Having decided that you wish to invest in forestry you may find yourself overwhelmed by the choice of companies out there specialising in that field.

Essentially there are two different ways of investing in forestry, directly or indirectly. Direct investments involve the purchase of ownership of the land and the trees grown on that land, either by an individual or a company. Indirect investment on the other hand involves buying shares in an established forestry investment company. While there are pros and cons to both investment types it is generally acknowledged that direct investments generate the higher returns.

Before of course making any decision I have included below some areas you may wish to look into before you go ahead.

Location, Location, Location

Many countries, worldwide offer various opportunities to invest in reforestation with the bulk coming from South and Central America, Australia and New Zealand. It is important to examine the financial and business infrastructure in each jurisdiction, for example: whether the area is well serviced by the infrastructure necessary for the planting, tending and harvesting of the trees. It is also worth noting that once the trees are ready for harvesting they must then be transported for them to be processed. Good transport links are very important and help reduce costs.

Experience, Experience, Experience

This really needs hardly any explanation. Forestry is a very specialised field and therefore the more experienced and expert the manager is then the better the eventual return once the trees are harvested.

Research, Research, Research

Even after making the initial investment regular and comprehensive information should be made available to keep you abreast of all new company information. I find a company newsletter to be the most effective way of establishing this in addition to the company website.

Many forestry investment schemes welcome international investment, indeed it is unusual to find one that doesn’t. In addition there are very attractive tax benefits international investors can claim against the income at harvest. So to conclude, should you be looking for a long term investment then investing in forestry might just be ideal.

The tax breaks associated with forestry aren’t to be sneezed at either, there is no income tax or CGT payable and once forestry investments have been owned for over two years they are free of inheritance tax liability.

While yields can be somewhat volatile, due to the nature of the product the investment can be stored on the stump until the market value goes back up. This is the advantage with forestry plantations as opposed to other crops as once the trees are mature they can be left to increase in value.  In 2007 forestry saw a 31.6% total annual return, this fell in 2008 to 7% but that was still well ahead of the commercial and residential property sectors and the stock market.

However, this is a long term investment, it can take anywhere between six to ten years to harvest a plantation, during which time there’s no income. This type of investment would suit those looking to add to their pension fund or those that already have a steady stream of income coming in.

Forestry Update is sponsored by Greenwood Management. For more information on investing in Forestry please click here

“We will be planting the least number of trees that we have in the past 40 years, at a time when there is an absolutely massive need for investment in replanting,” Macdonald said.

At the moment the forests in B.C. have already suffered with one million destroyed by forest fires and an additional 15 million by pests (largely the mountain pine beetle). This year the government is planning to plant 190 million trees, which is down from 225 million in a typical harvesting year. The biggest planting year in B.C. was in 1989 when a further 300 million trees were planted. Next year the number of trees planted is expected to decline further to 175 million.

According to Bell the majority of the planting is as part of reforestation obligations by logging companies harvesting Crown land. At the moment there is a two year lag between logging and replanting so the current planting decline reflects the downturn in the industry set off by the collapse of the US housing construction market.

The government’s pine beetle and fire reclamation programme has a budget of $42 million this year, with $400 million allocated over the next five years. So far 20 million trees have been planted this year. Bell this programme, called Forests for Tomorrow a ‘good, solid programme’.

To bring attention to the issue the Western Silviculture Contractors Association has launched a website at www.forestfacts.ca. In 2008 the association says that there were 6,000 tree planters working in B.C. and Alberta this year that number fell to 4,000 despite the widespread fires and beetle epidemic.

Unfortunately Bell said that the solution to the pine beetle epidemic wasn’t as simple as just replanting the affected areas.

“What we’re finding is stands that were killed 10 or 15 years ago have developed a relatively large understory, and that understory offers greater potential for the mid-term timber supply than going in, taking down the dead pine that’s left, damaging the understory that was in place prior to that, and replanting,” Bell said.

“The chief forester’s office has done a lot of work on this, and we analyze each stand individually before making a decision on whether to allow the stand to remain and the understory to survive, or knocking it down and replanting. And that’s what the Forests for Tomorrow program are all about.” He concluded.

Forestry Update is sponsored by Greenwood Management. For more information on investing in Forestry please click here

Following the widening of the international REDD initiative on deforestation to include forest restoration and sustainable forest management IFM has taken on a heightened importance.

Last week Ecotrust confirmed that it will be extending the rotation age of its trees for harvest in order to increase the amount of carbon stored in its forests, which are sustainably managed for timber. This proposed project methodology passed the VCS’s double approval process for new carbon offsetting project approaches.

In simple terms the project’s aim is to increase the carbon stock in the trees’s above ground biomass, dead wood and wood products by allowing for a longer harvest cycle. For the extra carbon stored in the forest and then sold into the voluntary carbon market VCS carbon credits or voluntary carbon units are issued. The revenue from the sale of voluntary carbon credits acts as an incentive for the forest owners, who need to be compensated for the timber revenue loss from delaying harvest events.

The forest carbon programme manager at Ecotrust, Steve Dettman, told Sustainable Business Oregon that the company’s objective was to diversify the revenue options for forest owners in favour of more careful approaches to forest management. Before any project can go ahead it must receive Forestry Stewardship Council certification and a project must not lead to a decrease in total volume harvested of more than 25% over the life of the project relative to the baseline.
Download
Methodology for Improved Forest Management through Extension of Rotation Age – Approved VCS Methodology VM0003 Version 1.0

Forestry Update is sponsored by Greenwood Management. For more information on investing in Forestry please click here

Forestry Update is sponsored by Greenwood Management. For more information on investing in Forestry please click here

Mr. Page represents Australia’s biggest power generators and was a well known critic of the proposed carbon pollution reduction scheme last year. ”The consequences will be quite dire if people can’t make investment decisions,” he said.

However not surprisingly of all the political parties the Greens have produced a tenable, market based climate policy proposing an interim carbon price starting at $23 a tonne of carbon dioxide. In the main the Green proposal, put forward in January has been either misunderstood or ignored by the general populace, including the business community.

If they misunderstood it, it was probably because they wrongly assumed it would be a temporary fix, not a long term solution. If they ignored it, it was probably because they rightly assumed it would be Buckley’s chance of the government doing a deal with the Greens.

As Page said at the time: ”Short-term fixes to long-term problems are likely to exacerbate the level of investor uncertainty for the energy supply sector when they are based on a wing-and-a-prayer promise that a new long-term greenhouse policy will emerge after the interim period concludes. If the answer to the question of what comes after the tax is ‘don’t know’, then the answer in terms of business investment in new low-emission technology is going to be ‘not now’.”

Sounds great but that isn’t what the Greens originally suggested. Their idea was that a fixed carbon price would increase at 4% plus the consumer price index, each year until at least July 2012. This is consistent with the original proposal for a transition period under the Garnaut Climate Change Review.

It stated: ”This timeframe should be sufficient to conclude the debate on the design of the emissions trading scheme and the adoption of a 2020 target that … reflects a fair contribution by Australia to the global effort of limiting global warming to less than 2 degrees Celsius. In the event that no agreement is reached on the CPRS during the interim period, the carbon tax will continue to operate.”

The price of carbon could reach well above $23 a tonne if an agreement is struck on an ETS that is consistent with commitments under the Copenhagen Accord and lets the market put a price on carbon.

Speaking off the record, one senior energy industry executive said that a carbon price starting at $23 a tonne and increasing by more than 4% per annum, if permanent would be a ‘perfectly valid’ response to climate change.

”It would stop coal-fired power stations being built, and it would bring on a conversion to gas. I don’t realistically see anyone talking about it … but anything is better than nothing.”

Compared with the government’s estimated $1.5 billion loss scheme, the Greens proposal would have generated roughly a $4.4 billion surplus in 2010-12. The Greens would be able to achieve this because they capped assistance to heavy polluters to 20% of the scheme’s revenue, which is consistent to the Garnaut Review. The Greens would also have paid the same compensation to low-income households.

The Greens proposal is a plausible, market based response to the threat of dangerous climate change and is better than nothing, which has belatedly won the backing of the whole environmental movement. So it is strange that it wasn’t considered more seriously by the Climate Change Minister, Penny Wong. Milne says she had only three meeting with her and while there was no deal breaker or sticking point neither side terminated the talks.

Having given ground on their desired and perhaps highly unrealistic ‘25% by 2020’ emission reduction target Energy researcher Tristan Edis of the Grattan Institute said that the Greens were offering a ‘reasonable compromise’. In order to achieve the desired 25% cuts the Treasury modelling for the ETS showed a carbon price above $40 a tonne.

Milne has said that businesses should be concerned that ”if a carbon price is not to come in this way, then the logical next step is regulation.” However, having met the Greens the Business Council of Australia won’t discuss the issue publicly.

According to the Department of Climate Change figures Australia emitted 553 million tonnes of CO2 in the baseline year of 2000. Assuming business as usual but including the 20% renewable energy target then this will rise to 664 million tonnes a year by 2020. So it will be hard for the government to hit its own emission reduction target of 5% by 2020 without a carbon price. In order to get it 139 million tonnes of cuts a year need to be found. The Prime Minister Kevin Rudd has said that he will push hard on energy efficiency.

There are 51 million tonnes a year of economic energy efficiency opportunities, according to Climate Works Australia’s low carbon growth plan, which leaves a further 89 million tonnes a year to be found. These could come from opportunities in forestry and agriculture. The main opportunities are in pasture and grassland management, reducing deforestation and re-growth clearing, reforestation, cropland carbon sequestration, etc, costing around $11-$27 a tonne of CO2. Combined these strategies could save up to 83 million tonnes and would cost $2.2 billion per annum. Had they had a carbon price they would have been economic.

However, recent analysis by researchers David Stern and Frank Jotzo from the Australian National University showed emission reduction pledges under the Copenhagen Accord by China, Indonesia, Brazil and South Africa of a similar magnitude to those announced by large developed nations. These are strong enough in fact to satisfy the government’s criteria for a 15% target.

Forestry Update is sponsored by Greenwood Management. For more information on investing in Forestry please click here

Last week Tony Burke the Minister for Agriculture, Fisheries and Forestry announced what offers were under the Government’s Forest Industries Climate Change Research Fund. To date, twenty projects have been offered support under the research fund. The research fund was an election commitment designed to address knowledge gaps about the impact of climate change in Australia’s forestry and forest industries.

Of the funding available RIRDC has been offered a grant of $248,700 to assess how new bioenergy agroforestry crops could be established and to examine biomass harvesting in planted forests.

A further grant of $420,000 was offered to CSIRO to create a pathway for developing sustainable regional biofuel industries as well as assessing environmental economic opportunities for biofuel production from forest biomass resources in two regions of Australia.

The Department of Industry and Investment NSW received a grant of $250,000 to examine how soil carbon dynamics are affected by growing pine plantations on agricultural land and if they can potentially enhance soil quality and greenhouse reporting processes.

Lastly Private Forests Tasmania was given $255,671 in order to help farmers and regional communities understand how to invest in, grow and manage plantations as part of their own climate change management practices.

According to Tony Burke Minister for Agriculture, Fisheries and Forestry the Australian forest industries plays a significant role in supporting regional jobs and the economy.

“Australia’s forestry and forest products industries turns over around $23 billion annually and supports an estimated 120,000 jobs,” Mr Burke said.

Forestry Update is sponsored by Greenwood Management. For more information on investing in Forestry please click here

IU was one of 74 schools that earned Tree Campus USA recognition in 2009. The Arbor Day Foundation began Tree Campus USA in the fall of 2008 to recognize colleges and universities that practice sound campus forestry. The aim of the program is to honor college campuses and the leaders of surrounding communities for promoting healthy urban forest management and engaging the campus community in environmental stewardship.

Since its inception, Tree Campus USA has been supported by $1.3 million in grants from Toyota.

The impact Tree Campus USA had more than doubled during its second year. In its inaugural year, 29 colleges and universities received Tree Campus USA honors. To celebrate the success of the program, the Arbor Day Foundation and Toyota are holding tree-planting events on five college campuses this spring. In addition to Indiana University, Tree Campus USA tree-planting events will also be held at American University; the University of Pennsylvania; the University of Louisiana at Lafayette; and California Polytechnic State University, San Luis Obispo.

During the event, IU students and volunteers in the community planted more than 50 trees as part of the campus Arbor Day Celebration. Trees were planted near the DeVault Alumni Center, which is located near Memorial Stadium and Assembly Hall. The trees will help increase the campus’s tree canopy and will provide shade for students and visitors.

“We applaud Indiana University’s commitment to improving the urban forest on its campus, and for demonstrating to students why it is so important to plant trees,” said John Rosenow, chief executive and founder of the nonprofit Arbor Day Foundation. “By striving to follow best tree-care practices and encouraging students to plant trees on campus, Indiana University is helping the next generation learn first-hand the importance of giving back to the earth.”

In order to become a Tree Campus USA community, schools are required to meet five core standards of tree care and community engagement. Those standards are: Establishing a campus tree advisory committee; evidence of a campus tree-care plan; verification of dedicated annual expenditures on the campus tree plan; involvement in an Arbor Day observance; and the institution of a service-learning project aimed at engaging the student body.

“Today’s tree planting took place in an area that has been designated as the ‘Woodland Arboretum’ in the 2009 IU Bloomington Campus Master Plan, and initiates the implementation process of increasing the campus tree canopy cover from 20- to 40-percent over the lifetime of the plan which is estimated to be 10 years,” said Mia Williams, Indiana University landscape architect.

Forestry Update is sponsored by Greenwood Management. For more information on investing in Forestry please click here

The report said that the decision to ensure the reserves are ‘off-limits’ is one of the steps in a plan to better regulate the mining industry, which lets face it has paid little attention to the environment in the past.

“I cannot, in clear conscience, clear these projects in the ‘no-go areas,’” Minister Jairam Ramesh said in an interview.

The deposits are located in some of India’s most biologically rich and densely forested areas that are inhabited by both poor tribal people and Maoist insurgents.

This new plan would mean that India as Asia’s third largest economy would have to import more coal, but Ramesh was adamant that the decision was important to saving India’s natural habitats.

Indian is the world’s third largest producer of coal and lignite but it appears that India can no longer afford to approve every proposed mine. Already there are areas where mining has clearly exceeded the carrying capacity. The consequences to privately owned firms such as Essar, Reliance and Adani as well as the state owned Coal India are that their projects located in the off-limit areas, which had received approval ‘in principle’ a few years ago will now be rejected. It goes without saying the government’s stance looks set to upset power project developers and mining firms.

“Companies are agitated,” the Financial Times quoted an unidentified executive from an infrastructure firm as saying. “Many have already ordered equipment and moved forward on this basis.”

But Ramesh remained adamant.

“It’s all very well to say environment and development have to go hand in hand, but what are the practical implications of that?” he said adding he favoured applying similar criteria to other mineral resources.

Forestry Update is sponsored by Greenwood Management. For more information on investing in Forestry please click here

“We can only get an agreement on climate change if it involves Brazil and it involves forestry. We recognise the very important steps that you are taking to protect the environment against illegal activities and other threats against the forest and we are very grateful to you. But we know there is more that we can do to help you manage the forest in a sustainable way. There is no solution to the question of climate change without forestry”

Deforestation causes over 17 percent of global carbon emissions, much of it occurring in the Amazonian regions.  But finding a way in which rich nations can persuade forested countries that their trees are worth more standing intact has been difficult historically, with legal issues of land ownership and the role of its indigenous inhabitants often stalling progress.   A solution involving sustainably managed forestry plantations, employing modern forestry practices and a secure chain of custody, could  have the effect of protecting the rainforest whilst also meeting the global demand for forestry products.

In Copenhagen this December the worlds leaders will convene and attempt to agree a global treaty to address the problems of  global warming, with deforestation naturally at the top of  the agenda.

On a five day diplomatic tour, Mr Miliband  met up with environmentalists, government decision makers and leading scientists involved in climate control,  as well as Brazil’s local forestry communities.

At  a press conference after the tour,  Miliband said he had been “shocked,  seeing the actual logs piled up and the illegal roads that have been built”  during  his flight over the Amazon rainforest.

“The Amazon forest is such a beautiful place when it is untouched and then you see these scars on the landscape of the deforestation, bigger and bigger scars.  Brazil is up for a deal…we just need proper ambition from developed countries and the right financial architecture in place.”

Forestry Update is sponsored by Greenwood Management. For more information on investing in Forestry please click here