In these unprecedented times, it’s reassuring to know that some investments, such as sustainable forestry, are flourishing.
Sustainable forestry investments ultimately produce valuable timber, a commodity constantly in demand and used globally on a daily basis as a building material, for paper manufacture and as a fuel source.
The demand for timber is projected to rise in-line with the global population, thus implying an increase of up to 55 per cent by 2050. Basic economics tells us that this growing demand combined with a diminishing supply will make this commodity rise exponentially in value.
Forestry has a proven track record of producing consistent growth for investors because of a number of simple factors. The first of these is biological growth. As trees grow they become inherently more valuable.
Secondly, the value of timber has historically risen above global inflation and has been the only asset class in existence that has risen in three out of the four market collapses of the 20th century.
Combine these two factors with the rising global demand and it’s understandable why devotees regard forestry as ‘the near perfect asset’.
In addition to substantial returns, forestry also offers environmental benefits and other feel-good factors. These include carbon sequestration – the process of absorbing carbon dioxide and sealing it within trees – and, indirectly, protecting the natural rainforests by offering an alternative supply chain.
Forestry investments are proving popular with a new wave of savvy green investors, who are adding forestry to their pension funds, savings plans and family trusts. Given that a shocking 56 per cent of couples aged over 40 have not worked out how much money they will need to live on in their old age, forestry can offer them one of a number of alternatives to ‘sleep-walking into retirement’.
The investments are also proving particularly popular with grandparents who wish to help support their grandchildren through life.
The regular returns pay out at important stages of the recipient’s life, helping with necessities such as cars, higher education, house deposits and starting a pension.
In addition to placing this investment into trust for their family, there is also a growing trend of newly retired grandparents investing some of their tax-free lump sum from their annuity to help cover future care and retirement home costs.
With the average price of a single room in a private residential home now costing £25,953 per year, this is a serious consideration if they wish to avoid eating into any inheritance.
To access forestry, investors need expert managers. Only a fastidious approach to care and management produces high-yield plantations. You cannot plant a forest, walk away and expect it to yield high returns. It needs the best daily care and management in order to be successful.
Adding to the ‘feel-good’ factor, companies offering these types of investment products also very often have goals relating to sustainable development, such as buying and protecting wild forests to preserve the abundance of wildlife, flora and bio-diversity within them.