- Timberland is a relatively new asset class, and emerged as an institutional investment opportunity in the early 1980’s.
- First recorded private Timberland investment plantations in Latin America date back to the 1930’s.
- Between 1989 – 2017 capital invested in timberland grew from US$1 Billion to US$225 Billion.
- World Bank promotes legislation to protect forests world-wide.
- Since 1987 the average return has been 14.1% and Standard Deviation of 9.4%.
- Today key institutions support investments in Timberland such as: Harvard Endowment Fund, Yale University, JP Morgan, and Mercer.
BENEFITS OF SUSTAINABLE FORESTRY INVESTMENT
a) One of the most important benefits of investing in Timber is its biological growth. It is invariably positive and will continue to grow regardless of current market conditions. Approximately 60% of the projected returns are generated from biological growth. 30% is generated by the market price increase of timber, and 10% is generated by land appreciation value.
Attribute Drivers for Timberland Returns
Relative asset class performance during inflation scenarios, defines as the top quintile (“high”), middle three quintiles (“moderate”), and the bottom quintile (“low”) of rolling 1-year consumer price inflation from 1987-2009.
b) Timber is also known to have historically outperformed other asset classes in high-inflationary periods. Timber as a commodity offers real returns to investors, thus always having an inflation hedge.
c) The demand for timber has always mirrored world population trends, as seen in the charts below. As population increases, demand for timber correspondently increases, but availability of natural sources becomes scarce. It is understood that humans use products from forests every single day of their lives, the question is who will supply future generations with the precious resources, if it is not plantation forests
Historic & Forecast Global Population and Roundwood Consumption (1980 – 2030)
Global Industrial Roundwood Usage and Population Growth