Forestry Investment Blog

A move by the Australian government to abolish the laws protecting forests in Victoria from logging have been welcomed by the forestry industry.

The government insists the focus will be on sustainability while the moves are intended to safeguard the long-term future of the industry in the region. It plans to do this by increasing the influence of the government-owned timber agency VicForests, which will now be responsible for ensuring that only a sustainable amount of timber is felled each year.

In a bid to increase investment in the industry, the government is also planning to increase the length of native timber contracts from the current five years cap, to 20 years. The new plan also involves a possible review of timber legislation and the allowing of ‘ecological thinning’ of certain areas of forests.

Peter Walsh, Australia’s agriculture minister, said that Victoria’s natural forests are a “magnificent and renewable resource” that could be the basis of a thriving industry, with plenty of longevity. He added, “There is absolutely nothing sinister in this. It is about, in the areas that were going to be logged, giving certainty to the industry and making sure forests are managed appropriately.”

Providing forestry is managed sustainable, it can provide a livelihood for communities while protecting the long-term health of a forested region. Plantation projects such as those operated by Greenwood Management, a forestry investment company, in Brazil, can also help to increase the volume forested land and protect natural forests from illegal logging.

The world’s largest paper and packaging firm, International Paper, is doing its bit for sustainable forestry.

It has announced the relaunch of its Copier Grade paper product in the coming few weeks, which will be accredited by the Forestry Stewardship Council (FSC). The FSC certifies forests and forestry product firms if they adhere to a wide range of sustainable and responsible forestry management criteria. The FSC mark has been designed to help consumers to choose ethically produced products.

The paper for the Copier Grade product is made from trees sourced entirely from International Paper’s own plantations in Brazil, which it has complete control over in terms of forestry management practices.
No wood from any native Brazilian forests is used and the plantations are certified under the Brazilian forest Certification Programme and the PEFC.

Planting sustainable plantations of non-native trees in Brazil is an effective way to safeguard the natural forests that need to be protected for biodiversity, habitat and carbon sequestration reasons.

Those interested in investing in these kinds of projects can buy up a piece of plantation land in Brazil through Greenwood Management, which offers ethical forestry investment products in Brazil.

Global Forestry Capital has announced the expansion of its Global Forestry Growth Fund to allow even more people to invest in its specialized investment fund.

The fund will now be available to investors throughout Europe, South America and the UK. It intends to provide returns of 8-10 per cent on an annual basis, which is an impressive claim. Jose C. Garcia, Global Forestry Capital’s Director, said, “Current results are exceeding all of our expectations, with a growing interest from a wide array of investment markets.

“We have recently signed important strategic alliances with very successful and experienced local partners across the globe, and look for this expansion into the rest of Europe and Latin America to accelerate this growing trend,” he added.

It seems that investors really can’t get enough of alternative investments at the moment, as they remove vast amounts of cash from the volatile stock markets and search desperately for that elusive ‘safe haven’.

Mr Garcia explained, “I truly believe our current rapid development is also due to our proposition’s minimal correlation to the global markets, whose present volatility has resulted in the growing awareness of alternative assets in the investment community.”

Although forestry funds can diversity portfolios, an even better way of avoiding correlation with the markets is direct investment in forestry through a specialist product such as that offered by Greenwood Management.

Greenwood has several plantations of non-native trees in Brazil, in which individual or institutional investors can buy a plot. The investors receive regular returns and Greenwood spends the investments on expanding its plantation business further, thus increasing returns for investors.

A report on the Phaunos Timber Fund in UK-based newspaper The Times has got us all talking. Analyst David Budworth can see both pros and cons for the timber fund, claiming forestry investment represents a good bet over the long term.

Examining the timber fund, Mr Budworth explains that the Alternative Investment Market (AIM) listed fund was a bit slow in the beginning, but is now fully invested and has paid its first dividend to investors. It’s total assets are valued at £393 million and are spread over many of the world’s most promising regions in terms of forestry investment opportunities, such as Brazil, Uruguay, the US and Indonesia.

UK timber prices increased by an impressive 38 per cent this year, while prices in some other regions struggled to keep up with those figures. However, the article backed forestry investment as offering some unique attributes that make it a seriously attractive prospect at the moment. Investing in trees is flexible in that if timber prices are low at the point of tree maturity, investors can simply wait it out until prices rise, by which time their assets will have grown (literally) even further.

If investors are really lucky, the value of the land on which the forests are growing will also have risen, offering some protection against inflation. These benefits are arguably even more noticeable for those directly investing in forestry, rather than through funds.

A growing number of direct investment opportunities are becoming available, through firms like Greenwood Management. These products allow people to invest smaller amounts directly into timberland and receive returns as and when timber is sold and income is generated. The initial investment capital is used to help fund the firm’s expansion and future projects so the process is ongoing and sustainable.

These direct investment options are also often preferable to funds as they offer medium-term returns, rather than having to wait for decades to see any income from a hefty investment. And let’s be honest, not many of us are in the positions to tie up tens of thousands of pounds for decades on end. Other longer terms forestry funds include the FIM Sustainable Timber and Energy Fund, but this also requires a minimum sum of £32,700.

One thing all these investment products have in common is their environmental credentials. Attracting private investment to timberland, particularly in developing countries, can dramatically help to reduce deforestation and safeguard the forestry industry for generations to come.

Investment is the key to cutting deforestation, according to a report published by the United Nations Environmental Programme (UNEP) that has – not surprisingly – attracted much praise from the forestry industry

The report, published in early September, argues that through an investment totalling just 0.034 per cent of global GDP, the world’s forestry sector could be completely transformed. The result of the increased investment could lead to the creation of an additional five million new jobs, along with drastically reduced carbon emissions by 2050.

Forests would absorb 28 per cent more carbon from the atmosphere than they do now with the help of investment totalling $40 billion a year. The cash could be raised, the report claims, through payments made by the public and private sector to landowners for maintaining and increasing forested areas.

The forestry sector would benefit hugely from this increased investment and it has welcomed the report, which helps to underline the importance of encouraging investment in forestry and projects that increase the amount of forested land on the planet.

Forestation is something that investment firm Greenwood Management is keen to promote. The company offers investors the chance to put their money into plots of land in Brazil that are run as sustainable plantations of non-native trees. The wood from these plantations is then used in charcoal production and in construction and furniture making – reducing Brazil’s reliance on its own valuable rainforests.

The report revealed that annual net loss of forested land has fallen from eight million hectares in 1990 to five million hectares. In some areas, the total land given over to forestry has actually risen – a trend that could spread globally with the help of the increased investment, claims the report.

Eduardo Rojas-Briales, the chairman of the Collaborative Partnership on Forests, lent his support for the report’s suggestions. He stated, “Optimal land use, further life cycle analysis, ecosystem landscape management, and governance are all key themes that will help unlock the full potential of forests in creating green economies.”

A cutting report by the NGO Global Witness, claims that the World Wide Fund’s Global Forest and Trade Network (WWF’s GFTN) is not strict enough and lacks transparency.

The GFTN was originally established 20 years ago to try to help create a global marketplace for sustainably produced timber and other forestry products. It has almost 300 members in 30 countries, but the report from Global Witness claims that its approach is too lax.

The report states that the entry requirements for members are too lenient and sites the fact that members are allowed to continue to handle illegally sourced timber for five years after they become members. The report claims that this rule is weaker than the regulations that have been established in countries in the US, Canada and Europe since the GFTN was set up.

The report states ‘Even companies involved in highly destructive activities, such as clearing natural forests to make way for plantations or buying wood products from illegal sources, can join and benefit from their association with WWF,” the report alleges.

WWF head of the programmes, George White, defended the GFTN but said, “As with any criticism, WWF is taking the allegations seriously and we intend to examine Global Witness’ recommendations in detail.

“Should we find any of them to be justified, we will respond appropriately, as we are constantly striving to improve our performance and accountability wherever possible,” he added.

The GFTN has helped to stop illegal logging in countries, such as Brazil, where more sustainable plantations of non-native trees are being established by forestry investment firms like Greenwood Management. These plantations offer alternative sources of timber and fuel and help to protect Brazil’s precious forests.

Charcoal prices are rising in the Brazilian region of Minas Gerais, according to new reports citing investment in infrastructure as the reason behind the increase.

In June 2011, the value of the charcoal produced through sustainably-managed forests in the region rose in response to demand soaring. With the country hosting the Olympics in 2016 and the football Word Cup in 2014, the steel industry – which is a major consumer of charcoal in Brazil – is flourishing.

A spokesperson for one of the major charcoal producers in the region, stated, “Looking further ahead, we believe the outlook continues to be very positive for charcoal prices generally, especially in relation the steel markets where demand continues to be strong.”

The Latin American nation has enjoyed greater prosperity in recent years thanks to measures brought in by current and recent governments. Encouraging foreign investment in sustainable forestry to help supplies of ethically-produced charcoal is just one of these measures.

The country’s GDP increased by 1.3 per cent in the first quarter of 2011, and by 5.4 per cent year-on-year. Planned investment and government expenditure was also up in the first quarter, according to the official figures from Brazil’s statistical bureau, IBGE.

“The measures we have been taking in order to maintain sustainable growth rates for the Brazilian economy are showing results, and gross fixed capital formation continues to expand in a steady path, which guarantees economic expansion without generating inflation,” explained Guido Mantega, Brazil’s finance minister.

Charcoal prices are rising in the Brazilian region of Minas Gerais, according to new reports citing investment in infrastructure as the reason behind the increase.

In June 2011, the value of the charcoal produced through sustainably-managed forests in the region rose in response to demand soaring. With the country hosting the Olympics in 2016 and the football Word Cup in 2014, the steel industry – which is a major consumer of charcoal in Brazil – is flourishing.

A spokesperson for one of the major charcoal producers in the region, stated, “Looking further ahead, we believe the outlook continues to be very positive for charcoal prices generally, especially in relation the steel markets where demand continues to be strong.”

The Latin American nation has enjoyed greater prosperity in recent years thanks to measures brought in by current and recent governments. Encouraging foreign investment in sustainable forestry to help supplies of ethically-produced charcoal is just one of these measures.

The country’s GDP increased by 1.3 per cent in the first quarter of 2011, and by 5.4 per cent year-on-year. Planned investment and government expenditure was also up in the first quarter, according to the official figures from Brazil’s statistical bureau, IBGE.

“The measures we have been taking in order to maintain sustainable growth rates for the Brazilian economy are showing results, and gross fixed capital formation continues to expand in a steady path, which guarantees economic expansion without generating inflation,” explained Guido Mantega, Brazil’s finance minister.

Recent trends indicate that there have been significant growths in Canadian forestry from Chinese investors.

After several miserable years of mill closures and redundancies totalling up to 1,000in a single month, Canada is now looking forward to a brighter future for its forestry industry.
The major surge in the desire for Canadian timber from China has marked a turn-around for Canada, whose forestry industry suffered greatly as a result of the U.S. property slump and the impact of the global recession.

Anthony Johnson, an analyst partner as Alternative Asset Analysis (AAA), said that there are several factors that prompted major investments from China in the Canadian forestry industry.
China’s traditionally sourced its timber from Russia, but the decision by Vladimir Putin in 2008, to apply 25 per cent log wood tax on exports resulted in inevitable changes. Although this was intended to increase investment in Russia’s domestic forestry industry, instead it drove China’s business buyers elsewhere.
Johnson claims that it was Canada’s timely move to launch major trade delegation in late 2008 that won Canada’s its new business.

Not only did this decision made such an impact on Canadian forestry, but China had the misfortune of suffering from a major earthquake in the Sichuan Province in May 2008. This saw many of the area’s buildings demolished to the ground, and they obviously required rebuilding.
Mike Richmond, an analyst from Canada’s Salman Partners Inc, explained,  “The wooden homes held up a lot better (than structures built with other materials) during the earthquake, so I think Chinese officials took a look at this and gained a more favourable view of lumber.”

As a direct result of this new found respect for timber, the building codes in Shanghai were altered and the demand for timber soared.

Anthony Johnson with many years experience as an investor in the alternative asset classes agrees that Canadian forestry is on the edge of a resurgence as investments in timber is steadily increasing from all over the Asian continent, prompted by initial interest from China.
“These are exciting times for forestry investors,” said Johnson. “Canada has seen exports to China double in the past year, while its reliance on the U.S. market has reduced considerably,”

Another forestry market worth talking about according to Johnson, is Brazil, which has seen plantation managers such as Greenwood Management, reap the benefits of legislation primarily intended to protect native forests.

Alberta’s forestry companies say Tuesday’s federal budget would help the beleaguered industry develop new markets and products and become more energy-efficient.

The federal government announced it plans to provide $60 million in 2011-12 to help with forestry innovation and accessing new overseas markets.

The budget will also support a program called the North American Wood First Initiative, which promotes the use of wood in non-residential construction,” said Brock Mulligan, a spokesman for the Alberta Forest Products Association. “That’s really valuable to us in getting some exposure for our product,”

Another planned program is designed to help strengthen Asian markets for forest products, which have grown in importance as the U.S. market has suffered from the weak housing market.

“The measures provided in today’s budget recognize the significant opportunity before the industry to expand its markets and products beyond lumber, pulp and paper,” said Avrim Lazar, CEO of the Forest Products Association of Canada.

“Overall, (Tuesday’s) budget continues the process of putting in place a policy framework that will foster the innovation and strategic investments needed for the Canadian forest products industry to become world-leading. This will bolster rural communities, strengthen the economy and advance Canada’s environmental and innovation agendas.”

Tuesday’s budget also included measures aimed at the agriculture sector. Ottawa will spend $50 million over two years to support agricultural innovations, as well as more than $40 million to contain and prevent certain food and livestock diseases.

The UK Government has decided to drop plans to sell-off 40,000 hectares (15%) of Forestry Commission land to allow a review of woodland protection.

The secretary of state Caroline Spelman said it wanted to re-examine the criteria for the sell-off but their other plans to have non-governmental bodies to take on sections of the 258,000 hectare estate will go ahead.

The Prospect Union warned that only a complete u-turn on the sale of land would protect England’s forests and the wider timber industry.

Prospect Union negotioator Malcoom Currie said “We welcome the fact that the government is thinking again, in the light of the near-universal chorus of opposition to the plans from all sectors of the community,”

Approximately 15 percent of England’s public forests had been planned for sale, with the aim of raising £100million for the government. Today, on Friday morning, the Department for Environment, Food and Rural Affairs (Defra) said it would hold on to the forest until the fate of the rest of the Forestry Commision’s lands had been decided.

Defra said the sale was being postponed because of concerns over access rights, and will not affect its broader proposal to sell the UK’s nationally owned woods, which is still the subject of public consultation.

The conservation director at the RSPB, Mark Avery, welcomed the move.  ”This is a good thing. Lots of forests were going to be sold off without enough protection [for public access rights and wildlife],” he said.

After the consultation, which ends on 21^st April, the 15 percent may return to the market for an outright sale. If the government’s current plans go ahead, the rest of the Forestry Commission’s land will be sold on long-term leases.

The government’s plan to sell England’s commercially run forests to private bidders, and the plan to hand over heritage woodlands to charities have outraged conservationists and the wider public. Opinion polls indicate that more than 80 percent of people are opposed to the plans.

A few Tory MPs are known to be nervous about the possible sale, which will not bring in new funds to the government because of the costs involved.

Mary Creagh, the shadow environment secretary, said”[Calling off the 40,000 hectare sale] is a panic measure by a government which has been spooked by the huge public outcry. This partial U-turn will not be enough to silence the protests. This government has not scrapped its plans to sell off the public woodlands,”

Initially, ministers suggested that the sale of the Forestry Commission would help to reduce the deficit, but then had to back down as Defra’s own analysis showed the sale would cost about as much as it would raise. The government also justified the sell-off on the grounds that the Forestry Commission currently suffers from a conflict of interest, as both a regulator and seller of timber, but this was rejected by campaigners.

There was further embarrassment for ministers when it emerged that selling off public woodland could cost millions in lost revenue, as it would widen an existing tax loophole whereby buyers of woodland can avoid inheritance tax.

The National Trust has said it will consider taking on stewardship of some heritage woodlands, but Reynolds added that there were still questions over how it would be paid for. She said it would be hard for charities to take on stewardship of heritage woodland. “It’s a big ask, for any charity,” she said.

Brazil has more than 100 years of Eucalyptus biomass fuel experience, but the Dow Chemical Company will be the first  Brazilian company in the chemical and petrochemical industry to utilise it.

The Dow Chemical Company has signed an 18-year supply agreement with Energias Renováveis do Brasil (ERB), where they will invest, install and operate a 13-megawatt plant next to Dow’s Aratu Complex on the Bahia State in north east Brazil. The Eucalyptus will replace natural gas-fired boiler and will supply 100 percent of its steam requirements for the Aratu site’s propylene oxide and propylene glycol operations and 30 percent of the requirements for the chlor-alkali and hydrochloric acid production units.

Dow and numerous other Brazilian companies choose to use the Eucalyptus species because Brazil has an enormous amount of resources to grow and use the tree for bioenergy. Brazil is the world’s largest producer of Eucalyptus, and the Bahia State is one of its most productive areas.

“Over the past four years, fuel prices have increased sharply in Brazil and biomass provides a proven, abundant and secure source of low-carbon energy,” said Doug May, vice-president of Dow Energy & Climate Change.

He also mentions that the use of Eucalyptus is attractive not only in Brazil, but also in Latin America and other regions. ERB also has three other projects under development in the Bahia State, and ongoing studies to another three more potential projects.

For its Aratu Complex, ERB is establishing a 9,500 hectare Eucalyptus plot at about 150 kilometres from the site to be used for fuel purposes. ERB will be responsible for planting and managing the plantation, harvesting,  transporting and chipping the timber. It is predicted that ERB will invest $90 million in the plant, which should begin operation in 2013. The cogeneration facility will reduce carbon dioxide emissions at the site by 180,000 metric tons annually. This saves 200,000 cubic meters of natural gas per day.

Eucalyptus not only represents a massive bio-energy opportunity in Brazil but it also has the potential to develop massively in South America as a whole. According to David Nothmann, the vice-president of business and product development with ArborGen LLC, the Eucalyptus represents the greatest potential of any hard wood tree to produce large amounts of biomass in South America.

Eucalyptus is purpose grown on plantations for biomass in almost 100 countries because of its rapid growth rate and its ability to withstand a variation of climates, disease and pests.

The Eucalyptus tree can hold its own against other renewable energy options, according to May. “Traditional alternative energy sources such as wind and solar cannot provide the necessary heat in the form of steam needed at Aratu. With sufficient local supply, woody biomass is an ideal renewable solution,”

The UK governement has unveiled its long-awaited plans for the Forestry Commission, proposing to lease woodland to private sector operators and hand over control of England´s heritage forests to charitable trusts.

The coalition is already committed to taking 15 percent of the public forest estate out of state control, generating up to £100 million of receipts. They are now trying to decide on the future of the remaining 85 percent still owned by the Forestry Commission.

A consultation document released by Defra this week confirmed that the government will follow the Scottish model and lease the 2,500 square kilometres, which is about 18 percent of English woodland, to private forestry companies.

It is thought that 150-year leases could raise between £140 million to £250 million, but sales are conditional on protecting public access and biodiversity. Smaller sections of woodland will also be offered to community groups to manage.

Many of England’s most well known forests, such as the New Forest and the Forest of Dean, will be transferred to the management of new or existing charities.

The environmental secretary Caroline Spelman said, “State control of forests dates back to the First World War, when needs were very different. There’s now no reason for the government to be in the business of timber production and forest management,”

Earlier proposals to sell off the Forestry Commission prompted a number of campaign groups to spring up. Spelman attempted to calm fears that the plans would see forests to become commercialised.

“The government is absolutely committed to the ongoing provision and protection of the public benefits provided by the public forest estate, and the consultation shows how we intend to achieve this,” she said. “We will bring forward amendments to the Public Bodies Bill to create a strengthened framework to safeguard the natural and social capital our forests provide now and for future generations.”

The reforms would also benefit commercial users such as the biomass sector by encouraging better managed forests.

“It’s time for the government to step back and allow those who are most involved with England’s woodlands to play a much greater role in their future,” she added.

The National Trust said that so long as access and conservation were safeguarded, the proposals could offer “exciting new opportunities” for communities, charities and business.

The consultation will run until 21 April 2011. Forests in Scotland, Wales and Northern Ireland are not affected.

Welsh foresters are planning to grow new exotic tree species such as the Giant North American Redwood and the Macedonian Pine.

These species are known to be drought tolerant and are considered for plantation as the Welsh National Forest tackles the challenges of climate change.

“Challenges in climate are going to create more opportunities for forestry as well as threats,” said Richard Carrick, a Forestry Commission Wales representative on the international FUTUREforest (FF) project.

“The Giant Redwood is a long shot, but it is fast growing and could provide a drought-tolerant alternative that can cope with predicted climate changes in Wales, and produce high quality timber.”

The Assembly Government has made ambitious plans to increase the tree coverage in Wales by a third over the next 20 years.

While many will be native species, alternatives may be required as the climate in Wales is becoming warmer with more droughts. This makes it more difficult for some existing species to survive the climate change.

The world’s biggest growing tree, the Giant North American Redwood, is already established as a specimen species at sites such as Coed Aberartro, Llanbedr and at the Leighton estate near Welshpool.

Others species such as the Western Red Cedar are also being considered by foresters as they seek to increase the diversity, and hence the resilience of Welsh woodlands.

“A number of tree species are already threatened by a range of pests and diseases in Wales,” said Richard Carrick. “Monoculture plantation forests are the most at risk as the climate changes. They are the least well quipped to cope with change.

“So we will certainly be planning replacement species for those which are threatened. We are lookng at a whole range of options because trees do offer cost effective solutions to protecting society from the effects of climate change.”

A current threat is Phytophthora Ramorum, a fungus-like organism commonly known as Sudden Oak Death, which attacks more than 100 varieties of plants.

It is spreading much faster than predicted and is likely to affect most of Wales’ larch. In the worst case scenario, a tenth of all Forestry Commission Wales’ tree stock could be affected.

The increase of flooding and snow is also having a major impact, prompting FUTUREforest, a pan-European project, to plan for the future.

“How we manage the forests in future is critical,” said the Welsh division FUTUREforest manager Dr.  Helen Cariss.

“Changing the nature of our forests takes many decades and we have to consider how we will replace those trees that are most at risk – pines, larch, spruce and oak. Problems associated with some of our species, such as that with the Oak decline, are less clear but climatic changes may be contributing. We need to research ways to ensure our native woodlands are better protected in the future.”

Forestry Commission Wales is currently working alongside researchers to develop guidelines for the use of various tree species.

After last week’s climate change meetings in Cancún, Mexico produced two important developments on forestry, which is a key issue for Indonesia.

Independent research discovered how deforestation is not a major generator of greenhouse gas emissions. Secondly, industrialised countries and the World Wide Federation alongside Greenpeace failed to win an agreement for their proposals that the cessation of conversion of forest land should be a precondition for climate change aid in developing countries.

Both Greenpeace and WWF have forecasted the exaggeration of the impact of forest industries and the understatement of the cost of halting forest conversion has been a standard feature of the climate change debate for decades.

A prime example occurred when in 2006 a report released by the British Government economist Lord Stern claimed that 17 percent of global emissions were cause by deforestation, Greenpeace and WWF inflated that figure to 20 percent without supporting evidence. They have repeatedly overstated the environmental impact of many forest conversions without scientific justification.

Today even Lord Stern’s data has been called into question. New research reported at Cancún finds that deforestation accounted for only 6 to 8 percent of all global emissions and that the number will fall further when carbon stored by forest re-growth is counted. This was discovered by the U.S. based Consultants Winrock International, on commission from the World Bank.

Therefore the estimates prepared for Indonesia’s National climate change office, led by the former head of WWF Indonesia Agus Purnomo, will have overstated the need for Indonesia to reduce emissions and understated the costs.

Indonesia aims to reduce emissions by 26 percent by 2020, as these targets were made according to the figures released by the two companies the achievement of it is much harder and more expensive.

In effect of this, the importance of REDD (reducing emissions from deforestation and forest degradation) has now diminished since forestry emissions are now considered minor.

The result in Cancún is an early indication of things to come. A new proposal where individual countries are expected to set out its own low carbon strategy levels. There will be no obligations on developing countries to reduce emissions and there will be no regulated trading in global carbon credits. They are not expected to cease forest conversion rates.

The Cancún meeting reasserted the right of each developing country to take any action that is necessary to advance national economic development goals.

Greenpeace, WWF and Western aid donors have campaigned for forested developing countries to terminate any further conversion of forest land to other purpose such as the expansion of agriculture. Their project has failed.

These situations present a new challenge to Indonesia. Its officials urged their President to adopt a bigger and more costly commitment to reduce emissions compared to other developing countries based on the advice from consultancies they supported that emissions from deforestation were large.

This cannot be justified now as the numbers that Indonesia used to estimate assessing its rate of deforestation are said to be overstated by at least 50 percent.

Another problem is to Western environmental non-governmental organisations such as Greenpeace and WWF who have long campaigned for an end to forest conservation by stating that deforestation emissions are high and implying that there is not an economic justification for the act of deforestation. It is obvious now that trusting advice from environmental NGOs are disadvantageous.

Indonesia is promised aid to improve forest management. Funds should be used to commission independent advice on the nature and source of greenhouse gas emissions in Indonesia, and the economic importance to Indonesia of conversion of forest to more productive uses.

The case for a freeze on forest conversion should be set aside until facts are properly and independently established.

The results from the climate meetings in Cancún is a good indication of the type of proposal for a new global treaty that will be put forward during next year’s climate change meeting in South Africa.

In the past, agriculture was used exclusively to produce food, but now we are turning to crops as a source for energy use. Nowadays everyone is familiar with the argument s relating to the environment and how the energy we use directly affects are surroundings. People are conscious of the effects of greenhouse gas emissions and one’s own carbon footprint. We turn towards sustainable, renewable, carbon neutral and bio energies in the hope that we can benefit the future of the environment.

Green energy crops are gradually gaining a foothold and even grain is being grown as a fuel for heat. Once a log is dry it becomes an excellent producer of fuel without the high energy costs or the requirement of further manufacturing prior to usage.

Fast-growing trees are preferred to supply with heating needs as they are able to provide mass amounts in a minimal amount of time. The Acacia species was often touted as the fuel crop of the future, however frosts severely disrupted crops and growth.

Another tree well known for its rapid growth rates and high resistance to pests and weather prove that the Eucalyptus is the tree of the future. When cut into logs or chipped, the Eucalyptus makes excellent fuel and can be harvested on an eight year rotation. Most varieties originating from the Eucalyptus coppice well and the speed of re-growth are astonishingly rapid.

It is able to deliver approximately 16tonnes of dry wood per hectare, and the process can be repeated three times more before the need to replant. Certain varieties can survive frosts of -16°C and with their rapid growth rates and the ability to coppice would appear ideal for growing for energy production.

Eucalyptus is planted and grown in almost the same manner as any forest tree with two metre spacing and weed control a necessity during the initial two years. It grows well on heavy soils, but the ideal land is good, free-draining land. Once harvested, the wood splits easily and is perfect for fuelling furnaces, open fires, stoves and log boilers. It is possible for the Eucalyptus species to produce double the yield of willow.

Three crops can be harvested before replanting, which takes place at year 24. This short rotation looks attractive, as do the high yields and volume of wood produced.

Timber has been a popular asset amongst investors for many years. Due to their long-term nature of asset class and the amount of positive attributes they offer.

One of the main benefits is the attractive high interest rate returns over a long period. If one observes timberland activity over the past twenty years, timber has performed well against equities, bonds, commercial property and other commodities.

For example, one does not receive a plus 30% returns or a minus 30% returns as one can in equities meaning not only are returns robust but are much less volatile than other more traditional financial assets.

To dissect the return aspects of timber, long-term returns are primarily driven by the biological growth of the tree, and significantly less so by timber and land prices. So over time there us an overall sense and a higher level of predictability financially speaking.

One of the obvious risks involved with forestry investments are of course fire or disease, but with good forest management this is taken under control. Good forest managements equates to plantations, so we are in control with the growth and trees in these conditions grow far better. In addition it is less prone to fire, as access roads are constructed throughout the plantations since daily access is required. These act as firebreaks.

Most of the fires that occur in forests are in areas such as national parks where there is a lack of undergrowth management and due to the fact that it is public land. To have the presence of people increases the risk of fire, for example, due to littering of cigarette ends.

Returns for investors depend on where they choose to invest. In the U.S. where lies the most developed, mature and liquid market then one should look into the Internal Rate of Return (IRR), which can range from 7% to 8% per annum. In South America, where in forestry terms are considered to be developed, one can expect low double-digit returns. In East Africa returns can be as high as 20% although that increases the risk of investment.

So to invest, be clear on the acquired assets, understand what drives those assets. Investing in Brazil, it is all about the timber, its growth and use. In the U.S. this includes the land and all other income the timber could potentially bring.

Wherever the investment is made, forestry continues to prove to be a secure and long-term investment with healthy returns for the money invested.

Over ten years Brazil has transformed itself into a financial powerhouse. The BRIC countries (Brazil, Russia, India and China) were given more voting rights and seats at the International Monetary Fund (IMF)
This marks Brazil’s emergence on the global stage.

Brazil with its oil reserves and booming agricultural sector indicates that the country’s economy could increase even further over the next few years. Analysts predict a growth that could even surpass the United Kingdom in five years.

The economic revolution is feeding national and consumer confidence. With the forthcoming hosting of the 2014 World Cup and 2016 Olympic Games solidifies this new found confidence.

Brazil is a prime demonstration of how the power in the world economy is shifting.

President Luiz Inacio Lula da Silva is a man credited for Brazil’s revival on the world stage.
Much of Brazil’s transformation has been down to China’s emergence on the world’s economic scene. The “commodity boom” fuelled by China’s economic explosion fuelled prices for Brazil’s iron and steel industry.
Brazil’s agricultural industry was also boosted by China, for example more than 60 percent of China’s orange juice comes from Brazil, as well as a third of its soya and tobacco purchases.
Finally not forgetting the new oil discoveries; in 2007, the Brazilian state energy giant Petrobras struck oil off the coast of Rio de Janeiro This new found off-shore oil could potentially hold as much as eight billion barrels of oil. This find enters as one of the world’s top ten discoveries. In another find nearby is Sugar Loaf Field, off the coast of São Paulo, which is estimated to contain 40 million barrels worth of oil. Brazil is set and well on the way to become energy independent, which is a desire able status to hold in today’s fuel-hungry world.

Soon President Lula will step down in power after holding two terms of government. Although only eight years ago Brazil was facing a financial crisis of its own when Lula first replaced Fernando Henrique Cardoso. Despite that, Lula focused on tackling inflation, removing high interest rates, and repaying all foreign currency debts. Brazil also managed to loan US$10 billion to the IMF last year, something that would have been unheard of only a few years ago.

It is believed that approximately 20 million people are not living in poverty. There still remains the fact that Brazil still has many challenges ahead if it is to truly arrive on to the world’s stage as a super power. Huge investments are required to upgrade its national infrastructure.

Flavia Cattan-Naslausky, currency strategist at Royal Bank of Scotland, said: “Brazil is on the cusp of a very important moment and needs to step up. Most of the macro work is done; it now needs some fine tuning.”

So over the upcoming years expect more to come from Brazil.

Brazil set to become the seventh largest economy.

According to the International Monetary Fund (IMF) Brazil is expected to surpass Italy in 2011 as the seventh largest economy in the world, and will most likely keep that ranking until at least 2015.

Brazil’s current economy makes it already larger than both Russia and India combined. With a GDP of $2 trillion, alongside China these four countries have formed a group of emerging market players known as the so-called BRIC group. The IMF also predicts that Brazil’s GDP will likely rise to $2.2 trillion by the end of next year, and will continue to rise to $2.8 trillion by 2015.

Brazil’s motor industry alone is expected to grow 13.1 percent this year and Brazilian car exports continue to recover.

With a robust economy, strong job growth and infrastructure expansion, the real estate market continues to rise as investors are arriving in Brazil to build their portfolio.

The Brazilian economy is strong. It is bang on track to close its growth as 8 percent by the end of this year. Brazil’s energy, food and minerals are in hot demand. The manufactured goods are selling well home and abroad.

Airport traffic being a useful indicator of economic activity is reflected at the Fortaleza airport seeing increases of 23 percent year-on year to the end of August 2010. Cargo traffic is reported to have risen by 40 percent during the same period. This alone is a quick sign that economic activity is increasing.

As a direct result of this, approximately 2.5 million new jobs were created this year and many new consumers.

On Monday the American forestry investment firm Timberland Investment Resources (TIR) has launched a European timber hedge fund to provide European investors access to asset strategies.

TIR will offer European high-net-worth investors access to the increasingly popular timber asset investments. The new London based subsidiary is still waiting for approval from the Financial Services Authority.

The fund received will invest in timber resources in Europe, the U.S. and Latin America.

“The forestry asset class is gaining prominence globally because of its history of outstanding performance and its demonstrated ability to serve as a portfolio diversifier and inflation hedge,” said Tom Johnson, Chairman of TIR-Europe and Founding Partner of TIR-USA.

“We intend to make these unique attributes more accessible to European investors by offering them investments designed to meet their long-term objectives.”

With over 50 years of investment management and corporate and investment banking experience between them, the new European subsidiary is headed by managing partners Hugh Humfrey and Gian Paolo Potsios, both formerly of Arch Financial Products, an investment management firm.

The founding of TIR-Europe proves to be timely because the ongoing instability within global financial markets has highlighted the benefits of investing in forestry.

Humfrey said, “Forestry-related investments have consistently demonstrated a strong capacity to provide portfolio diversification because their returns, historically, have been weakly correlated with the performance of equities, bonds and other financial assets.”

He added: “Forestry investments also offer excellent inflation hedging characteristics and have generated a long history of stable investment performance consisting of both current income and asset appreciation. As a result, the asset-class tends to offer a great deal of flexibility from both a tax and cash flow planning standpoint, which makes it very compelling given the prevailing market conditions.”

Thousands of trees are felled each year in the Brazilian Amazon forest. One way to track the location, size and who was responsible for the action is to attach a microchip to the tree base.

Using a hand-held device, a forestry engineer can pull up the tree’s vital statistics stored on the chip. Currently this project is still in its initial stages, but its leaders say that the microchip system has the potential to be a huge positive step in the battle to protect the Amazon.

The microchips allow land owners who use sustainable forestry practices to distinguish their wood from that acquired through illegal logging that yearly continues to destroy large sections of the forest. Each microchip is individual and tells a tree’s story from the point it was felled to the sawmill that processed and sold the timber. This information is important for buyers who want to know where the timber came from. Recently there is a growing trend where lumber certification is produced alongside the timber to guarantee that the wood was produced without damaging the forest where it originated from.

“People talk a lot these days about wood coming from sustainable forestry practices …this is a system that can prove it,” said Paulo Borges, a forestry engineer for the Ação Verde (Green Action) organisation, which is managing this new project.

Although the Amazon’s deforestation rate has fell in recent years, Brazil is still under international pressure to reduce this rate, as thousands of square miles of the forest are destroyed and is one of the worlds’ biggest contributors of greenhouse gas emissions.

Selectively cutting trees such as those from privately managed timber companies generate high revenues without damaging forests. In some cases even increasing the amount of carbon dioxide the forests trap, according to forestry experts.

Ação Verde believes that the widespread use if chips in trees would aid the elimination of corruption that allows illegally harvested wood to be “cleaned up” through false certification papers, and help lift Brazil’s sustainable forestry movement.

Existing projects in Bolivia and Nigeria already use technology such as bar code readers or satellite tracking with the aim to crack down on illegal logging and preserve the delicate ecosystems.

“If there is fraud taking place between the forest owner and the mill, then a microchip would be great help in combating illegal logging,” said Gary Dodge, director of science and certifications at the non-profit Forest Stewardship Council, which has pushed for lumber certification worldwide. Currently they are exploring at how satellite imagery may help better management of forests in countries such as Sweden, Russia and South Africa.

One disadvantage with micro-chipping is of course the higher costs involved. Although a stronger certification system could help increase the selling price of wood in certain markets.

The Brazilian government announced earlier this week, the plan to allow private timber companies to manage almost 42,000 square miles of the Amazon over the next 5 years. The management of the logging concessions is meant to selectively cut some logs while maintain the forest largely intact.