Introduction to Timberland Investing

Environment

Social and environmental sustainability underlie all our timberland investments. We see timberland investment as an ethically and socially responsible activity in itself contributing to sustainable development while generating profits to investors. We are committed to an investment philosophy that integrates rigorous timberland investment analysis with creation of innovative ways to enhance returns also from forest-based environmental services, such as carbon, biodiversity and landscape conservation. We put great emphasis on SRI/ESG issues. We have adopted a comprehensive Forest Investment Policy, which incorporates ESG-related principles as well as forest-specific environmental and social policies and guidelines. All investments are made in accordance with the Equator Principles and the EC’s and IFC’s environmental and social safeguard principles. Dasos Team has long experience in social and environmental aspects of forest management in various environments in addition to a broad technical know-how crucial in ensuring highly productive forestry combined with enhancement of societal development objectives.

Certification

We have a policy of investing only in forests that are certified or are certifiable to demonstrate that the forest management in the invested asset is economically viable, socially acceptable and ecologically sound. The certification of forest assets adds value to the timberland asset, improves market access, demonstrates sustainability through independent annual audits, and mitigates social, environmental and reputational risks. Certification also provides the platform and framework for planning, implementing and monitoring sustainable forest management at a project (investment) level. 

We are open to all accredited certification systems including FSC, SFI and PEFC.  In the emerging markets and tropical and sub-tropical forests, the FSC scheme is of special importance because of its global nature and the potential to improve risk-adjusted returns. The key principles of the internationally endorsed forest certification schemes are integrated in our environmental policy and implementation guidelines.

Wood

Population and GDP growth trends will drive demand for industrial forest products, and thus for fibre and logs; the global demand for wood is increasing steadily. Based on long-term historical data, real wood prices have increased by about 1.5% annually. Forest product demand and price trends are positive for timberland investment as whole, with considerable regional and country variations. We will aim at utilising investment opportunities derived from regional and country demand-supply imbalances and identify countries that have comparative advantages in supplying wood fibre to deficit areas.

Climate and Bioenergy

Climate change and environmental policies are creating the demand to have more land under sustainable forest management. Carbon and other non-timber markets can provide diversification benefits and an upside to investment returns.  Increasing popularity of "Green Buildings or Zero-carbon Buildings" and other green products promotes the use of renewable materials, especially wood.
Bioenergy related wood revenue has increased in significance over the past five years. This trend is driven especially by EU's renewable energy (RES) policies and higher energy prices. The use of wood biomass for energy will provide additional revenue from timberland investments; in some areas competition for wood fibre will likely drive up wood prices.

HBU

In addition to value creation via intensive, sustainable forest management, we identify opportunities for HBU (High and Better Uses) sales of selected timberland lots e.g. for recreation, especially when it can simultaneously contribute to rationalising the forest resource base.

Diversification

We aim at a well-diversified global timberland portfolio which combines the aspects of geographical, age and wood fibre as well end-use diversification. A relatively broad species/end-use mix offers diversification in terms of price exposure, changes in market conditions, natural risks, timing of harvests and rotation cycle. Investment into mature harvestable forests generates immediate, more secure returns while investment into younger assets provides potential for increasing yields and appreciation. Country diversification helps with addressing regional market variations, environmental and economic policy and related regulatory risks, and natural disaster risks as well as with providing exposure to climate zones with unique growing conditions and return potential.

Biological asset

Dasos focuses on what it sees as the primary driver of revenue generation, i.e. growing and harvesting trees sustainably and profitably with the objective of maximizing benefits from biological growth. Value is enhanced mainly by improving forest management, reducing inefficiencies in harvesting and marketing as well as improving the strategic positioning of the asset, e.g. through expansion or certification. For institutional investors, biological growth has unique features because trees grow all the time regardless of economic events or market fluctuations resulting in a predictable and positive carry and providing a natural inflation hedge. Additional revenue from environmental services is actively sought for but in most cases we see it as a complementary source of revenue. The ongoing discussions on the follow-up Kyoto agreement have increased the importance of forestry carbon credits, including those derived from avoided deforestation (REDD).

SRI/ESG

We put great emphasis on SRI/ESG issues. We have adopted a comprehensive Forest Investment Policy, which incorporates ESG-related principles and forest-sector specific environmental and social policies and guidelines.  All our investments are made in accordance with the Equator Principles and we have also adopted key EC’s and IFC’s environmental and social safeguard principles.  Our policy is to communicate openly about the environmental and social impacts of our operations.