Forestry Investment Blog

Financial website The Motley Fool has recommended forestry investment as a means of diversifying one’s investment portfolio (Touch Wood – It’s a Good Investment).

It uses evidence from several sources, including the Investment Property Databank’s UK Forestry Index, which shows that forestry produced strong annual returns, up to 19.3 per cent for some shorter investment periods.

The site adds that several large institutions have begun to invest in forestry over the past few years as the asset class has gained a reputation for a flexible, profitable investment option.

Tax benefits including no capital gains tax are among the advantages to investing in forests. Others include the fact that it is an environmentally sound investment providing the forestry is sustainable, and the advantage of being able to hold onto mature trees, allowing them to continue to grow instead of harvesting them if the economy, and therefore timber prices, are low.

This attribute – forestry’s relative strength against economic downturn – has led to a boom in interest in the asset class since the global recession set in.

Motley Fool says that experts often recommend investing heavily in forestry, with deposits of at least £200,000 to generate the very best returns from the investment. However, there are much more affordable options available to those who want to invest in a forestry-related fund.

Many also offer the chance to own an identified piece of woodland. Other see investors putting their money towards sustainable development of forests in countries like Brazil, Costa Rica and Uruguay in order to harvest the trees to develop renewable energy.

Finnish-Swedish paper and pulp manufacturer Stora Enso has recently released a report that shows it has invested EUR 3 billion in forestry research abroad, compared to just EUR 1 billion in Finland.

Another forestry giant in the country, UPM has also been accused of failing to invest enough in forestry research domestically. Lauri Hetemäki, special researcher at the Finnish Forest Research Institute (Metla), says that the most recent paper machine developed and built in Finland dates from way back in 1998. Meanwhile, the firm has made forestry investments totalling EUR 1.8 billion abroad.

Hetemäki says the forestry products capacity in Finland has slowed down in recent years and says domestic investment in research and development is needed. She explains, “the cost-cutting measures do not mean the end of the world, as new operations will inevitably replace the closed mills. However, it is alarming that during the recession the prerequisites for new business activities are particularly difficult in those localities that have been hit by layoffs.”

Along with many other experts in the  industry, she believed that wood based energy products could be the future of forestry but insists that government and companies need to invest in forestry research to make this happen.