An Irish forest fund was recently named as one of the best investments in the country by its management company. The fund, which reached 10-year maturity last year, recorded a total return rate of 83 per cent. The average initial investment in the fund in 2000 was estimated at €9,400. This is expected to generate a tax-free payout of more than £17,000, according to fund managers.
Bamboo Bond's UK founder promises better outcomes for investors. It claims an initial investment of up to £10,300 in fast-growing turf, used for stems stronger than steel, can deliver a 503 per cent return over 15 years.
In a troubled financial environment, forest funds generate public pressure over their portfolio diversification characteristics, inflation hedging capabilities and relatively low-risk investment potential. However, like any other investment project, the increasing popularity may lead to business practices that are dangerous to the environment to serve greedy interests and the need for financial security. Unfortunately, forests cannot compete with them. Therefore, investors who are looking at forests as the next long-term home for their investment capital must also look for forest funds with sustainable forest management practices. Only then will they be able to avail full benefits of the forest fund. – You don't really understand those last two sentences. How can forestry be dangerous for the environment?
Value
According to the World Bank's International Finance Corporation (IFC), forest funds generally depend on three main sources of revenue – the growth and sale of wood products (such as logs, wood chips and pulp), and the sale of non- . Wood products (i.e., food products, dyes, perfumery products and cosmetics). ) and estimate the land. In addition to the monetary value coming from these three sources, IFC also recognizes that the Forest Fund can generate value that is not reflected in the Institute's annual spreadsheets – landscapes, biodiversity, social and cultural sustainability, carbon sequestration and The value of value in minimizing damage from natural disasters. Like a flood. As stated in the UN-backed Millennium Ecosystem Assessment forestry report, the combined economic value of “non-market” forest services can exceed the recorded market value of timber, yet forest fund managers often take this into account when making investment decisions. Fails to give proper credit.
However, there are a growing number of forest trusts that are using sustainable forest management practices to protect the non-commercial value of forests. The International Center for Forestry Research defines sustainable management as “conserving or enhancing the contribution of forests to human well-being for both present and future generations, without compromising the integrity of the ecosystem, that is, its resilience, function and biodiversity.” Is. Forest funds are ready to invest in forests for wood. These sustainable forests fund natural forests, which are valued for their ability to sequester carbon and their role in community stability and development.
risk mitigation
There are several key factors that investors should consider to ensure that they minimize the risks associated with their investments and maximize returns:
- political environment Forest funds invested in tropical forest areas may fall under the jurisdiction of an area with unstable local governance or conflicting local political interests. Additionally, some governments may ban logging. Investors should be fully aware of the political environment of the country in which their forest fund operates. This is where investing locally makes sense – being familiar and comfortable with local law and knowing how the political process works can be very beneficial and give investors a sense of security.
- economic environment – As the Millennium Ecosystem Assessment report shows, there is widespread corruption in the forest sector, especially in developing countries with weak local governance. The stability of the local currency and the economic track record of the country are also essential for the return on investment of the forest fund. Here too, it may be a better idea to choose funds that care for local forests than venturing into tropical forests in remote locations, where investors may not be educated enough to make a proper investment appraisal.
- property rights – Who is the owner of forest land? Who is renting it out and what are the lease term/terms? Some forests are run by the state. Others are owned by private companies/individuals. Still others are owned by NGOs. These are also important aspects that investors need to address before choosing their forest funds to avoid future revenue manipulation challenges.
- transparency of operations – This key factor is concerned with monitoring the performance and evaluating the effectiveness of forest management. For example, if a forest fund is investing in offsets, investors should be told how carbon sequestration is measured, who checks it, and how carbon credits are issued.
Property damage – Are natural disasters a defining feature of the geographic location of a forestry project? If so, what properties have historically suffered losses? This information will help investors assess the degree of risk to forest funds due to external environmental factors. This way, potential shareholders will be able to calculate the potential loss of revenue and the associated insurance costs.
