03 May 2018

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Sustainable forestry investments in emerging markets

Did you know that a USD 1,000 investment in sustainable forestry in Latin America or Africa can remove approximately 100 metric tons of CO2 from the atmosphere? Or that 1,000 hectares create an average of 30 to 50 jobs directly – not to mention all the rest along the timber value chain?

Although investments in sustainable forestry currently occupy a niche in the growing real-asset market, they can generate powerful social and environmental impact.

Florian Meister, Marco Kaiser, and Danyal Altunay of Finance in Motion put their pens together with Till Pistorius of UNIQUE forestry and land use GmbH – a consultancy company for forest management based in Germany’s famous Black Forest – to explore this market’s potential. The resulting article was published in this year’s first issue of Absolutimpact, a periodical for institutional impact investors.

Entitled “Sustainable Forestry Investments in Emerging Markets,” the comprehensive piece argues the social and economic benefits of investing in forestry while advising on potential success factors and pitfalls to watch out for.

The discussion begins by presenting the market backdrop on forestry investments. Global demand for legally, sustainably produced timber is growing. Such an investment not only represents an attractive option for portfolio diversification, it also supports the expansion of forest plantations – which combats climate change, reverses deforestation and boosts local economic development in rural regions.

Furthermore, the long-term, real-asset nature of forestry investments, combined with flexible harvesting time, an existing supply deficit, and good growing conditions in well-chosen areas, all frequently translate into high returns that are cushioned against inflation.

“Investing in sustainable forestry simply makes good sense for the institutional impact investor,” says Florian Meister, Managing Director of Finance in Motion and co-author of the article. “The attractive risk/return ratio and demonstrable social and environmental benefits conferred by such projects, especially in Latin America and Africa, are impressive. We wanted to provide readers with a comprehensive overview of what they can achieve in this sector.”

The full article can be found here (German language only, for subscribers).