Forestry Investment

Why invest in forestry

Posted on by Chandra Ganegoda

Facts about forestry investment

  • Timberland is a relatively new asset class and emerged as an institutional investment opportunity in the early 1980s.
  • The first recorded private Timberland investment plantations in Latin America date back to the 1930s.
  • Between 1989 – 2017 the capital invested in timberland grew from US$1 Billion to US$225 Billion.
  • World Bank promotes legislation to protect forests worldwide.
  • Since 1987 the average return has been 14.1% and the 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

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.
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.

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.

Historic & Forecast Global Population and Roundwood Consumption (1980 – 2030)
Global Industrial Roundwood Usage and Population Growth

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