are currently enjoying a high profile. This is not only because of the potential financial returns they can offer, but also increasingly due to the environmental benefits they provide, which are taking the limelight as the number of eco-conscious investors grows.
The plight of the Amazon rainforest in Brazil has attracted massive press coverage and is one of the major areas where investment in reforestation is making a difference. It’s becoming clear that the opportunities in this sector are more than financial and, furthermore, they’re truly global.
US-based Global Forest Partners, for example, currently manages forests covering 75,000 hectares across Southern American countries, plus Australia and New Zealand, and has investment offices close to most of its major forestry interests. The group, which was founded in 1982 and was formerly part of UBS before a management buy-out in 2003, is presently managing $3.4 billion of forestry assets on behalf of 100 investors.
The numbers involved in forestry investment are undeniably high, but it is far from a get rich quick scheme. People thinking seriously about sinking cash into timber should be prepared to wait to see the fruits of their investments. If you are considering investing in a new project, such as a reforestation scheme in Brazil, it will take time for the investment to mature due to the natural cycle of planting, growing and harvesting the trees.
Many people new to forestry investment are using a fund to handle things, where managers administer the resource on their behalf. Such collective woodland schemes require an initial investment of around £40,000.
The chief executive of one such fund, Stellar, Jonathan Gain, told This Is Money: “This is a long-term investment and you should expect to keep your money in the fund for a minimum of seven years.
“This is because the funds operate over set periods – returning investors’ cash and profits through timber sales and sale of land.”
GWD Forestry is another asset management company involved in the sector but they have a slightly lower starting point for investors with up to €10,000 (£7,060) to spend able to invest in projects in Brazil and Canada. These are schemes that are already up and running and provide returns on the investment over the medium term.
The company focuses on sustainable forestry schemes, which mean investors can be confident their cash is being used to benefit not only the environment but the local communities where the projects are based.
There are financial benefits to supporting ecological forestry projects, too. Demand for certified timber, which has been grown and harvested sustainably, is increasing and attracts higher prices – known as the “green premium”.
GWD Forestry’s James Barrett said: “As a leading forestry investment company, we have been providing smaller investors across the world with the chance to support forest projects in Brazil since 2008.
“There is now growing recognition of the benefits of forestry investment on a number of different levels. As an alternative asset, forestry ticks so many boxes for ethical investors; their money is being used to make a difference to the world we live in, as well as growing their capital.”
Whether you choose to invest in a long-term new forestry project or are more interested in putting your money into an ongoing, proven scheme, there are strong financial – as well as ethical – reasons for doing so. And what’s more, there is a huge range of international timber initiatives available, from Singapore to Scotland.
Gail Clarke of Edinburgh-based solicitors, Blackadders, says that commercial forestry investments have been shown to make sense for those who want to see their money grow over the longer term.
Writing in The Scotsman, she said: “For the investor in forestry, returns have been as solid as the product itself: the market in Scotland has out-performed all other forms of investment over the past 20 years in terms of rate of return.
“This trend is predicted to continue for the next 15-20 years with the current IRR (internal rate of return) being about 15 to 20 per cent.”