Investor interest in forestry is building. This trend is being driven by the growing market for forestry products and climate change concerns, which has the world looking towards sustainable fuels.
Biomass is beginning to be favoured as a sustainable energy source by climate change politics and legislation. Addressing deforestation is being prioritised and in addition pension funds and policy makers are investigating the role of forestry in the investment pool.
Ahead of a conference this month in London on sustainable investment opportunities in forestry and biomass Mark Campanale, a director at Four Elements Capital said that “The backdrop for the sector is good.” He added that, “all institutional-grade properties are managed to very high sustainability standards … but it’s typically not the driver of the investment decision.”
Various groups of investors are looking a number of ways from which they can profit from sustainable solutions to climate change. These vary from looking at efforts to reduce deforestation in the Amazon to looking into the development of and demand for biomass as an alternative fuel.
The Finnish investment advisor Dasos Capital has raised roughly €100 million into a targeted €300 million fund and Marko Katila, a partner there stresses that “we pay a lot of attention to diversification based on the end-use market, and we see new demand drivers,” notably the use of biomass for bioenergy. “We see it as a mega-trend – the shifting of the entire economy from one based on traditional fossil fuel to a more biomass-based economy.”
What is exciting about this is that it isn’t just happening in the industrialised world, it is happening all over the globe from London to Bangkok, from Washington to Rio de Janeiro. Despite this most forestry investments rely only on selling biomass to the energy sector. In the long run this isn’t viable. In order for it to work it needs to be one revenue stream among many.
The biomass supply chain presents potential opportunities to investors as it is ripe for consolidation and integration. Should they wish institutional investors would be able to come in and consolidate all the various people involved in all stages of the supply chain, from the forest owner right down to the pellet makers. At the moment there is no one dominant supplier but plans are already in place for several biomass supply plants.
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May 26th, 2010 at 11:20 AM
Nice article, and well researched. Silva Tree, a forestry company based in Panama, are also moving into biomass production, see http://www.silvatree.com/biofuel-investment.html for details.
August 18th, 2010 at 3:03 AM
Sound good. Its also my favorite topic.That’s great andthanks for the fine sharring.