Forestry Investments

When green investments are mentioned as an investment category, forestry investments are not always naturally included. Wrongly so, as forestry investments or timber investments, as otherwise referred to, probably have some of the strongest credentials of any category as a green investment.

Commercial timber investments in forestry plantations are crucial to the process of eliminating illegal logging practices, as they are required, especially in tropical locations, to replace the supply deficit stronger restrictions have recently created. Timber investments in forestry plantations also act as a carbon sink, with a hectare of forestry annually sequestering between 10 and 100 tons of CO2, depending upon the tree variety. In terms of meeting the criteria one would hope of green investments, it is difficult to come up with any major criticisms, and it ticks all of the positive boxes.

In addition to their strong green investment credentials, forestry investments are also very attractive in terms of good returns and a low risk factor. Over the past twenty years, forestry investments have outperformed traditional investment vehicles such as stocks, bonds, shares and commercial property in terms of returns.

One of the most attractive aspects of adding timber investments to any investment portfolio, never mind a green investment portfolio, is its qualities as an inflation hedge. Being both tied to land investment, itself an excellent inflation hedge, and the fact that timber as a commodity historically does well in periods of high inflation, means that timber investments are an excellent stabiliser to an investment portfolio, as well as providing attractive low-risk returns in itself.

Present trends and future variables also look favourable for forestry investments for those considering it as a potential option for their green investments. As mentioned, the international crack-down on illegal logging practices, in the fight to preserve our remaining natural forests, has impacted supply lines. According to the ITTO report for 2010 on tropical timber exporters and importers, a major cause of declining production and export of commercial timber was a lack of supply due to illegal logging restrictions. This gap has to be filled long-term with timber investments in commercial forestry.

Demand for timber is also set to increase significantly. With the emerging economies of Asia such as China and India overtaking the west as the world's largest consumers of timber products future supply will be a major issue. China currently has a per capita consumption of timber products nine times less than the USA. And yet, it has already overtaken the USA within the past two years as the world's largest importer. As GDP per capita rises so will the consumption of timber products, which statistically have a strong correlation. Although India has not quite shown the same explosion in its imports, the same variables are reaching a level where that is expected to happen.

For investors looking for sound green investments, forestry investment seems to tick all the boxes. It is not an unknown quantity, with timber investments having a long and stable history showing strong returns. Demand and supply variables look very attractive for the future of forestry investment. And as a green investment forestry investments certainly fit the bill from an ecological point of view. It is however important to state that care should be taken that any projects, funds or companies chosen as the vehicle for your timber investments, have a commitment to sustainable forestry practices.

A more in-depth description of forestry/timber investments can be found at www.timberinvestments.co.