Forestry: See the money for the trees

This piece has an US slant but shows the growing awareness of the value of investing in forestry.

Money doesn’t grow on trees, but this could be missing the point. As some institutional investors have found, the trees themselves are valuable. And they tend to become more valuable over time as they increase in height and volume, making their lumber suitable for a wider array of purposes.

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Booming demand for timber fuels surge in profits at Scottish Woodlands

SCOTTISH Woodlands has highlighted the importance of the forestry sector in Scotland after it achieved record trading results amid strong sales of timber.

The company, which manages forests for owners ranging from individuals to local authorities, increased pre-tax profits by around 80 per cent annually, to £1.1 million in the year to September.

Scottish Woodlands harvested more than a million tonnes of timber during the year, when sales surged by around 15 per cent annually, to £74m.

The employee-owned company said the growth reflected strong demand for domestically grown timber in the UK.

Scottish Woodlands’ customer list includes sawmills, fencing producers, paper mills and biomass energy firms.

The company noted the growth was also driven by strong interest in woodlands among investors.

It said new woodland creation and re-stocking following harvesting led to stable demand for forest management services.

Managing director Colin Mann said the company’s growth demonstrated the importance of the forestry industry to Scotland.

“The forestry and wood sector in Scotland is delivering a powerful combination of sustainable economic growth and significant environmental benefits,” said Mr Mann.

Economists have estimated the industry supports 40,000 jobs in Scotland.

The monthly average number of employees at Scottish Woodlands was 141 in the latest year.

Scottish Woodlands has 13 offices in Scotland, from Strathpeffer in the Highlands to Castle Douglas in the south west.

Mr Mann said the firm’s success was based on the bedrock of the involvement of employee owners. Scottish Woodlands is 80 per cent employee owned, with the remainder held by sawmiller James Jones & Sons.


AXA Invests in Forestry because it is a ‘safe-haven investment’, with ‘resilience to crisis’.

AXA Real Estate has made its first foreign forest acquisition, buying three estates in Finland.

The investment manager paid €11.2m ($12.5m) for the assets, which cover 3,700 hectares.

The estates were bought for AXA Insurance from forestry company UPM, which will maintain its role as asset manager.

Christophe Lebrun, head of forest investment, said investor appetite for alternative asset classes had seen a “marked increase in recent years”, with demand for strong and sustainable returns.

“As a sector, forestry is underpinned by robust economic fundamentals,” he said.

The sector was, he added, a “safe-haven investment”, with “resilience to crisis”.

AXA said that, as part of its alternatives investment strategy, it was looking to grow its forestry portfolio for clients, targeting Western Europe and the Nordics.

The move into Finland by AXA Real Estate is, it said, part of a strategy to diversify into countries where forestry-related industries account for a significant proportion of GDP.

AXA Real Estate’s forestry assets under management total around €100m, comprising more than 17,600 hectares.

Globally, the 1.2bn hectare timber market is worth an estimated €600bn, the investment manager said.


New Green Bond Index

Barclays has teamed up with index provider MSCI to launch a Green Bond Index in response to ‘high demand’ from institutional investors.

Barclays will launch the index this summer following a consultation period for investors, which closes at the end of July and will help formulate a benchmark index methodology based on how “the market identifies, evaluates and classifies green bonds”.

“With an increase in green bond issuance, we have seen demand from institutional investors for a new benchmark in this emerging and rapidly growing market,” said Brian Upbin, Head of Benchmark Index Research at Barclays.

Remy Briand, Managing Director and Head of ESG research at MSCI, said, “MSCI ESG Research offers institutional investors an independent and objective evaluation of green bond securities with an aim to meet well defined criteria for green bond classification.”

The Green Bond Index will be available for institutional clients to license for their index-linked investment products, such as Exchange Traded Funds, separately managed accounts, and structured products, and may serve as a benchmark for dedicated green bond funds as well as informational measures of green bond risks and return.

Jim Glascott, Global Head of Debt Capital Markets at Barclays, said: “The creation of a Green Bond Index will be an extremely useful tool for issuers and institutional investors, and an important step in the evolution, transparency, and standardisation of the green bond market.”

The index will extend the partnership’s existing environmental, social and governance (ESG) fixed income benchmark index family, which it launched last summer.

“The green bond market has just started to develop and we are expecting the number of components in the Index to keep growing as there is an increasing interest and demand from the market for this type of product.”

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