The 8th edition of the Sustainable and Responsible Investment Week (SRI Week) took place from 12 to 21 November 2019 in Italy. The initiative was promoted and coordinated by the Italian Sustainable Investment Forum (Forum per la Finanza Sostenibile, or ItaSIF) and it is amongst the leading events on sustainable investment in Italy.
In this context a seminar on “Investing in forests and natural resources: Opportunity and experiences for Italy” was held in Milan on 14 November 2019 where Dasos Senior Advisor Pedro Ochoa gave a presentation “Why forests and natural resources are today a strategic and sustainable investment?”. Please find a summary of the presentation below:
Three responses from sustainable forests (main drivers of value for public and private investors):
- The current development model increases the demand for wood, especially that of long fibers. All market segments are growing: (i) wood products; (ii) paper and packaging; (iii) hygiene and textiles; and (iv) chemicals and biofuels.
- The growing evidence of climate change makes more urgent the EU’s determination to become a low-energy economy and the use of energy that is safe, competitive, locally produced, renewable and sustainable. The bioeconomy is growing with:
- The carbon-based economy and GHG emission reduction;
- The renewable energy policy;
- Biorefineries and derived products;
- Sustainable housing policy; and
- The circular economy for waste and the responsible use of products.
- The protection of biodiversity is paramount. Biodiversity and ecosystem services are undervalued and a market price exists practically only for wood. Avoiding the deforestation of primary forests and sustainable forest management is the most ecological and cheap response to climate change and the biodiversity loss.
Public and private funding flows to the forests and institutional investors participate in the development of the sector with green financing. Types of financing for forests:
- European forestry incentive(s);
- European programs for supporting natural capital and sustainable forestry investment;
National forest programs and programs to support Payments for Ecosystem Services (PES);
- Multilateral funding;
- Carbon credits;
- Habitat banking;
- Green Bonds;
- Impact Responsible Investments;
- Environmental, Social and Governance (ESG) investments; and
- Corporate/private investments.
Timberland funds are a good opportunity in terms of portfolio diversification for institutional investors because of:
- Long-term competitive returns on investment as measured by the National Council of Real Estate Investment Fiduciaries (NCREIF);
- Portfolio diversification;
- The wood has no loss of value if the forest is not used; and
- Protection against inflation, lands are real assets and low correlation with the stock market.
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