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Why a sustainable forest investment is key to diversifying your portfolio

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Posted on May 10, 2022 | INFLOR Forest INFLOR Sociall

Discover the benefits of investing in sustainable forest management both for your bottom line and the well-being of the planet

 

Every year, 10 million hectares of forests are being eliminated across the globe—an area roughly the size of the country of Iceland. The number appears alarming on its own, but becomes even more startling when taken into account that over 1 billion people depend on forests for their livelihoods and forests house 80% of the world’s terrestrial biodiversity. [1]

As an investor, you can aid in addressing the multiple issues caused by this elimination of forests for people and the environment by diversifying your portfolio with a sustainable forest investment. Keep reading to explore the main societal and financial benefits of investing in sustainable forestry. 

 

Reduce carbon emissions

One of the principal benefits of investing in sustainable forestry is it allows investors to address the impacts of global warming on the livelihood of the planet. 

Forests play a pivotal role in the climate change conversation with about one-third of the carbon dioxide released from burning fossil fuels absorbed by forests each year, making forests a ‘carbon sink.’ [2]

In addition to participating in the carbon cycle, forests stabilize the climate by regulating ecosystems, protecting biodiversity, supporting communities, and supporting the growth of sustainability initiatives. [2]

Environmental, social, and governance (ESG) investors should consider putting their money in funds that maintain and restore forest landscapes as well as those that practice sustainable forest management to aid in reducing carbon emissions. Investing even $1,000 in sustainable forestry has been shown to eliminate as much as 100 metric tons of carbon dioxide from the atmosphere, as evidenced by a report on the social and economic benefits of investing in forestry by German-based companies Finance in Motion and Unique Land Use GmbH. [3]

 

Strengthen local economies

With an estimated 1.6 billion people around the world directly relying on forests for their livelihoods—food, shelter, energy, medicine, income—a sustainable forest investment can have a huge impact on strengthening local economies for those dependent on the land. [1]

Although people do not treat them as such, forests are extremely valuable assets to our well-being as they provide fuel for cooking and warmth, plants with medicinal properties, nutritious food and clean water, and essential habitats for wildlife. The global timber industry also employs more than 13.2 million people and generates a gross value added of over $600 billion annually. [4]

If you invest in sustainable forestry initiatives aimed at assisting locals, you can make a significant long-term economic impact on surrounding communities. For example, the Finance in Motion and Unique Land Use GmbH report claims 1,000 hectares of land directly creates between 30 and 50 jobs for people on average. [3]

 

Increase sustainable products

Investing in sustainable forestry also offers the opportunity to aid in the increased production of sustainable wood and non-wood forest products to foster a greener world. 

In addition to wood products like plywood, aiding in the sustainable production of non-wood forest products such as cork, fruits and nuts, medicinal plants, and natural resins can have a massive positive impact on the environment and climate crisis. 

As an investor, you can aid in this effort by investing in sustainable forest management as well as in companies that are committed to utilizing sustainable materials to manufacture their products. 

 

Offer a strong return on investment

In addition to making a positive impact on communities and the environment, gaining a stake in sustainable forestry offers opportunity for a strong return on investment.

In sustainable forestry on average, emerging market funds target annualized returns of 15% and developing market funds target annualized returns of 10%. [5,6]

Beyond positive financial returns, sustainable forestry is also a smart investment because it provides predictable cash flows, offers long-term lock-up periods, and can serve as a hedge against inflation. [6]

“Sustainable forestry is one of the most important strategies to diversify investments while working to achieve ESG goals,” explains Antonio Tatagiba, CEO of INFLOR LLC. “It provides ways to contribute to the economic indicators of communities including clean air and water, conserving biodiversity, and responding to climate change.”

 

Related resource:
Top seven ESG investing trends paving the way for the future 

 

How we can help ensure the success of your investment

At INFLOR, we believe that sustainable forest management is one of the best ways to mitigate the risks of investing in sustainable forestry, and we have all the tools and expertise you need to do just that.

Our forest management solutions allow you to plan and control all stages of the forest production chain, monitor your physical and financial variables, simulate scenarios, set targets, calculate costs, and more as you help to make a greener world. 

We offer the leading forest management solution to:

  • TIMOs, REITS and Institutional Investors
  • Industry and Energy
  • Forest Management
  • Conservation and State Government

 

Interested in exploring the possibilities of INFLOR?
Request a demo today to get started.

 

Sources:

1: United Nations | International Day of Forests

2: International Union for Conservation of Nature (IUCN) | Forests and climate change

3: Finance in Motion | Sustainable forestry investments in emerging markets

4: The World Bank | Forests Generate Jobs and Incomes

5: Global Impact Investing Network | 2020 Annual Impact Investor Survey

6: Impactivate | Combating Climate Change through Sustainable Forestry Investments

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