An Irish forest fund was recently named by its management company as one of the best investments in the country. The fund, which last year reached a maturity of 10 years, reported total rates of return of 83 percent. The average initial investment in the fund in 2000 was estimated at €9,400. It is expected to bring in tax-free payments of more than £17,000, according to fund managers.
UK founder of Bamboo Bond promises better results for investors. It claims an initial investment of up to £10,300 in fast-growing turf used for its sturdier-than-steel stems could yield a 503 per cent return over 15 years.
In a crisis financial environment, forest funds generate public pressure on their portfolio diversification characteristics, inflation hedge capabilities, and relatively low risk investment potential. However, as with any other investment projects, increasing popularity may lead to business practices that are hazardous to the environment in the service of greedy interests and the need for financial security. With these, unfortunately, forests can not afford to compete. Therefore, investors looking to forests as the next long-term home for their investment capital also need to look for forest funds with sustainable forest management practices. Only then will they be able to reap the full benefits associated with forest funds. – you don’t really get those last two sentences. How can forestry be dangerous to the environment?
the value
According to the International Finance Corporation (IFC) of the World Bank, forest funds typically rely on three main sources of revenue—the growth and sale of wood products (such as logs, wood chips, and pulp), and the sale of non-wood products (that is, edible products, colorings, perfumery products, and cosmetics). ) and estimate the land. Besides the monetary value that comes from these three sources, IFC also recognizes that forest funds may generate value that is not reflected in the institution’s annual spreadsheet—the value of landscape, biodiversity, social and cultural sustainability, carbon sequestration, and even value in minimizing damage from natural disasters. Like a flood. As the UN-backed Millennium Ecosystem Assessment Forestry Report notes, the combined economic value of “non-market” forest services may exceed the recorded market value of timber, yet forest fund managers often fail to give it proper credit when making investment decisions.
However, there is a growing number of forest trusts that are using sustainable forest management practices to protect the non-commercial value of forests. The Center for International Forestry Research defines sustainable management as “the preservation or enhancement of the contribution of forests to human well-being, both for present and future generations, without compromising the integrity of the ecosystem, i.e. its resilience, function and biodiversity.” Investing in forests for timber, forest funds are looking forward These sustainable forests fund natural forests, which are valued for their ability to sequester carbon and their role in community sustainability and development.
risk mitigation
There are several key factors that investors should consider to ensure that they minimize the risks associated with their investments and maximize returns:
- political environment Forest funds invested in tropical forest areas may fall under the jurisdiction of unstable local governance or an area with conflicting local political interests. Furthermore, some governments may impose restrictions on logging. Investors must be fully aware of the political environment of the country in which their forest funds operate. This is where investing locally makes sense – being familiar with and comfortable with local legislation and knowing how the political process works can be of great benefit and give investors a sense of security.
- economic environment – As the Millennium Ecosystem Assessment report points out, there is widespread corruption in the forest sector, particularly in developing countries with weak local governance. The stability of the local currency and the country’s economic track record are also essential to the return on investment of forest funds. Here, too, choosing funds that oversee local forests may be a better idea than going to tropical forests in remote locations, in which investors may not be well enough educated to make a proper investment appraisal.
- Property rights – Who owns the forest land? Who is renting it and what is the term/terms of the lease? Some forests are run by the state. Others are owned by private companies/individuals. Still others are owned by NGOs. These are also important aspects that need to be addressed before investors choose their forest funds in order to avoid future challenges that may manipulate revenue.
- Transparency of operations – This key factor relates to monitoring performance and evaluating the effectiveness of forest management. If a forest fund is investing in offset, for example, investors need to be told how carbon sequestration is measured, who checks it and how carbon credits are issued.
Property loss – Are natural disasters a defining feature of the geographic location of the forestry project? If so, what property damage has occurred historically? This information will help investors assess the degree of risk to forest funds due to external environmental factors. In this way, potential shareholders will be able to calculate the potential loss of revenue and associated insurance costs.