Institutional forestry investment passes $100bn mark

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The presence of forestry on the global investment stage has grown so much that the investment class has now surpassed $100 billion, according to a sustainable real assets investment specialist.

Figures from the Sydney-based specialist, New Forests, have revealed that institutional forestry investment – which comprises direct investments, funds, and timber real estate investment trusts – has skyrocketed over the last 30 years.

As a result of this rise in interest and value, the firm is now moving forwards with its work to boost institutional interest in environmental, social and governance (ESG) investments in Asia.

According to David Brand, chief executive officer at New Forests, the focus has until now been on managing a “diverse” portfolio of forestry-related investments across Australia, New Zealand, and the major US marketplace. However, due to growing interest from Asia for forestry investments and wood products, the firm launched an institutional investment fund, the Tropical Asia Forest Fund (TAFF), showing what a key player forestry is becoming in the global investment sphere.

Asian investors are becoming increasingly aware of the importance of environmental, social and governance factors when it comes to investments. Indeed, Mr Brand said that all institutional investors could stand to benefit hugely from ESG investment by ensuring their corporate structure is in line with their local communities. This in turn will help to align both businesses and local people with the economic outcomes of these investments.

The growing importance of the sustainability aspect of forestry investment was highlighted recently when forestry leaders from over 30 countries across the Asia-Pacific region came together for a conference in the Philippines which aimed to structure future strategies regarding sustainable forest management.

The 26th Session of the Asia-Pacific Forestry Commission, which was linked to the third Asia-Pacific Forestry Week, focused on investment in natural assets such as forestry, as well as the issue of climate change and governance of natural resources across the region.

The event was organised by the United Nations (UN) Food and Agriculture Organization (FAO) and the Asia-Pacific Forestry Commission (APFC), along with the Philippines Department of Environment and Natural Resources (DENR).

The FAO confirmed that the event concentrated specifically on topics including climate change, governance, and investment in natural assets.

The event “reflects the need for society to proactively integrate forestry into the wider context of sustainable development”, said the FAO.

FAO’s senior forestry officer for Asia and the Pacific, Patrick Durst, said: “Gone are the days forestry can be viewed as primarily an extractive sector. More than ever, forest managers and policy makers need to recognize and integrate the full range of benefits that forests generate, including contributions in enhancing food security and eliminating poverty, conserving biodiversity, mitigating climate change and strengthening resiliency to natural calamities.”

Meanwhile, the FAO representative in the Philippines, José Luis Fernández, confirmed that significant steps were being taken in order to boost those nations in managing their forested areas to the best of their abilities “while ensuring that long-term social, economic and environmental objectives are met.”

“In the Philippines, we are working in close partnership with DENR’s Forest Management Bureau in the implementation of three projects that will facilitate the adoption of Forest and Landscape Restoration principles as well as the development of a National Forest Monitoring System Action Plan,” Mr Fernández went on to say.

It was hoped that the event would serve as a springboard for discussions on the implementation of the commitments made as a result of the Paris Agreement on climate change. These commitments also included
future trade and market access arrangements, as well as responding to institutional and governance issues and environmental investments.

GWD Forestry spokesman, James Barrett, said: “Forestry investment is a wide-reaching and varied concept and it is essential that investors are aware of the full host of benefits that the asset class can bring. From helping to wipe out poverty in local communities that rely on the forest land, to stamping out climate change, investing in forestry is so much more than just a numbers game.”

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