Forest financing: the growth of timberland investment

Opportunities to invest in timberland are growing rapidly. As institutions seek genuine diversification and ‘green’ investments move up their agendas, timberland can represent an attractive alternative investment to equities and bonds. The timberland investment universe comprises a diverse range of assets from managed native forests in developed temperate regions to plantations in emerging tropical regions. Regardless, there are essentially three drivers of return; two of these (timber value and land value) have their equivalents in mainstream real estate investment, but the third and usually largest component of return (biological transformation) is what sets timberland apart. Timber assets literally grow despite the prevailing economic environment, which explains both the relatively low volatility of returns and why investors worldwide see timberland as a counter-cyclical investment.

The range of income sources from timberland is set to grow and in turn this is spawning a widening range of investment themes by both new and existing timberland investment managers. In our view, timberland has an important role to play in investment portfolios whether because of the returns that may be available, the diversification benefits, the sustainability characteristics or any combination of these. As the opportunities from timberland investing grow, it will remain a sophisticated investment area demanding a sound understanding of the risk and return dynamics.

Download the attached pdf to read more in the PwC authored forward to The Definitive Guide to Investing in Timberland, published by PEI Media

How PwC can help
In response to the increasing interest in timberland investment, PwC and the World Business Council for Sustainable Development (WBCSD) jointly developed the Sustainable Forest Finance Toolkit. The toolkit is designed to support the financial sector in sustainable financing of industries impacting forests. Our Forest Carbon services page contains relevant information, as does our Sustainability & Climate Change Forest Paper & Packaging microsite.