Forestry Investment is one ethical investment, which has historical, low risk, tangible and attractive investment value and well as making a positive contribution to sustainable development.

Forestry investment is an investment based upon human civilisation’s oldest commodity – timber.  The stone-age would arguable be more appropriately named the wood and stone-age.  Man’s first tools, weapons and construction material, were fashioned from wood.  And, what was arguably the single most significant step on our evolutionary trail, the production and harnessing of energy through combustion – fire, with timber as it’s fuel.

At that point, it could hardly be argued that forestry was a scarce resource.  Forests were vast and the human population around 5 million, compared to over 6 billion today, and rising steeply.  Tropical forest covered 14% of the earth’s surface in 1900, compared to 6% today.  As the human population sharply spiked during the industrial age, forestation levels have sharply declined.  Timber, as a resource, and commodity, is in more demand than ever, and stocks are sharply falling.

Natural forest is not only a source of timber for construction, furniture, fuel etc., but also the earth’s lungs and home to irreplaceable biodiversity.  Belatedly understanding both the pace and consequences of sourcing timber from natural forest, the international community have slammed the brakes on the process.

World Population Growth

The trend of global deforestation began in earnest around 1853.  Between 1947 and the present day, around half of the world’s mature tropical forest was cut down.  Scientific opinion is that present rates of continuing deforestation of tropical reserves meand that by 2030 only 10% will remain.  This will impact severely on global atmospheric carbon levels, as well as the extinction of vast swathes of irreplaceable biodiversity.  90% of West Africa’s coastal rainforest territory has already been lost.

International bilateral agreements on timber trade, such as the EU’s recent agreements under Forest Law Enforcement, Governance and Trade (FLEGT), with it’s main trade partners in Africa, and Indonesia are now making a real impact.   Total EU imports of wood and paper products coming from Indonesia total around 1.2 billion USD, and it is estimated that until recently 20% to 40% of these imports were of illegal products.

International agreements being lead by strict UN policies on illegal-logging mean that illegal products will be slowly strangled by the demand for registration of all timber products as coming from legal sources.  In the same way as gem stones, precious metals etc. require authentication, so does timber.  It will of course be impossible to completely eliminate illegal timber products, but sooner rather than later, they must become a small minority of exports, not the current status quo of a significant percent.

It is against this background of sharply decreasing and regulated supply, against increasing demand that has brought the issue of forestry investment, and timber as a commodity sharply into limelight.  Developing economies such as China, Brazil and India are voraciously consuming timber imports for construction and newly affluent middle-classes want hardwood furniture.  As fuel, wood chips and biomass are also being consumed in ever increasing quantities as an alternative to fossil fuels.

The crucial characteristic of timber, is that it is replenishable.  Whereas with regards to coal and oil, reserves will eventually run out, we can always plant more trees.  And we have to.  Forestry investment in the form of commercial forestry is not a new concept within the developed world.  Reforestation and afforestation has been on the political agenda within Europe and North America for some time now.  A perfect example is Poland, where the National Program of Afforestation resulted in the country’s territory covered in forest increasing from 20% to 26% since the Second World War.  The aim is for this percentage to rise to 33% by 2050.

Commercial forestry investment must fill the gap in demand that restricting logging of natural forest creates.  Forestry investment within the developed world has long shown return on investment levels which are better than almost any other asset or commodity.  As demand increases exponentially and illegal supply decreases, that can only be good news for those involved in forestry investment.  This is a fact which has not been lost on major investment vehicles with 37% of US pensions funds currently holding forestry investments, much of them recently acquired.

While forestry investment in the developed world continues to grow apace with increasing global demand, the developing world must follow suite.  Commercial forestry investment in tropical hardwoods must replace illegal logging of the remaining tropical forest sooner rather than later.

Economic indicators point clearly to forestry investment as both a highly profitable enterprise, as well as a necessary one in terms of preserving the earth’s biodiversity and natural balance.  Forestry investment is the perfect vehicle in an asset with sound and tangible prospects for excellent return on investment, as well as having a positive and sustainable impact for sustainable development.