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Newsletter January 2014
Institutional investors and forestry
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Investments in forestry

One way to address climate change


First of all a Happy New Year!

Looking back into 2013, the most important political event for the forestry sectors has been the UN Climate Change Conference in Warsaw. Marcin Korolec, President of the COP19 conference said, that “Warsaw has set a pathway for governments to work on a draft text of a new universal climate agreement [...] in Peru, which is an essential step to reach a final agreement in Paris, in 2015”.

A central outcome of the conference has been the decision to significantly cut emissions from deforestations, which still account for around one fifth of all human-generated emissions. Apart the decision to cut emissions from deforestation, the question how to finance The Warsaw Framework for REDD+ and other reforestation and forest protection measures, still remains. The pledges of 280 million dollars from the US, Norway and the UK to finance these measures are far from being sufficient and other possibilities to finance the cut of emissions have to be considered.

We think that the private sector could play a major role. In large investment portfolios (> USD 1 billion) forests usually represent only around one percent of the total portfolio (Glauner 2011, p. 14). Already minor changes in the investment strategy can significantly increase the allocation of investments into the forestry sector. These potential investments can help to finance reforestation activities. But what is preventing institutional investors from allocation investments into the forestry sector?

The heterogeneity of sustainable forest ecosystems and the complexity of management tasks make forestry a difficult asset and require extensive experience and expertise. To unleash the full potential of private investments into forestry, risk assessment tools have to be developed in order to evaluate the performance of forest investments more accurately. At OpenForests we are working continously on these tools.

One tool we discussed at our blog in September was a best practice forest investment plan. In this newsletter you can find the revised business plan as the outcome of this workshop.

Another tool we present is our FairForest Voluntary Rating which will be launched during the next weeks. It can be used to evaluate sustainable forestry projects and investment opportunities.

At the end of the newsletter we invite you to sit back, turn up your speakers and dive into the virtual tours we created for one of your clients in Costa Rica.

We wish you a successful year 2014 and the power to follow your vision of sustainable forestry.

Kind regards,

Results: forest investment business plan workshop

Revision of the business plan by incorporating comments and advices of the workshop

 

Download business plan

We want to say thank you to all participants of the workshop for their input, especially we want to thank Bruce McKelvie for making his forest investment business plan available. At the following link you can download the revised version of the business plan. All parts which have been changed and improved are marked in gray.
                                             Download

 


 


 

 

Lore foundation

If you liked the Forest Investment Businessplan Workshop, you might be also interested in other projects of Bruce McKelvie who is currently focused on establishing the Lore Foundation, based in the Lore district, Lore Lindu, Central Sulawesi, Indonesia. Currently Bruce McKelvie is looking to raise funds to get the program started and running over the first 18 months. Main objectives of the program are helping with the nutrition and education of children, providing food and basic medicines for elderly people as well as establishing conservation education and community based conservation programs. Lore is in a region that is one of the world's most biologically rich and diverse, and includes areas of the beautiful and extraordinary Lore Lindu National Park. More information

(top left) As a result of poor nutritions, many children in Lore are undersized for their age and many have learning disabilities. (top right) Elderly people in Lore often need basic medicines and are underfed as their families struggle to keep children fed and schooled. There are no pensions for the elderly across Indonesia. It is one of the key aims to assist the elderly in their basic needs and empoverished families so that they can take better care of their elders as well as their children. (below left) Traditional music group in Lore playing bamboo instruments. (below right) The old church building in a Lore village, that will be renovated for use as a community library and community education center. Books are very rare throughout Lore and consequently literacy is at a low level as there are insufficient books for children to practice reading.

FairForest Voluntary Rating

Measuring the performance of sustainable forestry projects

We are happy to introduce the FairForest Voluntary Rating, developed by OpenForests. The goal of the rating is to measure the performance of sustainable forestry projects. Investors can obtain an easy and understandable tool to pre-select potential investment opportunities in high quality and sustainable forestry projects.

Background

Forestry ecosystems as investment subjects show heterogeneous characteristics, for example in relation to their regional context, available infrastructure, tree species, management objectives, etc. The set of factors which influencing the success of a project are broad and interdependencies between these factors are often strong. This makes it difficult for investment analysts to evaluate a potential deal. Although forest investments show competitive returns in comparison to other investment classes, large investment portfolios (> USD 1 billion) only have allocated around one percent of the total portfolio into the forestry sector. With the FairForest Voluntary Rating we want to capture the heterogeneity of forestry investments and make them assessable for investors.

Rating

Current certificates and standards predominantly focus on environmental and social impact. The financial performance is not evaluated. However we think that the financial sustainability is the prerequisite to guarantee social and environmental sustainability. The FairForest Voluntary Rating especially asks for the business performance.

FairForest provides a voluntary self-rating system for forestry landscape projects. With a broad spectrum of questions, the rating system is designed to be applicable to a wide range of different forestry projects. The following sections are rated to evaluate the overall project performance:

  • social impact
  • environmental impact
  • financial performance
  • business environment
  • management performance
  • production risks

Each section consists of about 20 questions that can achieve a performance between 0 to 100 percent. All questions are weighted in accordance to their importance in comparison to the other questions. In addition, the FairForest Voluntary Rating describes characteristics which are important for internal analysis. Background analysis and research by OpenForests complements the voluntary rating.

Value

By measuring indicators and grouping them in sections, complex investment subjects like sustainable forestry investments can be compared more easily. Comparing measured indicators with internal benchmarks enables responsible investors to select projects which fit best in their investment portfolio. The rating assists systematic deal sourcing to find high quality projects. Through this, high due-diligence costs can be saved.

The goal of the FairForest Voluntary Rating is to increase transparency and security for ethically responsible investing in sustainable forestry. Please contact us for more information.

Network & partners

Close collaboration between ForestVisions and OpenForests




We have established a close collaboration with ForestVisions, an innovative provider of web-based services for marketing, management and mapping of sustainable forestry projects. All clients of OpenForests will profit from this close collaboration and extensive knowledge exchange.
 

ForestVisions » Connect «

ForestVisions Connect symbole

ForestVisions is developing online services to support sustainable forestry projects. The first module which will be available is the » Connect « module. ForestVisions Connect is a marketplace that helps to market sustainable forestry and agro-forestry products. It enables your stakeholders to explore your project and products in a transparent and engaging way. With interactive web maps and virtual tours the social, ecological and economic value becomes perceptible and tangible.

Virtual tours

A new way to present sustainable forest invesment projects

 

1. Tour

http://www.bauminvest.de/tour/lavirgen
Instructions are in German, simply use the mouse or the buttons at the bottom to navigate.

2. Tour


http://www.bauminvest.de/tour/sanrafael
Instructions are in German, simply use the mouse or the buttons at the bottom to navigate.
 

Services OpenForests

Improved consulting services

Explore our services

Read past issues

For all who have missed the last newsletter issues: Last issues

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